Globally, 72% of CEOs believe that the next three years will be more critical than the last 50 years.
Research conducted on behalf of KPMG among chief executives internationally and locally has found unprecedented levels of uncertainty regarding the future of the businesses they lead. Indeed globally 72% of CEOs believe that the next three years will be more critical than the last 50 years. Uncertainty brings threats for sure, but for those nimble and agile enough it fuels opportunity too.
Ireland has become a location of choice for US companies looking to expand their operations overseas. According to the IDA, over 530 US companies have operations in Ireland and the US investment in Ireland is greater than the combined US investment in the BRIC countries of Brazil, Russia, India and China. What does the future hold for those US companies already established here or for those US companies looking to invest in Ireland in the future?
We are in our fourth industrial revolution fuelled by unprecedented technological advances making the impossible possible. Change is everywhere and no company is immune regardless of size, industry or location. The pace, scale and scope of change is staggering – we just need to look at the disruptor companies like Uber, Airbnb, Spotify or Netflix to see how new innovative companies are fundamentally changing the business landscape. We’ve entered an era of unprecedented technological change where technological advances, connected consumers and sector convergence are driving the pace of change.
Businesses need to transform to succeed. This means developing cutting edge technologies, focusing on innovation, fostering collaborative alliances and acquiring key talent – critical elements to implementing change. While this transformational change will bring with it a host of challenges, it will also create significant opportunities for companies to grow, expand and succeed in a global environment.
I believe Ireland is well placed as US and other global companies deal with this era of transformation, for the same reasons companies have been investing heavily in Ireland for years. Leaving aside our competitive corporate tax rate and our advantageous geographical position our people are our key asset – our people are the reason companies stay here and expand. We have a young, agile, well-educated, talented workforce with a “can do” attitude, an ability to embrace change and with the necessary “soft skills” particularly in the areas of communication skills and developing relationships – these all key attributes for driving change.
Indeed, Ireland’s recent economic turnaround is testament to our resilience, adaptability and flexibility in an ever changing world. Many US companies have completely transformed the nature of their Irish operations over the years from low cost manufacturing and back office processing, to R&D, innovation and the establishment of global centres of excellence in Ireland which is testament to our people along with our pro-business economy.
If you look at the history of FDI in Ireland, the success of companies located here has fuelled further inward investment and created a number of significant clusters in a variety of areas including technology, fintech, cybersecurity, pharma, medtech and financial services. These clusters are critical to fostering ideas and driving innovation and change.
But we cannot be complacent. In the long term, the war for investment will not be won over things like tax. The real issue is highly skilled talent. The World Economic Forum estimate that five million jobs will be lost in fifteen major developed and emerging economies by 2020 due to technology and automation. We need to continue to invest in skills, and critically, our education system to ensure that that we secure a pipeline of talent, particularly in the STEM subject areas and we need to continually focus on this area.
In the short term, global economic and geopolitical factors including Brexit and a new US president make for an uncertain business environment. While the wider impact of Brexit is yet to be determined, for US companies the investment case for Ireland remains and may even have strengthened for companies wanting access to the European market.
On the other hand, possible US policies of protectionist trade, including the recent threat of import taxes on US pharma companies operating abroad and planned tax cuts are aimed at discouraging US companies from investing overseas. Only time will tell, the full extent of how US policies will evolve and be implemented. While Ireland offers much more to FDI than a competitive tax environment, this short term political uncertainty may result in companies adopting a “wait and see” strategy on investment decisions.
This uncertainty is one of the key challenges facing US companies who had planned to invest in Ireland in 2017.
In the midst of the choppy seas of global politics, Ireland may yet to prove to be a safe harbour. Resolute cross party commitment to maintaining Ireland’s corporate tax rate, talented workforce, pro-enterprise culture, social cohesion, and guaranteed access to an EU market of over 500 million people all play in our favour. Ireland has weathered worse storms, and the fundamentals of our FDI policy remain strong. The old adage “keep calm and carry on” comes to mind.
Celine Fox is a partner with KPMG’s Cork audit practice.
This article was originally published in the Irish Examiner on 3 February 2017 and is reproduced here with their kind permission.