Bumbling Brexit is boon to some Irish-based firms
Most of the commercial services barometers, including the recent World Trade Organisation report, indicate a downturn in global sales for software, financial services, and information communications technology.
The global services Purchasing Managers’ Index, the passenger air travel index, and services indexes, all fell in the first six months of the year, with no sign of an uplift for the rest of the year.
Against this backdrop, the 20% growth in Ireland’s export of services to €52.7bn in the three months to June, coming as it did on the back of a 17% expansion in the first quarter, is a clear signal that the sector is dramatically increasing its share of the global market.
The main growth is coming from the massive cluster of computer software companies located in Ireland which exported €27bn worth of services in the three months.
They are on track to reach €150bn of sales exports for the full year.
There is some evidence that the bumbling process at Westminster, as it tries to come up with a Brexit solution acceptable to the British parliamentarians, is working in Ireland’s favour.
But with services exports to the UK in the quarter at €7.8bn, only down 10% on the same period in 2018, it is clear that Brexit worries by Microsoft, SAP, Amazon, Google, Apple, and others is not the main driver.
More convincing evidence indicates the boom is driven by the growing number of information factories in Ireland providing the data processing capacity for the cloud storage systems.
These support desk-based computers as well as mobile phone data searches when googling, watching YouTube, sending pictures by WhatsApp, the use of GPS in the car or buying over Amazon, for users across Europe and the Middle East and Africa.
There are currently 53 data centres active in Ireland; there are another 34 in the pipeline, with eight under construction.
Garry Connolly who heads up the data centre business group Host in Ireland, estimates that a total of €4.5bn will be spent in building the new centres up to 2025.
“Ireland is now recognised as the largest data centre cluster in Europe and has maintained its Tier 1 status because of its ability to innovate and change to meet the rapid advances in the world of data,” he said.
Its survey found that off-island fibre connectivity, power availability and reliability are influential factors for firms mulling investing in data centres in Ireland.
There are, however, other good reasons for the internet giants to choose to expand in Ireland, rather than in France where president Emmanuel Macron has provoked the ire of US president Donald Trump with his recent announcement of a French digital tax on the US internet behemoths.
It may have dissuaded data centre companies choosing Spain where digital tax legislation was passed in January, or indeed, in the Brexit-torn UK which still found time to announce a digital tax.
The moves by large European countries present worrying tendencies to attack the accounting practices of the Silicon Valley giants.
Ireland, by comparison, has been standing shoulder square with these global players who have settled in Ireland, by pushing for the continuity of the status quo and urging the European Commission to hold back until the Organisation for Economic Cooperation and Development (OECD) comes up with a globally-accepted solution.
As EU tax decisions must be taken unanimously Ireland can for now block an EU level deal.
The OECD is working on a draft deal, which it officially aims to have ready in 2020, most likely for a summit of the Group of 20 economic powers towards the end of the year.
Ireland has committed to accepting the broader OECD deal, which also has the support of the US, Japan, Mexico, and others.
The Government has argued that it is the best approach.
So far, the strategy is working for Ireland.
But official figures show €20bn in services trade payments were made tax free, mainly to the global internet companies, in the quarter.
This will inevitably raise eyebrows internationally on the robustness of Ireland’s tax regime for intellectual property rights associated with royalties and research and development and licences.
