Business Irish

Monday 23 April 2018

Foreign-owned firms spend 'just fraction of budgets here'

Foreign-owned companies bought only 17.5pc of their materials and services from Irish suppliers, research from Forfas has found
Foreign-owned companies bought only 17.5pc of their materials and services from Irish suppliers, research from Forfas has found
Sarah McCabe

Sarah McCabe

Foreign-owned companies operating in Ireland spend just a fraction of their budgets on the local economy, research has found.

These firms overwhelmingly prefer to import materials and services rather than source them from Irish suppliers, research from government advisory body Forfas reveals.

They bought a mere 17.5pc of their materials and services from Irish providers in 2012, opting to source the vast majority overseas, the research shows.

The study examined the spending behaviour of foreign-owned firms in Ireland who were 'agency assisted', meaning they have dealt with state enterprise agencies such as IDA Ireland, Shannon Development and Enterprise Ireland – a pool of hundreds of companies, from Microsoft to medical device manufacturers.

The firms bought just 14pc of their raw materials from Irish suppliers in 2012, spending only €3.2bn of a total materials budget of €24.1bn.

Services spending was only marginally better, with a mere 21pc of services (everything from transport to legal advice) provided by Irish companies – only €11bn out of a total services budget of €53bn.

Sinn Fein jobs spokesman Peadar Toibin said the results were proof that government priority for foreign direct investment (FDI) over other forms of job creation was not working as well as had been thought. "The lack of integration between FDI and the local economy is shocking. They might have Irish operations, but many of their business models and logistics models are completely isolated and geared towards imports," Mr Toibin said.

Countries such as Germany, where policy emphasis is placed on encouraging foreign companies to engage with the local economy, utilise FDI far more effectively, he said. "There's a major opportunity sitting on our doorstep. Encouraging existing multinationals that are already here to draw on local suppliers and services could be far more beneficial than trying to constantly attract new ones, and probably cost the Government less too," he added.

The study showed a downwards trend; the purchase of local materials is down by about a fifth since 2002, while the purchase of local services has been halved.

The medical device sector and chemicals industry were some of the worst offenders, with the vast majority of their materials and services sourced from elsewhere.

The best performers were foreign-owned manufacturers of traditional products and food, drink and tobacco companies – but they still spent only two-fifths of their total purchases budget in Ireland in 2012, on average.

Irish Independent

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