Manufacturing

The manufacturing sector is seen as a potential source of economic growth despite high costs.

The term manufacturing covers a broad spectrum of industries involving produce, but according to the latest CSO figures (for 2010) the largest sectors by value in goods produced are pharmaceuticals (€34.6 billion), food (€17.8 billion), computer equipment (€9.1 billion) and chemicals (€7.5 billion). Other major strands include basic metals, wood products and beverages.

Manufacturing is categorised into two sections. A ‘modern’ sector composes chemicals, basic pharmaceutical products, computers, electronic equipment, reproduction of recorded media, and medical and dental instruments. The ‘traditional’ sector covers all others.

The sector is estimated to be worth 31.3 per cent of GDP, with 211,900 employed (11.7 per cent of total employment).

Employment has fallen in recent years due to the recession as well as strong productivity gains and output growth from less labour-intensive industries such as pharmaceuticals. Yet with substantial foreign direct investment, manufacturing employment remains almost 10 per cent of total employment.

Recent manufacturing production and turnover figures show mixed fortunes for the sector. The production index measured 110.5 in January 2012, an increase of 0.7 per cent on December; the turnover index was down 9 per cent in January on the previous month, a decrease of 3.8 per cent over 12 months.  Within these figures, production grew in the modern sector (from an index measurement of 121.3 to 127.3) between December and January, but contracted in the traditional sector (from 88.7 to 82.2).

Another indicator of activity comes from the NCB stockbrokers’ manufacturing purchasing managers’ index, which saw a rise in February from 49.7 to 48.3 (on a 100 point scale, over 50 means expansion, less than 50 means contraction). The survey found that new orders and output increased. Input costs continued to rise and exports fell.

Foreign direct investment remains central to manufacturing employment in Ireland. The Horizon 2020 strategy is focused on attracting high-end manufacturing and away from commoditised manufacturing.

To secure foreign investment, the IDA is targeting the following areas:

• medical technology and high-value engineering (i.e. high end products);
• pharmaceutical and biotechnology (i.e. capital and skills intensive operations);
• pilot and short run productions in the pharmaceutical and biotechnology areas where trial amounts of a product are made; and
• demand fufillment operations, where a manufacturing plant is the hub of supply chain management or close to markets.

The Government’s Action Plan for Jobs, published in February, anticipates 100,000 extra jobs by 2016, 20,000 to be created through manufacturing. The plan notes that multi-national corporations and indigenous manufacturing are moving towards more sophisticated and high-value activities e.g. precision engineered tools combining embedded ICTs. It says that Ireland can be competitive in these areas rather than high volume, low added-value areas. Challenges for the sector include production costs, scale in indigenous manufacturing and the need for upskilling.

In 2012, the Government plans to establish a manufacturing development forum to identify the sector’s needs, and to develop a long-term vision and strategic plan for manufacturing.