Ireland won the business, and by 2013 a new SSC employing 150 will be up and running in Cork. As Davidson sees it, “Based on the current economic state of every country in the world, none is such a shining star that you can say, ‘I absolutely want to go there because I don’t see any risk.’”
Then and Now
In the late 1990s, when Ireland’s popularity as a destination for multinational investment took off, its relatively low corporate tax rate (currently 12.5%); abundant and highly educated, multilingual workforce; and business-friendly environment attracted many companies, particularly those looking to open SSCs.
Then Ireland began losing its luster with foreign businesses — and not just because Poland, Hungary, and a number of other, cheaper European countries began stepping up efforts to attract international investments, says Jan Siemons, Netherlands-based managing partner of Buck Consultants International, a site-selection advisory firm. With more and more businesses piling into Ireland, competition for land and labor began to intensify. Eventually, according to EU statisticians, Ireland became second only to Denmark in terms of average gross hourly wages among the EU’s 27 member states, at almost €21 per hour. Property prices soared, and Dublin’s tony Grafton Street surpassed rivals in Hong Kong and London on the list of most expensive retail locations in the world.
With the bursting of the real estate bubble, says Fergal O’Brien, senior economist of the Irish Business and Employers Confederation (IBEC), “we’re now pricing ourselves back into the market.” The country is rediscovering its former growth engine — exports. Recording its highest-ever level, the value of exported goods and services reached €161 billion last year, up nearly 7% over 2009, according to the Irish Exporters Association.
Meanwhile, according to the EU’s statistics agency, the euro area’s hourly labor costs in the fourth quarter of last year were 2% higher on average versus the prior year, while Ireland’s declined by slightly more than 1%. From 2008 through 2012, Ireland’s unit wage costs will fall about 9%, while increasing nearly 4% on average across the euro zone. As for real estate, property adviser Cushman & Wakefield says prime rents fell across Ireland by almost 20% last year.
The adjustment, while a painful systemic shock for Ireland, is a silver lining for newcomers like Quest, says Davidson. “Now is not a bad time to go there if you’re looking for opportunity,” he says. “Clearly, the Irish economy is a red flag, [but] there are a lot of highly educated people looking for work.”
A Two-Track Economy
While Ireland can’t begin to compete with the likes of China, India, and Brazil as a hot spot for corporate growth, it is attracting foreign investment ranging from new manufacturing sites to service centers like Quest’s. “We’ve actually had the best flow of FDI [foreign direct investment] that we’ve had in about six or seven years,” says Barry O’Leary, CEO of Ireland’s Industrial Development Agency. “The domestic economy may be flat, but the typical multinational doesn’t come to Ireland to service the domestic market.”