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News : Irish Economy Last Updated: Feb 23, 2015 - 4:24 PM


Ireland has 4,000 exporters, Denmark has 30,000
By Michael Hennigan, Finfacts founder and editor
Jan 13, 2015 - 8:36 AM

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Enterprise Ireland, the State agency responsible for the indigenous exporting sector on Monday announced that client firms added 19,705 new jobs in 2014 resulting in a net addition of 8,476 jobs to total over 180,000. Here we look at the number of exporters in Ireland and a comparable country, Denmark, which is both an important food producer and successful knowledge economy.

Denmark's export GDP ratio is about 55% of GDP, which compares with Ireland's 100%  but because of the significance of inward FDI (foreign direct investment) for Ireland - stock in 2012 was at 142% of GDP compared with 47% in Denmark - in particular with a dependence on the US and related tax avoidance that boosts exports data, we argue that for a more realistic comparison, annual export value should be adjusted from €184bn to €100bn, giving a ratio of 68% of GNP.

Enterprise Ireland clients were responsible for €18bn worth of exports in 2013 and adding tourism and transport would give a ratio of about 25% for total indigenous exports related to the adjusted total annual exports.

Enterprise Ireland has almost 3,000 client firms and the number of FDI firms is over 1,000.

The European Commission published data in 2014 which show that SMEs (firms with up to 249 employees) with intra-EU exports of goods (percentage of SMEs in industry) in 2011 was at 23.15% for Denmark compared with an average of 13.899% in the then EU27.

Based on the indicators available for measuring internationalisation, Denmark exceeds by far the EU average. The Commission said: "This positive situation is both the result of advantageous general framework conditions for trading — as shown by the indicators measuring the time, cost, and number of documents required for importing or exporting — and the significantly stronger performance of Danish SMEs. In 2011, about 20% of Danish manufacturing SMEs reported exports of goods to third-country markets, a level of performance that is far above the EU average of 9.7% and one of the best in Europe."

There is no comparable data for Ireland but only 3% of Irish SMEs are active in manufacturing, whereas the equivalent figure for the EU is 10%, according to the European Commission.

SMEs with intra-EU exports of goods (percentage of SMEs in industry); 2011; Germany: 18.72%; EU average: 13.89%;

SMEs with extra-EU exports of goods (percentage of SMEs in industry); 2011; Germany: 13.39%; EU average: 9.68%;

SMEs with intra-EU exports of goods (percentage of SMEs in industry); 2011; France: 4.41%; EU average: 13.89%;

SMEs with extra-EU exports of goods (percentage of SMEs in industry); 2011; France: 8.26%; EU average: 9.68%;

In 2010 a report prepared for the European Commission was based on a large scale survey of 9,480 firms in 33 European countries.

It found that 25% of SMEs within the EU27 export, of which about 50% also go beyond the Internal Market (13%).

The share exporting; importing or active in subcontracting is at least twice as high for medium-sized enterprises as for micro enterprises while the six largest EU economies, i.e. France, Germany, Italy, Poland, Spain and the United Kingdom represented over 70% of all SMEs of EU27. Of these six large EU economies, four countries i.e. Germany, France, Spain, and the United Kingdom had a lower than average percentage of SMEs exporting.

24% of Irish firms in the sample including foreign-owned, exported compared an EU average of 25%; 41% in Denmark, 39% in Sweden and above 30% in Greece, Belgium, Netherlands and Portugal.

Destatis, the German federal statistics office, said in 2014 that 340,000 firms exported goods in 2013; France says it has 120,000 exporting companies: two thirds less than Germany, and half as many as Italy.

The Spanish Economy Ministry reported last November that in 2013, 150,992 Spanish firms sold products abroad, 10.2% more than in 2012, and 48.9% more than in 2008. What is more, the number of firms that export regularly rose by 7.3% in 2013 and reached 41,163, reversing for the second year in a row the previous downward trend (-3.9% in 2011, -1.4% in 2010 and -0.8% in 2009).

A Lloyds Bank report found that most UK businesses with a turnover of between £25m and £750m are too conservative and reluctant to expand into fast-growing markets overseas, despite business confidence reaching a 22-year high. Almost three out of five firms said they do not currently export, and less than one in 10 is considering exporting within the next five years.

This reluctance to sell abroad is a setback for the chancellor, George Osborne, who aims to double UK exports to £1tn by 2020. "He argues that rebalancing the economy away from consumer spending and towards manufacturing and exports will put the UK on a more sustainable path for the future."

Eighty six per cent of UK Trade & Investment (UKTI) clients said that exporting led to a level of growth not otherwise possible (compared to 57% of companies not using UKTI services). Companies that export become 34% more productive in the first year alone.  UKTI said: "We have increased the number of businesses we support from 27,000 in 2009/10 to almost 48,000 in 2013/14."

