This is the business year in review from July to December.
“Illusory” GDP numbers put the international focus back on Ireland’s tax regime, as the CSO reported huge upward revisions to economic growth numbers in 2015 of 26.3%. The figures were described as “artificial” and “illusory” and promoted the infamous jibe of “leprechaun economics” by economist Paul Krugman.
The numbers risk putting Ireland’s corporate tax regime back under the international spotlight, analysts warned. The CSO said capital transfers into Ireland last year led to “dramatic” revisions to the GDP growth numbers and mean the economy here supposedly surged in 2015, up from the 7.8% expansion in a preliminary estimate.
Experts said that, following the international tax crackdown led by the OECD, a small number of multinationals last year switched their capital assets from Caribbean tax havens into Ireland. The Irish Examiner reports the transfer by Apple of huge amounts of intellectual property into Ireland amid a re- arrangement of its international tax affairs was the main driver behind the surge.
The Irish economy could grow by 50%, over the next four years, with 140,000 jobs created if the country can take a leading role in the creation of the EU’s planned Digital Single Market, according to a Google commissioned report. Despite a previous report last year over 90% of Irish and European tech firms are not prepared for a harmonisation of technology and digital regulation across member states, the Google study said Ireland stands to be one of the main beneficiaries.
The research, by Boston Consulting Group, bracketed Ireland with the likes of the Benelux nations, Scandinavia, and the Baltic states as European ‘digital frontrunners’. Ireland could join the group of well- digitised, export-dependent and innovative small countries largely driven by the information and communications technology industry. “Ireland’s e-GDP — as a share of total GDP — is the highest of comparable countries, at over 12%, excluding multinational corporations,” said Boston Consulting’s Niclas Colliander.
Average land prices dipped 1.5% to €9,650 per acre in the six months to June, according to a survey by Sherry Fitzgerald estate agents. This reversal follows modest but steady upward price movement during 2015, with the most marked price deflation found in the south-west, which can be largely attributed to the Cork market, where agri-land prices appeared to be particularly challenged. The average price of land in the south-west fell by 2.2% in the three months to June, bringing the fall in value in the year to date to a significant 3.5%.
That said, the South-West remained one of the most expensive markets, where prime grassland stands at approximately at €11,750 per acre, and prime arable land at €12,500 per acre.
Businesses are struggling to combat the rise of cyber criminality which continues to grow increasingly sophisticated, according to a major new report. A range of constraints including aging infrastructure, poor employee habits and limited resources are hampering firms’ fight back against attackers and leaving them vulnerable to potentially seriously damaging attacks. According to Cisco’s report, the struggle to constrain the time and space afforded to cyber criminals is the biggest challenge facing businesses and threatens their ability to fully embrace the digital economy.
“To close attackers’ windows of opportunity, customers will require more visibility into their networks and must improve activities, like patching and retiring aging infrastructure lacking in advanced security capabilities,” Cisco security business group vice president Marty Roesch said.
The National Competitiveness Council issued its annual report designed to alert people to the need to address gaps in the nation’s economy, with the high cost of housing and credit singled out for attention.
“Rising costs remains a key concern of the council, there is an urgent need to address the supply and affordability of residential property,” said chairman Peter Clinch, adding that high rents and house prices were making Ireland “a less attractive location” for skilled migrants and emigrants considering a return home.
Growth in Irish manufacturing shuddered to a halt last month, largely as a result of the drop in sterling following the decision of the UK to quit the EU. The Investec Ireland survey of Irish purchasing managers posted a reading of 50.2, down from 53 in June. The survey was the weakest reading for 38 months, and also showed that new business “stagnated” in the month. For the first time since June 2013, no meaningful rise was recorded in new orders, with some purchasing managers blaming the Brexit vote for the reading.
“While we draw a modicum of reassurance from the relatively modest declines in both new orders and new export orders, our sense is that conditions in the Irish manufacturing sector are likely to get worse before they get better,” said Philip O’Sullivan, chief economist at Investec Ireland.
The country’s main tourism industry group warned that any UK recession sparked by the Brexit vote will directly hit Ireland, and urged the Government to make the reduced Vat rate tax an untouchable part of the tax code here.
The Irish Tourist Industry Confederation (ITIC) said the drop in the value of sterling against the euro made the UK “a better-value” destination for overseas’ tourists, potentially damaging Ireland’s tourism industry. The ITIC wants the Government to keep in mind the importance of the industry and the almost 227,850 people the industry employs, and make good its promise to fully restore its international promotional budget to pre-crisis levels. It also pleaded at the time that the reduced Vat tax of 9% should be a “pillar” in the same way that the 12.5% corporation tax is widely accepted as a permanent fixture of Ireland’s tax code.
The drop in sterling following the UK decision to leave the EU is now the main risk facing the Irish economy and has led to the sharpest fall in business sentiment since the bailout in 2010, according to a major survey of business confidence. Since the unexpected outcome of the June 23 Brexit vote, sterling has slumped 13% against the euro, making it more difficult for a wide variety of Irish businesses who employ tens of thousands of people to sell their goods across the Irish Sea.
