Foreign direct investment (FDI) in Ireland

FDI in Figures

Ireland is an attractive destination for investment but inflows are highly volatile as they are dependent on the activities of large multinational companies that are present in the country. According to UNCTAD's World Investment Report 2022, after falling sharply from USD 149.4 billion in 2019 to USD 80.9 billion in 2020, FDI inflows to Ireland further shrank to USD 15.7 billion in 2021. Ireland dropped to the 25th rank in terms of FDI inflows, but ranked 9th in terms of FDI stock, which reached USD 1,362 billion in 2021 (UNCTAD). According to OECD data, Ireland’s inward FDI flows dropped to negative levels in Q1 2022 (USD -522 million) and in Q2 2022 (USD -36.1 billion). In addition to the COVID-19 pandemic, the war in Ukraine and inflation created a challenging business environment.

The United States is by far the largest investor in Ireland, followed by Luxembourg, offshore centres, Switzerland and the UK. FDI flows mainly target manufacturing, financial intermediation, IT and administrative services (Central Statistics Office). The structure of FDI is changing, as low-value activities are being replaced by R&D and high-end services (engineering, information and communication technologies, pharmaceuticals, medical technologies).

According to the latest The Economist’s Business Environment ranking, Ireland is a top performer, occupying the 8th position out of 82 countries. The business climate is favorable, but it worsened recently due to changes to the tax regime. Having signed the International Tax Agreement in October 2021, the corporate tax rate will be increased from 12.5% to 15% for companies with a turnover of at least EUR 750 million, reducing the attractiveness of the Irish economy. According to the Investment Promotion Agency of Ireland (IDA), more than 32,000 jobs were created through FDI in 2022 (over 24,000 net jobs). In the first half of 2022, investments were up 9% on 2021, with associated employment potential of over 18,000 jobs. In 2021, the agency announced a new five-year strategy, which aims to create 800 investments and 50,000 new jobs, focusing on five pillars: growth, transformation, regions, sustainability and impact. Among the country's assets are an attractive tax and legal framework, a skilled and multicultural labour force, and strong ties with the United States. Ireland is also the only English-speaking country of the euro zone.

What to consider if you invest in Ireland

Strong Points

Ireland's strong points include:

• Strong and tightly knit industrial and tertiary fabric
• One of the lowest corporate tax rate in Europe
• Young, skilled and multilingual workforce
• Competitive economy, with pro-business government policies and regulators
• Modern infrastructure
• One of the lowest unemployment rates in Europe
• Strong and stable domestic demand, notably thanks to high wages and living standards.

Weak Points

Ireland's weak points in term of FDI attractiveness include:

• The economy is voluntarily very open internationally and therefore highly dependent on the European economy (especially on the UK) as well as the strategies of multinationals that are currently attracted by favourable taxation
• The economy is highly dependent on the activities of  multinationals: their offshore business, mainly in the form of contract to manufacture abroad, accounts for a quarter of GDP and has a great deal of weight in the labour market
• Exposure to the consequences of Brexit
• High labor and operating costs
• Internal market is relatively small and is under increasing pressure on labour costs
• Banking sector remains vulnerable to shocks and the level of public and private debt remains high.

Government Measures to Motivate or Restrict FDI

For years, the Irish Government has actively promoted foreign direct investment (FDI). Ireland provides an attractive taxation framework for foreign investors and has one of the lowest taxation rates in the European Union. This strategy has fuelled robust economic growth since the late 1990s.

More recently, the Government has focused on Ireland’s international competitiveness by encouraging companies with foreign investments to increase their research and development (R&D) activities and to provide goods and services with higher added value. The United Kingdom’s departure from the EU (Brexit) leaves Ireland as the only remaining English-speaking country in the EU, an asset for the country.

Several state organisations promote investment inflows:

• The Industrial Development Authority of Ireland (IDA)
• Enterprise Ireland
• Udaras na Gaeltachta

The Irish government provides aid grants through its investment organizations, which will only pay grant aid after the foreign investors have achieved externally audited performance targets.

The government has invested heavily in ambitious programs to attract the best researchers specialised in business. Science Foundation Ireland (SFI) is the state science agency that has been responsible for administering Ireland’s R&D funding.
In the same vein, by investing in the entrepreneurial ecosystem, the state seeks to attract entrepreneurs to Ireland who wish to create start-ups with a strong international orientation.

Bilateral investment conventions signed by Ireland

To see the list of investment treaties signed by Ireland, consult UNCTAD's International Investment Agreements Navigator.