A major new survey showing a drop in confidence in the manufacturing sector for the next six months compared with the same period last year identifies the cost of energy as the principal challenge for Irish manufacturing businesses, followed by supply chain issues and access to labour.
The survey by Ibec, Ireland’s largest lobby and business representative group, shows that the manufacturing environment in Ireland is felt to have deteriorated considerably between 2021 and 2022 among survey respondents, the very good and good rating has gone from 89% to 53%.
Yet, while confidence is down from last year, more than half of the manufacturers surveyed continue to be positive about the external environment (53%) and their own businesses (65%). However, optimism around sales/profitability are held in check by caution from rising costs and supply chain instability.
“Having successfully emerged from the pandemic, our manufacturing businesses now face into the energy cost crisis, the highest inflation in many years, and continued supply chain issues, all playing out against the backdrop of war in Ukraine,” said Sharon Higgins, Ibec Executive Director of Membership and Sectors.
While also dealing with the more constant challenges of climate change, global tax regime changes and Brexit, she pointed to exporting a record €165.2bn of total goods in 2021 as a testament to this diverse sector’s ability to navigate through turmoil, while simultaneously growing their organisations, increasing their input into global markets, and delivering significant levels of employment and tax revenue into the Irish economy.
“But manufacturing, as diverse and resilient as it is, will require support from government to keep the sector competitive and thriving,” she cautions. “We know international competition for investment never stays still and competitor countries are constantly nipping at our heels.”
Ireland must anticipate this “by never staying still ourselves,” as well as nurturing a business-friendly environment, and taking care of the social infrastructure that is key to being a great place to live and work. This includes addressing housing, broadband, and transport infrastructure.
“We also know how important it is to focus on education, so that access to talent remains one of our key strengths,” she added. Acceleration of digital technology also remains a priority with 53% expecting to increase investment in digitalisation, potentially with a view to bring operational efficiencies to scale.
While 65% of business leaders, mostly from the pharma and medtech sectors, continue to be more bullish about the prospects for their own businesses currently, fewer business leaders (47%) are positive about their prospects over the next six months.
- Despite rising costs on several fronts, 62% of CEOs intend to increase their investment in sustainability over the next 6 months to future proof their business for sustainable long-term value.
- Investment continues to be strong despite headwinds, but almost all respondents expect increases in cost of energy (98%), wage growth (85%) and cost of raw materials (82%).
- Three out of five (62%) expect investment in environmental sustainability to increase.
- Just under half (47%) expect to increase capital investment, and over half (56%) expect to increase investment in digitalisation/ advanced manufacturing.
- 38% expect to increase employee numbers.
The Irish manufacturing sector employs 260,000 people, accounting for over 12% of total employment.
The sector is responsible for €12.5 billion in wages and employment taxes annually, generating a yearly €1.7 billion of tangible investment, over €4.4 billion of corporation tax, with manufacturing companies spending around €20 billion spent each year on goods and services from suppliers in the Irish economy.
Sharon Higgins underlines how the data reveals a modern manufacturing sector, central to Ireland’s economic success, running counter to traditional perceptions based around a low tech factory floor environment.
“The high tech manufacturing sector now has deep roots across every county, operating in modern facilities that are designed for the cutting edge technology needed in the advanced manufacturing process,” she explains. “And the careers that our people can experience in these environments are also a far cry from the old idea of factory work; high skilled, exciting careers delivering products and services that are tangible and valued by the global community. From advanced drug therapies and medical devices in the pharma sector to high quality food products in our world renowned food and agri sectors, our people operate to the highest manufacturing standards to meet the needs of the global community.”
She points to the development of strong clusters in life sciences, technology, food and drink over many years: “Our ecosystem has been highly supportive and adaptive, enabling ongoing FDI investment and transformation. But international competition for multi-national investment is aggressive and unrelenting, and this puts the onus on Ireland to remain highly vigilant, agile and visionary, and to invest in the future at all times.”
