Ireland Industry Outlook – 2016
In this article we aim to present a quick and easy to digest run-down of the main trends and developments in the process manufacturing industries in one of our covered regions. For more information on the areas we cover, click here.
Strong investment activity builds positive outlook for Ireland in 2016
In general terms the Irish economy is a star performer among European counterparts, with some 7.5% annual growth. The question of whether this translates to a healthier capex investment environment is slightly more complex, but the overall outlook is very positive for Ireland in 2016 across the main processing industries.
Many large capex projects are planned, with a large proportion seeing financial sign-off due to strong economic performance and political support for inward investment. Pharmaceutical giants such as Bristol Myers Squibb and Alexion lead the charge, with gigantic schemes planned.
Areas of particular buoyancy include medical devices, primary and secondary pharmaceutical production and food processing. The medical device industry alone is seeing some €500m a year of investment across 6 sites, which has remained at this high level for 3 years.
These large projects are indicative of a wider issue facing the Irish processing industries, particularly pharmaceutical and food & beverage – that of resource. Rapid reinvestment in Ireland, including huge amounts of inward investment from international organisations has placed massive strain on the countries diminished engineering and technical resource. Alexion’s approx €700m investment coupled with BMS’ €1.4bn planned capex development are examples of how skilled resource has become hugely in demand in an effort to get projects off the ground.
Post recession, it was reported that there was widespread ‘brain-drain’, and it is believed this is one factor that has contributed to the widespread delay we are seeing across most capex activity in 2016. While schemes are being planned, many are being delayed by internal resource issues or external political pressures. Furthermore, design work is often completed abroad where resource pressures have become too great. Government intervention to combat this is already underway.
Companies are constantly recruiting to backfill on-hold projects. Many projects are being postponed while clients await the ‘A’ team from main contractors.
We previously wrote of the implications of the US government’s crack-down on tax inversion and the impact on the Irish pharmaceutical industry. This is still a prominent driver of investment activity, with Pfizer’s headquarter relocation into either Dublin or Cork a good example of the affect new legislation is having on Ireland. The soon-to-be biggest listed company in Ireland will bring huge investment levels of approx €1bn while a location is developed to house some 5000 employees.
In food and beverage, meat production, distilleries and dairy are still performing well. In the latter sector, which accounts for 8-10% of Irish GDP, the impact of the lifted milk quota was not quite as pronounced as expected.
Pharmaceutical/biotech & laboratories, Ireland – Our coverage
On our MyProtel project search engine we are currently tracking:
• 157 active pharma & process related laboratory investment projects;
• totalling a potential value of €6.5bn.
Food & drink, Ireland – Our coverage
On our MyProtel project search engine we are currently tracking:
• 94 active food & beverage investment projects;
• totalling a potential value of €960m.
Summary
For suppliers, the outlook is impressively positive – there is huge opportunity despite project activity being plagued with resource problems. Issues with skills shortages mean that on-hold projects can still be a opportunity for suppliers looking to establish relationships with end users. Clearly clustered industry developing in different sectors makes repeat, long-term relationships key.
Overall, the Ireland industry outlook remains as dependent on the global economic picture as ever. However, in Protel’s key markets there is a strong level of investment, which, despite some challenges and uncertainties surrounding resource, is expected to persist through to 2017.
Correction – It is understood that the Pfizer HQ move will be on a much smaller scale than previously reported. The expected final site is currently Global Financial Shared Services, Ringsend, Dublin. 42nd Street, USA will remain open and only 150 jobs will be created as a result of the move.
To gain information on specific projects or gain more insight into this sector, including all the contact details you need to start your sales process at the right time, get in touch.