Ireland remained the le ading location in Europe for foreign direct investment (FDI) on a per capita basis in 2020, but investment fell 13pc overall as Covid-19 and a Brexit tail-off slowed inflows.
Ireland attracted 165 FDI projects last year, placing ninth in the European table of 48 countries, according to the EY European Attractiveness Survey 2021.
That level of activity was down on 2019, when 191 investments were made, but it was still enough to maintain the top ranking for projects per million population.
Although the number of Irish FDI projects has now fallen two years in a row after the Brexit bounce of 2018, last year’s total was in line with the five-year average of 167.
First-quarter GDP figures published last week underlined the centrality of FDI to the post-Covid economic recovery as well, as growth hit 11.8pc annually when factoring in multinationals. Modified domestic demand for the same period, which measures the indigenous sector more accurately, fell by 5pc.
FDI is a key plank of Ireland’s economic policy, with roughly 20pc of the national tax take coming from the corporate sector, which is dominated by major multinational companies.
But with the G7 finance ministers last week agreeing to set a global minimum corporate tax rate of 15pc, Ireland’s attractiveness as a location for FDI is facing a new challenge in the coming years.
“Tax is one of the important factors companies consider and it will be important for Ireland to present the full panoply of what it has to offer and to show there are other things in the proposition,” said Feargal de Freine, head of FDI at EY Ireland.
“It’s important not to put too much emphasis on tax itself, though. Availability of talent is front of mind with investors.”
Mr de Freine emphasised the need for Stem graduates to fill the kind of roles technology and life sciences that were important to companies are looking to, but said the general standard of education in the country and widespread comfort working digitally was just as important to the investment proposition.
“We’re recruiting from a broad pool of competence and increasingly we’re asking more of people. You need a rounded pool of talent with real competence and agility in project management and data especially.”
He said Ireland was facing a new opportunity in the sustainability economy to become a provider of business services in the ESG (environmental, social and governance) area, similar to how the country is a leader in investment fund management support services.
“Ireland has a very strong footprint in business services and there is a lot to do around reporting and regulation for sustainability. We have real advantages from a reputation point of view,” he added.
France was Europe’s top destination for FDI for the second year running, attracting 985 projects, an 18pc annual decrease. Despite the looming impact of Brexit, the UK maintained its second place position with 975 projects, representing a 12pc decrease on 2019, while Germany in third place secured 930 projects, experiencing a more modest 4pc decline on last year.
Manufacturing took the biggest hit in investment due to Covid-19, but both logistics and life sciences saw an increase in projects.