A hard-working, highly skilled and agile talent pool is often cited as the number one reason FDI will choose where to locate, and Ireland has an extremely strong reputation for its talented workforce. “One thing we’ve learned from the pandemic is that we are even more adaptive and resilient than we thought, as we seamlessly and successfully pivoted our businesses in many ways in order to deal with the challenges of the various restrictions.
In some ways, this has merely hastened change that was already coming, for example, in the retail sector which has been forced to pivot to the online environment in order to survive. Covid-19 has provided us with a taster of the kind of adaptations that will be required of us as technology accelerates the pace of change.”
Navigating the disruption in 2020 and 2021 has required all of us to develop new skills, agility and resilience, according to Ibec’s Director, Member Services, Sharon Higgins.
“The challenge, as we emerge from the restrictions, is to keep learning and developing new ways of doing business. Lifelong learning is critical to that, but Ireland, which already has a lower rate of lifelong learning participation than some of its peers, must now continue to boost investment in upskilling despite the uncertainties facing learning and training budgets.”
Ibec research indicates that over 35% of businesses are seeking, as a priority, targeted supports for employee upskilling and retraining, to help them return their business to pre-crisis level of activity, which is an indication that business knows what is needed and is trying to respond.
“We have for a long time recognised the importance of bridging the gap between education and industry to boost our talent pipeline and build stronger businesses. We can anticipate that the global war for talent and rapid changes in technology and consumer behaviour skills, will be greatly heightened as economies seek to adjust to the post-pandemic world. This makes it more important and timely to focus on upskilling our people to compete for the high skilled jobs.”
An education system that is more closely aligned with business needs will have a better chance of turning out graduates who will be in demand - and thus more collaboration between education and training programmes and industry are essential.
“We need to broaden our thinking around university degree programmes, seeking to develop the basic skills needed by graduates on entry to their chosen profession, but not necessarily viewing this as the completed educational journey, i.e. opening our minds to more on the job training, apprenticeships and other pathways to high skilled employment.”
Ms Higgins references a number of Ireland’s potential problem areas that urgently need attention - fundamental economic issues that include access to housing, broadband and road infrastructure. Some are particular to industry, particularly our high cost of labour which could prove a major drawback in the Foreign Direct Investment decisions. We need to review where we can realistically and sensibly take cost out of the system for employers and employees and regain some cost competitiveness, she believes.
Recognising that technology will continue to advance exponentially, with the power to fundamentally change the manufacturing processes on an almost constant basis, we need to understand more about how to ‘cross fertilise’ our skills and apply collaborative strengths to drive better innovation.
“We need to focus on developing and enabling those who will lead the tech advancements, the Next Generation Leaders, so that Ireland continues to have a central role in building successful multi-national businesses,” she concludes. “As our people and our economy emerges from the lockdown, now is the time to plan for the future.”
Ibec is Ireland’s largest and most influential business lobby and representative group, with their members employing over 70% of private sector workers. Together with their trade associations, Ibec lobby government, policymakers and other key stakeholders with evidenced-based policies designed to positively shape business conditions and drive economic growth. As well as lobbying, Ibec provides a wide range of professional services and management training to members on all aspects of human resource management, occupational health and safety, employee relations and employment law.
To find out more, visit www.ibec.ie/cork.
Ibec is Ireland’s largest and most influential business lobby and representative group, with their members employing over 70% of private sector workers. Ibec has over 39 trade associations that support, champion, advocate, provide great knowledge sharing, networking and training across all industries, with some of our larger trade associations representing the biopharmaceuticals, electronics, medical technology, and food production sectors.
Together with its trade associations, Ibec lobbies government, policymakers and other key stakeholders with evidenced-based policies designed to positively shape business conditions and drive economic growth.
As well as lobbying, Ibec provides a wide range of professional services and management training to members on all aspects of human resource management, occupational health and safety, employee relations and employment law.
To find out more on how Ibec is supporting Ireland’s manufacturers, visit www.Ibec.ie/manufacturinginireland.