The US Department of Commerce has said that about 305,000 firms exported goods in 2012 comprising 6,872 large firms and 297,995 SMEs, (defined as having less than 500 employees) who accounted for a third of the value of goods exports.

In 2012, 59% of US SMEs exported to only one market and more than half of large exporters recorded sales to at least five foreign markets.

The population ratio per exporting firm is 187 in Denmark; 236 in Germany; 550 in France and 1,150 in Ireland" - Michael Hennigan

Denmark vs Ireland

About two-thirds of Irish indigenous exports go to English-speaking countries and language is a factor in the poor export performance in mainland Europe.

The Danish government said last year: "Ten percent of the approximately 300,000 Danish companies export. Of these 30,000 exporting companies, approximately 10% account for 90% of total exports. The 100 largest exporters alone account for approximately 50% of total exports. About 75% of Danish exports of goods go to European countries and an additional 6 - 7% go to the United States.

Only 15 - 20% of exports go to economies outside of the OECD area – the very economies where the bulk of global growth is expected to occur in the coming decades."

Up to a fifth to emerging and developing economies is a good performance!

Foreign firms account for about 94% of Ireland's exports to China.

We have estimated that about 40 American firms account for two-thirds of Ireland's annual headline exports.

The French Treasury said in 2009: "A very small number of firms account for the bulk of...exports, with the top thousand exporters representing 70% of total export revenues."

It added: "Generally, French SMEs are restricted in their international development by their small size and limited innovative capacity. When they export, they export to just one or two countries, generally to neighbouring countries, and 30% fail to hold onto their market for more than a year. German SMEs, which are larger and more innovative, are also bigger exporters, with exports accounting for a larger share of their total revenue, and they also export more regularly."

The statistic that almost a third fail to hold onto their market for more than a year is a sobering one, irrespective of the country.

Denmark is the most expensive country in the European Union but Ireland was the fifth most expensive in 2013 despite a lower standard of living.

German per capita standard of living highest in Europe; Ireland below EU average

If Ireland is to reduce its dependence on American FDI and mainly administration jobs, then it will have to more than aspire to become Denmark.

Denmark has many more firms and in 2013 its food & drinks exports were 60% higher than Ireland's and it has a significant business research base.

Enterprise Ireland said on Monday:

In 2014 we transferred a total of 29 clients employing over 700 people to IDA Ireland as a result of mergers and acquisitions that resulted in the Irish entity becoming majority foreign owned. These leading Irish technology players are expected to continue to grow substantially in the future and help embed MNCs even deeper in Ireland. It is a testament to the quality of their products and services that they have attracted the interest of the world’s best companies."

This is naive because it's hardly a rational way to find the elusive formula for a credible knowledge economy — venture capitalists like to take the money when the going is good and the promoters sometimes including academics are offered the opportunity to become rich — meanwhile the taxpayer is called on again for more grants under its new status and wonder how much of the State spending on science policy of an inflation-adjusted €24bn, has ended down the drain.

Usually the purpose of the acquisition is to acquire a startup's technology not buildup an Irish company.

In 2011, Richard Bruton, enterprise minister, dreamed of creating a Google or Microsoft in Ireland - with no local market and zero chance that such a project would have remained in Ireland:

If we are to get out of this crisis, we must work hard to create an indigenous engine of growth. While multinational investment in Ireland is and will remain crucial, it is vital that we find ways of enabling our indigenous firms to perform better and take full advantage of export opportunities. As I have said before, our industrial policy must not just be aimed at attracting the next Google or Microsoft to Ireland – we must strive to create the next Google or Microsoft here in Ireland."

When was the last time that an acquired firm was scaled-up to be a significant firm in Ireland with a payback to the taxpayer??

Remember Elan? From most valuable Irish firm to a cash/ royalty shell

It is not an easy challenge to develop a high-performance indigenous sector and opening new export markets is only easy to people living a sheltered life!

Benchmarking Irish food & drinks industry in 2015 - Part 1

Ireland: Only 3% of Irish SMEs are active in manufacturing - Part 2

Scotch whisky exports at £3.9bn; Irish whiskey exports at €365m

Enterprise Ireland says a net 8,476 jobs were added by client firms in 2014

Ireland: Jobs in foreign-owned exporting sector in 2014 below 2000 level

Forty American firms account for two-thirds of Irish exports

The idiot/ eejit's guide to distorted Irish national economic data

Germany's more than 1,300 'Hidden Champions'

Europe's Worst Exporter: Poor export and FDI performance of Greece

Chinese investment into Europe at record high; UK on top, Ireland hopes

Ireland 2016: "Best small country in the world" for business? - a FAIL

Analysis: Germany world's top surplus economy; UK tops deficit ranks

Italy's SMEs poor exporters compared with counterparts in Germany, Spain

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