The survey by KBC Bank Ireland and Chartered Accountants Ireland said that Brexit, along with other concerns about world demand and the political instability at home, has led to the sharpest drop in sentiment since the third quarter of 2010.
Apple received planning permission for an expansion at its European head office in Cork that is due to provide an additional 1,000 jobs. The plan by the iPhone maker comprises a four-storey office block and 752 car spaces. The additional jobs will bring Apple’s workforce in Cork to 6,000. It is likely the new development will come on stream in 2017, allowing for a construction period of five months, and Apple has confirmed that 200 workers will be employed during construction.
The UK’s economic resilience following Brexit encouraged some economists to rethink their short-term forecasts. Deutsche Bank has exited a bet for sterling to fall on a trade-weighted basis, while retaining its longer-term negative view on the UK currency.
UniCredit said it had closed a short pound-dollar position, or a wager that sterling would weaken, to reduce “tactical” risk. Reports such as an index of August services, which jumped the most on record when it was published, gave a more positive view of the UK economy in the wake of the June 23 vote to leave the EU than many had predicted.
“Recent data suggest the near-term confidence impact of Brexit may have been overstated, and with risks the Bank of England now sound a more sanguine note, we take profit on our May recommendation to bet against the pound on a trade-weighted basis,” said London-based Deutsche Bank strategist Oliver Harvey.
Strong trading levels at its Irish operations helped drive an estimated 9% rise in sales at discount clothing retailer Primark in its latest financial year. The Associated British Foods-owned retailer is headquartered here and trades in the Republic as Penneys. It said that its full-year sales were expected to be ahead of the previous year on a constant currency basis.
“Ireland delivered a strong performance throughout the year,” it said. “Spain, France, and Austria traded well and the Netherlands and Germany improved. The UK performance was in line with the group and good trading in periods of more typically seasonal weather.”
Retailers are missing out on billions of euro worth of trade every year as consumers continue to do the bulk of their online shopping overseas, according to research by Virgin Media. The value of goods bought online by Irish consumers has continued to increase over the past two years, growing 13% to €7.5bn — growth that is expected to not only continue but accelerate to over €14bn in annual online sales by 2021. While the growth of e-commerce presents a golden chance for web-savvy firms, the fear is that many SMEs are missing out on significant revenues.
“Ever increasing numbers of Irish consumers are shopping and using services online. This is seen in the increase in spending over the last two years and the projected forecast for online consumer spending to grow from €7.5bn to €14.1bn in 2021,” said Tony Hanway, the chief executive of Virgin Media. “Irish websites account for just 41% — some €3.1bn — of Irish online purchases, with a further €4.4bn being spent offshore.
The European Commission is not demanding any changes in Irish tax laws over the Apple arrangement condemned by Brussels, according to Minister for Finance Michael Noonan.
“It’s part of the Irish offering now for years,” said Mr Noonan. “We could nearly put it on the flag now, because everybody knows what the rate is. When industrialists think of Ireland, they automatically think of 12.5%. Just in case there’s any doubt, I’ll confirm it again in this year’s budget.”
Mr Noonan was speaking at the announcement of 100 jobs in Limerick by US digital website hosting service provider WP Engine, and said employment has grown to just 100,000 below the level at the height of the Celtic Tiger era.
“Over the past year, more than 56,000 additional people are at work — bringing those at work to more than 2m,” he said. “The Celtic Tiger was a false economy built on one sector, building and development. The difference now is that in job creation, the economy is growing across all sectors.”
The Irish economy will grow at a “significantly” slower pace and the possibility of a recession in Europe cannot be ruled out as it faces into key elections in Germany and France next year, according to Merrion Capital. In its latest quarterly outlook, Merrion cut its Irish growth forecast to 3.5% this year from 4.8% in its previous outlook, and has pared back 2017 growth to 3.2% from 3.8% previously.
The outcome of the federal election in Germany and the presidential vote in France could well decide the future of the EU and unsettle economies and markets for some time, warned chief economist Alan McQuaid.
“The international headwinds include the potential for a European recession. Europe has considerable vulnerabilities, of which the banking system is a prime worry,” he said.
Twitter shares fell 12% on the day after potential bidders were said to have lost interest in making offers to buy the company. The social media company had attracted interest from Google, Salesforce.com, and Walt Disney, all of which had consulted with banks on whether to pursue a bid.
The stock was down to $17.31 at one stage, having closed at $24.87 earlier in the month after reports emerged that some companies were mulling an offer. In October, the shares hade lost a quarter of their value since the start of the year. The company has been entering partnerships for sports, politics, and entertainment content — such as American football games — that it can stream alongside tweets related to the video.
Dublin Port said it is taking on so much business it will need to expand, setting aside fears that Brexit would severely disrupt its trade.
