Irish Market Overview – Storm Clouds Gathering

The Irish economy is currently operating at close to what is defined as full employment, with an unemployment rate of just below 4%. While the overall picture is very positive there are certain clouds on the horizon which will generate challenges as the year progresses. Ireland as a small open economy needs a stable investment environment, predictable trade policy and open markets. All three are under threat.

The first factor to consider is that the amount of new roles generated by Foreign Direct Investment (FDI) has plateaued. The IDA reported that investments by IDA Ireland client companies in 2024 saw employment levels within the FDI sector remain above 300,000 for the third consecutive year. This figure is very impressive, but it hides a significant churn. IDA figures are a bit vague as it states that 13,500 jobs were created in 2024, they may not all fall into last year. Taking this figure as average for the year, it means we lose about 4% of IDA created jobs each year, the agency has to work hard just to stand still. While the headline number of people employed in the sector remains steady, the figure of 13,500 new roles created in 2024 is a 30% drop from the figure of 19,000 in the 2023 IDA report. Reading the IDA website it appears that the number of announcements is down on last year, as is the number of roles per announcement. Unfortunately all the key metrics seem to be pointing to a slowdown in job creation from FDI.

When you look at the figures for Enterprise Ireland supported client companies the figures are broadly the same and there is also evidence of a plateau effect there too. In their 2023 Enterprise Ireland supported the creation of 15,530 new jobs. In 2024 the figure was 15,741 new jobs, a small increase year on year in fairness and its not a bad performance when you take into account the context of coming out of the pandemic, the supply chain disruption that occurred and the lingering impact of Brexit on Irish companies as they pivot away from suppling the UK market to a certain extent. Further contextualising that Enterprise Ireland employs about 750 people, so simply put each employee can be attributed to creating roughly 21 jobs annually, or 1.75 jobs a month each. In comparative terms the IDA far outperform Enterprise Ireland with their 350 employees generating 3.2 jobs a month each, however they have had the advantage of leveraging Ireland’s IP-based BEPS tax tools to entice companies in. Irelands ability to use tax policy as a means of enticing employers into the state has been severely compromised by recent agreements. This has not stopped the development of a dangerous structural dependence on a very small number of multinationals. The Irish tax take has become lopsided and has developed a dependence on corporate tax revenues which are by no means guaranteed to continue in the medium-term. The chances of An Bord Snip Nua Nua coming into existence are growing by the day.

The Employment and Recruitment Federation surveyed members in Q1 this year. Recruitment firms are a barometer of where the economy is at, they feel the slowdown first. The figures are a comparison of January 25 v December 24, vacancies across all three sectors reported on – Contract, Permanent and Temp – were negative, albeit by a single percentage point in Contract and Permanent vacancies. However this finding is very worrying when you consider the that generally January would be among the busiest months of the year in recruitment. Another feature of the recruitment market that the ERF tracked was the availability of suitable candidates, across the market as a whole the overall figure is up a small amount. We have seen a number of companies opt for mandated back to the office policies and if that means people elect to move on so be it. Certain large multinationals seem to be adopting this policy as a strategy to actively mitigate potential redundancy costs. You throw in the disruptive impact of AI technologies and their impact on employment and it’s an increasingly blurred picture. Our experience in @Recruit IT is that in the IT vertical candidate quality and availability have both increased, furthermore the average time that it takes for a permanent candidate to find suitable employment is increasing.

You put all the above trends in the context of the geopolitical uncertainty created by the current US administration (In fairness that is somewhat of an insult to the word administration) They are showing themselves to be increasingly rudderless and seem to have no clear strategic goal other than corruption and increasing the president’s personal fortune. If it takes a bit of ethnic cleansing in Gaza well, no real harm there.  We have already posted about their rudimentary understanding of Tariffs and the fact they obviously don’t realise the impact of Tariffs is to act as a tax on consumers. Trump markets himself very well to the common man but once they’ve been stupid enough to vote for him, he could not give a fiddler’s about them or their concerns. Rather than Making American Great Again it looks a lot more like Making American Greedy Again. It’s as if the bastard lovechild of Gordon Gekko and Bernie Madoff is sitting in the White House, only with lower moral standards. That a sitting US President would even consider accepting a gift of a 747 from a foreign government is truly a demonstration of just how utterly broken Trump’s moral compass is, if indeed he ever developed one. The fact a serial bankrupt who has tried to meddle in the independence of the Fed is sitting in the White House surrounded by a chorus of spineless nodding yes men has had a very obvious impact on the investment climate. The blatant and very questionable nature of how Trump is using meme coin as a way of directly channelling money, sorry “investments”, to him personally beggars’ belief. At the time of writing this has generated €1.1 billion tax free for Trump, with over 50 wallets “investing” $10 million or more in the meme coin, those 50 “investors” will be well rewarded under this current US administration. How can you evaluate serious investment decisions  in the US when your competition can opt to “invest” with the administration and get what it wants?

Bringing it back home uncertainty is the enemy of growth and investment. There is so much uncertainty driven by the US that some commentators are actually starting to present Xi’s China with all its political, environmental and human rights abuses as the stable and reliable international partner. Frankly this would have been unthinkable a few years ago. The US in shutting down USAid has ceded the playing field to the Chinese, US soft power was hard won and has been jettisoned very quickly. The US president’s actions have well and truly stripped the US of any right to claim moral leadership. How can someone so amoral that they think posting a meme of themselves as the Pope shortly after Pope Francis’ death is appropriate claim any kind of moral high ground? The word odious doesn’t even come close to describing that. The bottom line is that the post second world war rules based international order we have depended on for the last 80 years is under serious threat when you have a kleptocracy in the US run by an individual who sees personal profit in ethnic cleansing and who has a lot of explaining to do around the uncanny coincidences that are swirling around beneficial decisions and individual’s  “investment” in the US presidents personal meme coin. We all know Nature abhors a vacuum, there is one in terms of global leadership currently. This will be a make or break period for the EU. It needs to show cohesion and leadership – both morally and commercially now more than ever.

At the local level, certain sectors of the Irish economy like Healthcare and Construction continue to experience high demand, however the storm clouds for other key sectors of the economy are clearly gathering. Ireland as we pointed out is massively reliant on FDI both for employment and tax revenue. As a country we are also hugely reliant on Global Trade operating freely. Our tax advantages have been eroded. In brief all the pillars upon which we have built the economy over the last 15 years post the last recession are under threat.

The forecast is that its going to get bumpy out there!