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News : Irish Economy Last Updated: Nov 25, 2010 - 7:19:50 AM

Foreign-owned firms accounted for 91% of Ireland's tradeable exports in 2009; Food & drink exports fell 15%
By Michael Hennigan, Founder and Editor of Finfacts
Nov 24, 2010 - 6:34:36 AM

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Foreign-owned firms, mainly American, accounted for 91% of Ireland's tradeable goods and services exports in 2009. Food and drink exports, which come mainly from the indigenous sector, fell 15%.

The Forfás Annual Business Survey of Economic Impact, was published on Tuesday and provides aggregated estimates for state enterprise agency assisted Irish-owned and foreign-owned firms for variables such as sales; exports; expenditure on wages/salaries and related costs; and purchases of raw materials and services.

The survey covers the client base of Enterprise Ireland, IDA Ireland, Shannon Development and Údarás na Gaeltachta and the total value of exports reported is €126bn compared with €151bn as reported by the Central Statistics Office (CSO) for 2009. In current price terms, exports increased from €105bn in 2000 to €151bn in 2009 but there was no net jobs growth in the sector.

The difference of €25bn between the Forfás total for 2009 and the CSO total is accounted for by tourism, transport (mainly airlines e.g Ryanair), re-exports, Irish financial institutions' foreign earnings and some financial transactions at Dublin's International Financial Services Centre (IFSC) not covered in the survey, including tax haven activities.

Export earnings for Irish-owned firms was €11.5bn and the earnings for the foreign sector was €114.4bn. Indigenous exports accounted for 8.7% of the total.

Services accounted for €3bn or 28.6% of indigenous exports and 5.3% of total tradeable services exports of €60bn.

Average pay per employee was 20% higher in the foreign sector than in Irish-owned firms.

The indigenous food and drink sector saw sales decline by 10.7% in 2009 and exports by 15%. The euro exchange rate with sterling was a contributing factor to this result. Exports in traditional manufacturing also saw a decrease of 15.5% in 2009 over 2008. In contrast, the relatively small sector of modern manufacturing & energy reported a small growth in exports in 2009 of 2% on the previous year.

Export growth among Irish-owned internationally traded services was over 7% during 2009. Exports of information, communication & computer services among Irish-owned firms were strong, with growth of almost 12% between 2008 and 2009 compared with 2.8% for the period 2000-2009. While the business, financial and other services sectors also saw growth in 2009 with 5.6% over 2008 and giving an increase of almost 14% for the period from 2000-2009.

Export growth of 2.6% per annum over the period 2000-2009 for all sectors compares with the 2.3% per annum growth in total sales among indigenous companies.

On a per-annum basis between 2000 and 2009, export growth had been higher in internationally traded services sectors (8.7%) compared to the manufacturing industries (0.9%) though this has been from a much lower base. Though in monetary terms, manufacturing exports at €8bn are almost two and half times that of exports in internationally traded services sector at €3.2bn.

The food and drink sector exported  almost 47% of output in 2009.

Payroll costs per employee in Irish-owned manufacturing and internationally traded services sectors averaged at €47,700 in 2009, representing an increase of 5.8% per annum over the period 2000-2009. The broad manufacturing sectors have an average payroll costs per employee of approximately €43,000, compared to the internationally traded services sector which had an average payroll cost per employee of €60,500 in 2009. Payroll costs in business, financial & other sectors were highest at €63,000 in 2009.

The rates of increases in payroll costs per employee in both the internationally traded services and manufacturing sectors have been relatively close, at 6.7 and 5%, respectively between 2000 and 2009.

Total sales of agency assisted foreign-owned manufacturing and internationally trading services companies declined by 7% in nominal terms and amounted to €119bn in 2009.

Manufacturing & other industry sectors accounted for €65bn of this total which equates to almost 55% of all sales in foreign-owned companies.

Chemicals are the largest sector on the manufacturing side and reported a 16% increase in sales from 2008 and stands at €39bn in 2009.

The second largest sector is computer & electronics and here there was a significant decrease in sales of 50% to €10bn.

Medical Devices have shown steady growth over the course of this survey and 2009 was another good year for that sector showing an increase of almost 9%.

