John Whelan: Crisis reboots Irish computer exports
Computer software has been one of the big Irish export winners during the Covid crisis, while aircraft leasing took a severe impact.
There have been winners and losers since the onslaught of the Covid pandemic early last year.
The need to communicate without physically touching persons; buy food, drink and clothing without visiting a shop; and keep yourself entertained without joining a party or music session, created a massive surge in demand for services from companies who would solve these problems.
The trend in this direction was already there, but the pandemic ratcheted this up in 2020, driving export sales of Ireland’s solution providers in the computer services industry by 13%.
However, the continued lockdown in 2021 accelerated the demand and gave rise to record levels of growth in the sector, as revealed in recent releases for the first half of 2021 by the CSO.
Sales growth of 27% — to €78bn — in exports from the computer software companies in the six-month period, copper-fastens Ireland’s position as the second-largest exporter of software services globally.
Brexit has also played into the growth of Ireland’s services sector.
The remarkable failure of the Westminster government to include provisions to protect the banking industry in the exit Trade and Cooperation Agreement with the EU, has benefited the Irish financial services industry.
It has showed substantial growth last year as London-based finance houses scrambled to retain their EU customers by opening operations in member states.
Pandemic-related travel restrictions may have held back the full consequences of banking exits from the UK in 2020, but this year the trend has accelerated, giving a boost of 34% to sales of financial services from Ireland, taking the industry exports to over €11bn for the first half of 2021.
The IFSC-based insurers who secure international transactions, benefited somewhat last year, but there has been a very substantial surge so far this year, with exports from the sector up 16% in the first six months.
The collapse of the travel sector due to the pandemic, had knock-on effects for the aircraft leasing sector, which has been a major loser as airlines grounded their fleets due to lockdowns in countries across the globe.
Ireland is the leading centre for aircraft leasing, globally, and a high growth sector of international services representing more than €80bn of assets.
In 2020, export sales income in the sector dropped marginally, but as the pandemic lockdown extended into 2021, income has dropped by €1.4bn, as airlines sought deferrals and restructuring of their rental agreements.
To date, 30 airlines have financially collapsed due to the Covid crisis, including CityJet and Norwegian Air going into examinership in Ireland, Alitalia ceasing operations, and Miami Air going into Chapter 11 administration in the US.
What has been a positive for aircraft lessors, is that they came into this crisis in a very strong liquidity position which has allowed the sector some breathing space.
Also, €100bn of government support provided to airlines across the globe so far, has helped, which has been effective in reducing the number of airline failures.
Every crisis results in winners and losers.
Fortunately, Ireland’s services exporters are on balance coming out on the winning side, with total services exports of €131bn in the first half of the year, up by 18% on last year.
- John Whelan is managing partner of the Linkage Partnership
