Manufacturing & Supply Chain

Ibec, the group that represents Irish business, has published the results of a major new survey which shows a drop in confidence in the manufacturing sector for the next six months compared with the same period last year and identifies the cost of energy as the No.1 challenge for manufacturing businesses in Ireland, followed by supply chain issues and access to labour.

The Ibec survey shows that the manufacturing environment in Ireland is felt to have deteriorated considerably between 2021 and 2022 – among survey respondents, the very good and good rating has gone from 89% to 53%.  But while confidence is down from last year, more than half of the manufacturers surveyed continue to be positive about the external environment (53%) and their own businesses (65%). However, optimism around sales/profitability are held in check by caution from rising costs and supply chain instability.

Speaking at the launch of the report, Sharon Higgins, Executive Director of Membership and Sectors, Ibec, said: “Having successfully emerged from the pandemic, our manufacturing businesses now face into the energy cost crisis, the highest inflation in many years, and continued supply chain issues, all playing out against the backdrop of war in Ukraine. They also have to deal with the more constant challenges; climate change, changes to the global tax regime and Brexit.

“The state exported a record  €165.2 billion of total goods in 2021, which is a testament is a testament to this diverse sector’s ability to navigate through turmoil, while simultaneously growing their organisations, increasing their input into global markets, and delivering hugely significant levels of employment and tax revenue into the Irish economy.  But manufacturing, as diverse and resilient as it is, will require support from government to keep the sector competitive and thriving.

“We know international competition for investment never stays still and competitor countries are constantly nipping at our heels. Ireland must anticipate this by never staying still ourselves; as well as nurturing our business-friendly environment, we also need to take care of the social infrastructure that is key to being a great place to live and work.  This includes addressing housing, broadband, and transport infrastructure.  We also know how important it is to focus on education, so that access to talent remains one of our key strengths.”

Amongst the key findings in the report include:

• Despite rising costs on several fronts, 62% of CEOs intend to increase their investment in sustainability over the next 6 months to future proof their business for sustainable long-term value.
• Acceleration of digital technology also remains a priority with 53% expecting to increase investment in digitalization, potentially with a view to bring operational efficiencies to scale. Energy costs/efficiency is the greatest challenge for all businesses, followed by the cost of raw materials and the cost of labour. 65% of business leaders, mostly from the pharma and medtech sectors, continue to be more bullish about the prospects for their own businesses currently. However, fewer business leaders (47%) are positive about their prospects over the next 6 months.
• Investment continues to be strong despite headwinds but almost all respondents expect increases in cost of energy (98%), wage growth (85%) and cost of raw materials (82%).
• Three out of five (62%) expect investment in environmental sustainability to increase.
• Just under half (47%) expect to increase capital investment, and over half (56%) expect to increase investment in digitalization/ advanced manufacturing.
• 38% expect to increase employee numbers.

260,000 people are employed in the Irish manufacturing sector, accounting for over 12% of total employment. The sector is responsible for €12.5 billion in wages and employment taxes annually, generating around €1.7 billion of tangible investment annually, over €4.4 billion of corporation tax, with manufacturing companies spending around €20 billion spent each year on goods and services from suppliers in the Irish economy.