Between 2008 and 2009, there was a decline in the foreign-owned food & drink sector (Guinness and Irish Distillers are included in this data) of 14% with sales totalling €5.2bn. Over the course of this survey between 2000-2009 there has been a per annum increase of 5% in this sector.

The international services base reported a decrease of 4.5% in 2009. However services have grown 7.8% per annum between 2000 and 2009 and now represent 45% of total sales by foreign-owned client firms. The information, communication and computer sector had sales of €51bn – a decrease of 4.7% over 2008.

The survey says in terms of employment it is interesting to note that there are some areas where sales and employment levels are disproportionate. The chemicals sector accounts for 33% of the reported sales, but it comprises only 16% of the employment in foreign-owned companies in Ireland. In traditional manufacturing and medical devices sales represent less than 10% of total sales but both sectors account for over 31% of employment.

There is a stronger correlation in the services sectors between share of sales and numbers employed. Overall Services accounted for 45% of sales and 35% of employment in 2009.

Manufacturing sectors accounted for 55% of all exports in foreign-owned companies in Ireland in 2009. Manufacturing exports by foreign companies declined between 2008 and 2009 by 10% – - a decline that was driven mainly by the computer, electronic and optical products sector. However during the period 2000-2009 there has been a per annum increase in exports of 3% during this period.

Exports were down significantly in 2009 for the computer & electronics sector by 50%. Traditional manufacturing also saw a decline in exports in 2009 of 27% in what was a very difficult year for business.

In the Internationally Traded Services sector exports account for the majority of sales and have increased from 92% in 2000 to almost 96% in 2009. Overall exports decreased by 4% in 2009 over 2008 and now stand at €51.8bn. There has been an increase of exports in the Internationally Traded services sectors during the period of this survey 2000-2009 of over 8%.

Payroll costs account for around 12% of the reported value added of foreign manufacturing and internationally traded services. Payroll costs comprise almost half of all value added in the Traditional Manufacturing sector, but 7.6% of the chemicals sector.

Total payroll costs per person employed averaged €59,200 in 2009, representing an increase of 5.7% per annum in nominal terms over the period 2000-2009. Payroll costs per employee are roughly on a par in both the international services sector and the manufacturing sector; averaging €62,800 and €57,200 respectively in 2009.

The chemicals sector has higher average payroll costs per capita than other manufacturing sectors (€71,200); however, it has the lowest ratio of payroll cost as a%age of value added (7.6%).

Irish food and drink exports fell in both 2008 and 2009 while the sector has become increasingly important for Germany. Meanwhile, the UK has also seen exports grow and the balance of trade with Ireland, may turn positive for it.

In 2008, Germany became a net exporter of food and drink for the first time according to modern trade data.

While exports grew 12% in 2008 and dipped by 5% in 2009, exports as a ratio of output have grown from 20% in 2000 to 26% in 2009.

Germany is Europe's second biggest food and drinks producer and the food and beverage industry is the fourth largest industry sector in Germany

UK food and drinks exports have grown for five straight years and Ireland is its biggest customer.

UK food and drinks exports grew by more than 5% in 2009 when Ireland's dipped by 15%.

Irish food agency Bord Bia has said the competitive threat on the Irish market is highlighted by rising food imports which on a per capita basis have increased by 50% since 2000 to €1,070 in 2007, with growth strongest in the meat, vegetable and prepared foods categories. In terms of meat, strongest import growth has been evident in pigmeat and poultry putting significant pressure on local processors to maintain a viable business on the Irish market. It is estimated that as much as 90% of poultry and 60% of pigmeat sold at foodservice level consists of imported products.

UK supermarket giant Tesco accounts for 25% of the Irish retail market.

Ireland is an increasingly important market for British food/drink exports, accounting for 27% of total earnings. Imports of food and drink from the UK topped €2.99bn in 2009, an increase of 6%.

There is a positive trade balance for Ireland of about €500m but it's eroding fast.

Total food & drink exports from the indigenous sector were valued at €5.4bn in 2009, €6.3bn in 2008, €6.4bn in 2002 and €4.8bn in 2000.

There are 45,000 directly employed in the mainly foreign-owned chemical/medical devices sectors; there are about 47,000 directly employed in the Irish food and drinks sector.

SEE: Ireland: A "smart" economy in food better than pie-in-the-sky aspirations?

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