Dublin 4th most attractive European city for FDI

Dublin is the fourth most attractive European city for foreign investors, according to a new EY report.

The city was chosen by 17% of respondents in the EY European Attractiveness Survey as an attractive city for FDI over the next three years, three times more than last year.

Connectivity is very important to foreign investors according to the survey, would the scenes at Dublin airport over the weekend affect the reputation of the capital in the eyes of investors?

Feargal de Freine, Assurance Partner and FDI Director at EY Ireland, said the situation was difficult for all those affected.

“We are an island and we have a very open and international economy, and the quality of our air and sea connections is really important to foreign investors.”

He said, however, that the problems were not unique to Ireland as travel patterns and infrastructure settle.

“I think investors will look beyond the short-term issues and of course expect and want them to be resolved quickly,” de Freine said.

“More broadly, one of the findings from our survey is that connectivity is very important to investors, and that includes things like flight connections and regional access, so I think the short-term solution has to go accompanied by a continued focus on quality Connections to all parts of the country, not just Dublin.”

Ireland remains one of Europe’s top 10 locations for FDI with a 3% market share of all FDI among European countries, after it was reported to have attracted 152 new FDI investment projects last year.

The report finds that foreign investment in Europe in 2021 showed a modest 5% recovery compared to 2020, the year in which Covid-19 caused investment levels to fall by 13%.

The recovery in 2021 was also mixed, with relatively stronger performance in some southern European countries.

The number of FDI projects in Ireland fell by 8% in 2021 as a result of the general drop in US investment projects in Europe and a reduction in investments in software and IT services during 2021.

The survey found that investor sentiment towards Ireland remains very positive, with a large majority believing that Ireland’s attractiveness will improve or remain the same over the next three years.

Ireland’s positive reputation is also reflected in investment intentions, with 43% of respondents planning to establish or expand operations in Ireland in the next year.

The United States accounted for 59% of Ireland’s FDI projects during 2021, while the United Kingdom remains a significant source of Irish FDI and accounted for 19%.

Mr de Freine said Ireland’s FDI projects are dominated by the services sector with software and IT leading the way, followed by business and professional services and finance.

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“There was a strong performance on record in Ireland, despite global disruptions. After a sharp drop in 2020, Ireland’s business and professional services projects grew by 13%, outperforming Europe, where projects in the sector fell by 16% % in 2021. The life sciences sector (pharmaceuticals and medical devices) also saw an increase in projects in 2021,” he said.

“The future is digital. Companies have made huge investments in technology since the start of the pandemic to facilitate remote work, automation and e-commerce,” De Freine said.

“The increasing digitization of services and industry explains why the level of technology adoption by consumers, citizens and administrations is now the most important factor determining where companies invest across Europe.”

Based on the survey results, Mr De Freine said policymakers should focus on workforce skills, housing and global connectivity to address global investor concerns. During a period of increased supply chain disruption and a trend toward close sourcing and relocation, global connectivity has never been more important.

Ireland is also viewed exceptionally positively by global sustainability investors. 88% of respondents said that Ireland performs equal to or better than the European average in terms of workforce presence and skills to facilitate sustainability projects, providing a strong reputation base from which to attract future investment.

Investment levels in Europe remain 12% below the all-time high of 2017, and the recovery is slower than after the global financial crisis, when investment levels returned to pre-crisis levels after only a year.

France led the way last year with 1,222 projects, a sharp increase of 24%. Investment in the UK remained steady, rising 2% to 993 projects. In stark contrast, the number of projects in Germany fell 10% to 841.

With increasing global complexity and turbulence, the EY report aims to examine whether this context has changed the way companies make decisions about where to locate facilities and whether Europe remains competitive.

Although companies are more cautious in their investment prospects due to the war in Ukraine, they remain optimistic about the long-term prospects for investing in Europe.

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