Multinationals producing five times more than Irish-owned firms, figures indicate

It has been suggested that some of the manufacturing output by large multinationals in other countries has been included in these Irish productivity figures.

Activity was largely driven by the pharmaceutical sector, among other big players such as technology companies.

Multinationals boosted Ireland’s economy during the pandemic as foreign-owned firms were five times more productive than domestic companies in 2021, according to figures from the Central Statistics Office (CSO).

This activity was largely driven by the pharmaceutical sector, among other big players such as technology companies, which ramped up productivity in the covid years by making and exporting vaccines, among other essential equipment and medicine.

National Accounts Productivity in Ireland 2021. Source: CSO

Meanwhile, domestic labour productivity declined by 1%. This was associated with a slow return to work in sectors such as hospitality, transport, construction, and arts as lockdown restrictions were gradually eased.

However, it has been suggested that some of the manufacturing output by these large companies in other countries has been included in these Irish productivity figures, as many multinationals have headquarters in Ireland. 

“If you get an Apple iPhone that’s manufactured in China and it’s exported to Los Angeles, that is appearing in our net export figures,” said Isme chief executive Neil McDonnell.

It is understood this will be a key point in a pre-budget submission by the business group, which is set to be published in full on Wednesday.

“Covid drugs were made here on the island,” said Mr McDonnell.

So that’s a real product that was exported from Ringaskiddy, for example. That’s real money. 

"But if it relates to transfer pricing by a company to avail of our corporation tax, then it isn’t."

Two-speed economy

Ireland is often described as having a 'two-speed' economy, in which the growth in output for foreign-owned multinational enterprises far outpaces that of the domestic economy. But this may be slightly skewed, as Isme is concerned that around a quarter of the manufacturing output by these firms, which contributes to the overall productivity figures, occurred outside of Ireland. 

Its submission is expected to say that there are some estimates that up to 25% of Ireland’s improved net export performance is attributable to third-country manufacturing.

The CSO figures also highlighted that while Ireland had one of the highest productivity levels in the EU, it reported greenhouse gas emissions per employee in 2021 were over 1.5 times that of the EU average. 

Ireland’s economy continues to depend on the large multinational presence across the country. 

Separate CSO figures from earlier this year showed the value of Irish goods exports reached a record high in 2022, rising to €208bn year-on-year despite a sharp downturn in economic activity. This represents a €42bn increase compared to 2021, with the record-breaking figure largely driven by Ireland's pharmaceutical and scientific sectors.

More recently, the Government collected a record €19.7bn in tax revenues in the March quarter, up by €2.5bn from a year earlier, which corporation tax receipts contributed to.