Outlook bright for Irish manufacturing sector

Ireland is punching above its weight in the global economy with manufacturing output up 28% since 2000 despite 31,000 job losses in the sector, a report revealed today.

As traditionally strong businesses such as textile firms go to the wall, Forfás the national enterprise advisors found new avenues were being opened.

Ireland now ranks 13th in the world for exporting services, with seven out of 10 people here now employed in the sector.

“Despite concerns about the sector, manufacturing continues to contribute significantly to our economic success,” said Forfás chief executive Martin Cronin.

“Ireland is punching well above its weight in terms of share of manufactured exports.”

Forfas revealed the manufacturing sector was following international trends with jobs declining in traditional areas, but with strong production in new fields.

The report went on to show the sector spends almost €25bn a year on wages and it accounts for almost 30% of corporation tax.

It said that while output has grown recently, employment in manufacturing has declined significantly since its peak in 2000, by 13% or 31,000 jobs, indicating greater productivity, and the number of firms overall has remained stable.

Sectors such as medical devices, up 79%, and chemical, up 27%, have seen growth in employment since 1995, while textiles, down 74%, and electrical machinery, down 28%, have fallen.

And because of the high proportion of US and UK owned firms, the manufacturing sector is quite exposed to currency shocks.

Enterprise minister Micheál Martin said the trends in the Irish economy closely mirror those in other developed countries.

“It underlines the need for a healthy manufacturing sector, particularly as it is an important driver of productivity and innovation,” he said.

“It shows that Ireland has been successful in the evolution of its enterprise base. However, our favourable enterprise environment must continue to evolve to support the changing nature of industry in Ireland.”

Mr Martin plans to set up a high level manufacturing group to review the challenges facing the sector and how to tackle them.

In the service industry Forfas found employment increased 21% since 2000, compared to an average G7 rise of 6%. Now, almost seven of every 10 people work in this expanding sector.

Services exports have grown rapidly in recent years, and we are now ranked 13th in the world. The contribution of services to total Irish exports increased from 22% to 35% between 2000 and 2005.

Despite this impressive growth, Ireland remains a net importer of services with a deficit of €9.9bn in 2005, compared to a trade surplus of €30bn in merchandise.

Computer services are the most significant export service sector accounting for 35%. There is a strong export base of insurance and finance services, accounting for a further 25% of total services exports.

Forfás warned that Ireland is well behind the US in the area of R&D and royalties and licenses, suggesting a need for augmenting our intellectual property, patents and technologies.

Regarding offshoring, Forfás noted the loss of jobs to cheaper markets in Asia was a worry.

It was not all doom and gloom however, as productivity gains achieved by relocation were predicted to give Irish companies a chance to develop higher value manufacturing and services activities, including R&D, marketing, sales, technical support and product management.