“We think the effect of Brexit on Dublin Port’s business will be much, much smaller than the impact of the recession post-2007, and we think we will double our 2010 volumes by 2032,” said chief executive Eamonn O’Reilly.
“Our challenge now is how best to create additional port capacity in sufficient time to stay ahead of this growth.”
The port said its master plan includes developing 44 hectares of land which lies some 14km from the existing port over the next five years. Total trade volumes — which include both imports and exports — climbed to 26m tonnes in the first nine months this year, up 6.8% from the same period in 2015.
The decision by a Canadian firm to buy Ireland’s only refinery at Whitegate in Cork Harbour ensures security of supply and contributes to the country’s economic growth, Environment Minister Denis Naughten said.
“It is crucially important from the point of view this is the only oil refinery on the island of Ireland,” he said. “It is much easier to access crude oil than processed oils — petrol and diesel — so it is important from a security point of view that we have an oil refinery on the island. It is not just an Irish issue. It is a European issue as well.”
Irving Oil views Whitegate as a key element in expanding their business in Europe. Whitegate supplies up to 40% of the main products on the Irish market, and was privatised as a result of its sale by the State in 2001 to Phillips 66.
A former Nama board member described the hugely controversial Project Eagle deal which allegedly saw taxpayers lose out on €200m as an “inspired” transaction. John Mulcahy, the former head of asset management for the State property group, told a meeting of the Dáil public accounts committee he fully supported the deal.
“My view would be that to shift the entire Northern Ireland portfolio in one go for €1.3bn was an inspired transaction,” said Mr Mulcahy. “I didn’t need to see a lot of cash flow to know it was a superb deal. I never liked the Northern Ireland portfolio, it was difficult.”
It was a perfect opportunity, he said, as it would “bring in cash” at a time when there was significant pressure from the ECB on the Republic to sell-out distressed assets.
Ryanair shares jumped more than 5% on the day after the company offered an upbeat outlook, despite Brexit uncertainties, and approved a plan to return another €550m to shareholders. The airline’s first-half results showed a 7% year-on-year rise in after-tax profit, to almost €1.17bn. Revenues jumped 2% to over €4.13bn as passenger numbers grew 12% to just under 65m people.
Ryanair said in Novermber it expected to carry more than 119 m passengers across its Europe-wide route network in its current financial year, which runs to the end of next March. The knock-on effect is the company upping its long-term traffic forecast by 10%, meaning management now sees more than 200m customers a year flying with Ryanair by March 2024.
Sterling clawed back some ground against the dollar and the euro, as markets continued to sift through the potential implications of Donald Trump’s surprise victory in the US presidential election.
A number of banks said they expected the dollar to strengthen next year on the back of higher US yields and inflation, which would put more pressure on the pound against the dollar, as London starts formal talks on an exit from the EU. Irish-based analysts have long said that the euro’s surge against sterling this year could be stopped in its tracks, on the outcome of key national elections in France and Germany in 2017.
“Trump in the White House will help the pound,” said Derek Halpenny, European head of global market research at Bank of Tokyo-Mitsubishi in London. “The UK Brexit vote will no longer be viewed as some kind of outlier vote but perhaps the beginning of a global shift towards more populist voting.”
Supermac’s fast food and hotels group saw pre-tax profits double to €14m, as it broke through the €100m barrier in annual revenues for the first time, with income soaring by 24.5% to €116m. Owner Pat McDonagh has diversified, and his four hotels contributed to the growth in revenues. November saw the opening of the 106th Supermac’s outlet, in Charlestown, Co Mayo, with further plans to open four or five more outlets next year.
Vietnam is expected to be the fastest-growing destination for Irish exporters in the next decade, closely followed by China, India and Malaysia, as companies continue to look east to boost trade levels. On a combined basis, the three countries are expected to account for around 40% of the total growth in Irish merchandise exports, HSBC said in its latest Irish trade forecast.
Cork-based retail group Musgrave is to start exporting SuperValu products to China after sealing a deal with internet giant Alibaba. Musgrave, which controls the SuperValu and Centra brands here, will use Alibaba’s e-commerce platform to sell SuperValu breakfast cereals, coffee, jam, biscuits and other products to consumers. Musgrave will initially offer 40 own-brand products for sale online, selling directly to Chinese consumers — the first Irish company with a presence on the platform — and will have a SuperValu storefront on the global website.
Irish SMEs warned the UK’s exit from the EU was significantly more negative for Ireland’s economy than the election of Donald Trump in the US. A survey of 100 export-focused SMEs who regularly use short-stay visas for business travel found that while Mr Trump’s presidency will impact negatively on Ireland, and a majority said Brexit would hit harder.
Residential construction edged in pole position as the most active section of the building industry, according to the Ulster Bank Purchasing Managers Index. November’s activity levels were “at a pace slightly ahead of the average seen in the sector’s three-year recovery to date”, according to Ulster Bank chief economist Simon Barry.
The Government proposed introducing rent caps of 4% for Cork City and Dublin, and will consider introducing the controls in other cities.
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