Business leaders in Ireland more positive about foreign direct investment

The findings of this survey are a valuable insight into the views of Irish company Chief Executives on the business environment as Ireland enters economic recovery. Our economy is on the turn and we must keep our focus on key areas for recovery: competitiveness; human capital; innovation; infrastructure; green economy; and trade.

A quarter more MNCs with Irish operations are considering additional investment in Ireland compared to last year - Irish business leaders confirm confidence is returning.

This is according to the PricewaterhouseCoopers (PwC) 2010 CEO Pulse Survey launched today. The survey gives a snapshot of the views of over 200 CEOs on Ireland's business environment and the challenges and opportunities it presents for corporate Ireland.

MNC CEOs are more upbeat about the prospects for foreign direct investment with 40% saying they are considering additional investment in Ireland, up from 32% last year. Three-quarters (75%) said they are neither reducing investment nor closing existing operations in Ireland. It is notable that the number of respondents considering closing operations in Ireland is down by almost half on last year, down to 8% from 15% in the previous year. MNC CEOs cited improving cost competitiveness (51%) as a critical factor to maintaining or increasing Ireland's attractiveness as a location for foreign direct investment. This was followed by a continued commitment to a stable and low tax environment (43%) and enhancing investment in education (30%).

The survey, which covers CEOs from both indigenous and multi-national businesses, also points to clear actions for Government. While action has been taken by Government to address Ireland's budget deficit and fiscal position, business is now looking for Government to drive the recovery agenda in other areas. Top of the list for action is reducing public sector expenditure; promoting growth for the SME sector; restoring credit, and further incentivising innovation.

Other survey findings include:

• Almost a third (29%) of Irish CEOs are favourable about the outlook for the Irish economy for the next 12 months compared to just 3% last year;
• 17% expect Ireland's economy to return to growth this year; with a further 51% expecting this growth to return in 2011;
• An overwhelming majority (86%) said that responding to changing customer purchasing behaviour and their approach to risk management (78%) are the top two key drivers for change in the business operating model going forward;
• Reviewing key contracts will be the single most popular cost reduction initiative (76%) in the next year;
• Launching new products will be the key driver of business development (73%). A quarter (24%) also see opportunities for a merger or acquisition;
• Only a third (35%) of Irish CEOs see climate change as a top business priority compared to 62% last year;

Launching the survey, the Minister for Enterprise, Trade and Innovation, Batt O'Keeffe, T.D., said:

The findings of this survey are a valuable insight into the views of Irish company Chief Executives on the business environment as Ireland enters economic recovery. Our economy is on the turn and we must keep our focus on key areas for recovery: competitiveness; human capital; innovation; infrastructure; green economy; and trade. One of the most important findings of the PwC survey is that confidence among job creators has improved dramatically. Confidence is key confidence to lend, confidence to spend, confidence to invest, and confidence to hire. Creating new jobs, sustaining existing ones and re-skilling those who find themselves out of work will underpin our recovery and return to growth.

The survey also highlights that clear challenges remain for Ireland's economy particularly around cost competitiveness and availability of finance. Reinstatement of lost competitiveness was cited as the most critical factor for Ireland's recovery (68%) followed by increasing the availability of finance (61%). The survey suggests that businesses continue to tackle these challenges head-on as they prepare their businesses for the economic upturn. Three quarters (76%) will look to reviewing key contracts to achieve further cost savings. The majority (73%) expect to implement a basic pay freeze over the coming 12 months.

Speaking at the survey launch, Ronan Murphy, Senior Partner, PwC, said:

The survey confirms a sentiment of cautious optimism and confidence with the majority of Ireland's business leaders expecting growth in both revenues and profits over the next year. Irish companies have set a smarter course for growth as they complete internal reorganisations and remain very alert to emerging opportunities.

Key business development opportunities will be derived from launching new products (73%), entering new markets (42%) and planning a merger or acquisition (24%). The survey suggests that now is a good time to grow by acquisition due to the perceived value in the marketplace.

Ann O'Connell, Consulting Partner, PwC added:

The survey highlights some significant refocusing of business models and value propositions by Irish companies in the wake of the economic crisis. Across all sectors, there has been a profound shift in customer purchasing patterns, with greater focus on buying smart and seeking greater value-for-money. As a consequence, businesses are responding imaginatively in order to hold and increase their share of wallet.

Risk management (78%) is high on the CEO agenda. The survey suggests that risk management is clearly taking on greater importance as a result of the recession as CEOs begin to reshape their strategies. This will produce sustainable long-term benefits for organisations  along with their shareholders, employees, customers and communities

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ENDS

Notes to editor:
The survey was conducted in May 2010. There were over 200 CEO participants from Ireland's top companies covering a range of sectors and ownership types.