While most world economies shrank during the first year of the COVID-19 pandemic, Ireland was one of the few that trended upward. Ireland’s 3.4% GDP growth far outpaced the rest of Europe, as countries in the region contracted by an average of 7.4%. Ireland also recorded higher growth than China, which many experts considered the world’s most successful economy during COVID-19.
Ireland’s strong growth doesn’t indicate the country didn’t face challenges during the pandemic. GDP is an inexact measure of economic prosperity because it does not account for how wealth is distributed. Officials in Ireland estimate the country’s unemployment rate reached 25% as recently as February.
Still, Ireland’s bullish economic performance amidst a worldwide recession cannot be ignored—particularly by companies eyeing profitable markets for international expansion. That’s because global companies with a presence in Ireland drove much of the country’s GDP growth in 2020. According to Ireland’s Central Statistics Office, multinational companies in Ireland saw 18.2% growth last year while other sectors contracted by 9.5%.
The tremendous performance of these foreign companies underscores a key point: Ireland’s business environment is exceptionally favorable to overseas businesses. Read on to discover three reasons why companies choose Ireland as a base for their international operations.
Ireland’s Corporate Tax Rate Is One of Europe’s Lowest
In 2003, Ireland lowered its corporate tax rate to 12.5%—one of the most business-friendly rates in Europe.
Portugal enforces the highest corporate tax rate—31.5%—of any European nation in the Organisation for Economic Development (OECD). Germany and France hover close behind with rates around 29%. Among European OECD countries, Ireland’s 12.5% tax rate is far below the average of 21.7%, trailing only Hungary (9%) for the lowest rate overall.
Ireland’s low tax rate makes it highly appealing for companies looking for a cost-efficient base of operations in Europe. Pharmaceutical giants like Pfizer, Merck, Novartis, and Johnson & Johnson all have production facilities, research and development centers, or administrative offices in Ireland. Tech companies also take advantage of the company-friendly tax rate, as Google and Facebook both have set up headquarters in Dublin.
While the low tax rate is a huge draw for foreign companies, Ireland may not be able to rely on it as a major differentiator going forward. United States Treasury Secretary Janet Yellen recently called for a minimum global tax rate across international economies. If Yellen’s proposal is implemented and Ireland is forced to comply, the country would lose a significant component of its overseas appeal.
Ireland is Home to a Skilled Workforce
Ireland is also home to a highly skilled workforce, giving foreign companies in Ireland access to a wealth of top talent.
Ireland has a higher percentage (98%) of 18-year-olds in education than any other European country. The World Economic Forum ranks its graduates as more skilled than all but 15 countries worldwide. Ireland has a greater percentage of its population under 25 years of age than any other European country, meaning the country has a young workforce capable of learning skills required to compete in an increasingly digital world. Considering these factors, it’s no surprise that Ireland is a European leader in developing talent with skills in artificial intelligence (AI), information technology (IT), and other tech sectors.
Facebook and Google are just two examples of tech companies that take advantage of Ireland’s strong workforce by setting up headquarters in the country. Linkedin, Indeed, IBM, and Microsoft are among many global tech organizations that have chosen Ireland as a European home base. Intel also recently announced a plan to double its manufacturing capabilities in Ireland as part of a three-year, $7 billion investment. The company will fill 1,600 high-tech jobs in Ireland as part of the plan—a testament to their trust in the country’s tech-savvy workforce.
As companies like Intel build facilities for manufacturing, research, analytics, and data processing in Ireland, they increase the demand for a skilled local workforce. Ireland’s academic institutions help the country develop the talent required to fill these positions. Many universities and colleges have founded AI or tech programs in recent years, some in partnership with tech companies themselves. Other institutions like Trinity College Dublin and the Tyndall National Institute have recently launched accelerator programs for Irish startups.
Brexit’s Positive Economic Impact on Ireland
Brexit is another reason multinational companies turn to Ireland. While the United Kingdom’s departure from the EU creates complications, it also leads to new opportunities for countries like Ireland.
With the UK now separate from the EU, London is no longer the de-facto financial capital of Europe—and companies are acting accordingly. Fintech giant Stripe, valued at $95 billion, recently announced that Dublin would be the new home for its processing center for all customers outside of the UK and Switzerland. Stripe will also triple the staff of its Irish headquarters in Dublin, using the city as a launchpad to roll out its services to the rest of the EU.
Stripe is not the only financial company choosing to move from the UK to Ireland. A recent survey by global consulting agency EY found that Dublin is the preferred destination for financial firms relocating from London. More firms choose Dublin than noted international commerce destinations like Luxembourg, Frankfurt, and Paris.
Dublin offers several benefits to companies leaving the UK. Dublin is already an established financial center that is home to over 400 global firms. Ireland is also now the only entirely English-speaking country in the EU. Finally, the country’s long history of serving as a base for overseas companies means it has a regulatory framework friendly to foreign companies.
Confidently Expand in Ireland With Velocity Global
Companies that move into Ireland gain access to business-friendly tax rates, a skilled talent pool, and an EU hub increasing in international prominence. Velocity Global helps you take advantage of all the country has to offer by making your expansion as fast, smooth, and cost-effective as possible. Whether you’re looking to hire from a top workforce, reach new overseas customers, or accomplish any goal in between, Velocity Global has the expertise to help you succeed.
Reach out today to find out how our international experts help companies of all sizes streamline their entry into markets like Ireland.