2. Executive summary
The latest data from the International Business Report Figure 1: Balance percentage of optimism/pessimism 2013
(IBR), which surveys business leaders across the globe Balance percentage of those indicating optimism against those
indicating pessimism over the next 12 months
from 12,000 listed and privately held businesses in 44
economies, shows that 36 per cent of Irish senior
executives are slightly or very optimistic about the
country’s economic prospects in 2013, an increase of 6 per
cent year-on-year and 15 per cent on 2011.1 Irish
businesses are ranked the 5th most optimistic of the 10
Eurozone countries surveyed with a net percentage balance
of -2 per cent2 (2012: -12 per cent) i.e. those business
leaders optimistic (36 per cent) about the economy’s
outlook in 2012 less those who are pessimistic (38 per
cent). Globally Ireland remains 29th out of the 44
economies in 2013 (see figure 1).3
Successful organisations sustainably and responsibly
identify and exceed customer needs. In doing so, successful
companies create many opportunities in their community
such as employment, taxes, talent development and
innovation. Successful organisations unfortunately alone Source: IBR 2013
cannot solve all economic woes. IBR 2013 shows the clear
While the Irish outlook improves, IBR 2013 suggests that
and widening gap between the outlook for the macro
the on-going Eurozone crisis at -22 per cent (2012: -16 per
economy and the outlook for those trading in Ireland.
cent) and United States fiscal cliff at -4 per cent (2012: +1
Ireland and therefore the customers of many Irish
per cent) continue to undermine global growth prospects,
businesses have endured severe financial and emotional
with the balance percentage of business leaders optimistic
stress following several years of austerity budgets. The
less those pessimistic in both economies decreasing in
stress on the country and as a result for Irish businesses
2013. Globally business optimism stands at a net
who focus solely on Ireland for its market will continue due
percentage balance of +4 per cent (2012: 0 per cent).
to the following three key challenges:
Relative to our Eurozone counterparts, only Germany
i balancing the government budget; (+21 per cent), Denmark (+14 per cent), Belgium (+12 per
ii dealing with the oversized debt burden – public, cent) and Estonia (+18 per cent) are more optimistic about
personal and corporate; and their economic outlook in 2013. The continued decline in
iii funding the public sector pensions deficit. business sentiment across European economies suggests
that businesses leaders are now adjusting their outlook due
to the difficult process of fiscal and structural reform
across the zone.
1
2011’s IBR surveyed Privately Held Businesses exclusively
2
Balance percentage between those businesses that are optimistic and those that are
pessimistic
3
44 countries surveyed in 2013 compared to 40 in 2012. Holding for the 40 economies
th th th th
surveyed in 2012, Ireland would have climbed from 29 to 25 and from 7 to 4 out of the EU
countries in 2013
3. Economic uncertainty typically elicts a ‘wait and see’ policy • Irish senior executives are increasing investment in
from many businesses. In Ireland those that continue to R&D, plant and machinery and buildings, expecting
wait, have seen their competitiveness erode or face ever increased productivity and export led growth in 2013
decreasing returns. (see figure 3):
After five years of toil, Irish businesses are more cost
efficient and lean, with senior executive sentiment in these Figure 3: Irish business investing in growth as uncertainty prevails
Percentage change of businesses expecting investment to increase or
organisations reflecting this trend. Those organisations that remain the same from 2012 to 2013
have survived this challenging trading period are now
2013 84% 70% 70% 92%
investing in long-term growth and competitiveness, as the
key financial indicators of revenue, profitability, selling
prices and exports continue to stabilise (see figure 2).
Figure 2: Economic Indicators 2012 62% 42% 65% 68%
Balance percentage 2007-2013 Investment Investment Investment Investment in
in plant & in new in R&D employment
machinery buildings /talent
Source: IBR 2013
Profit is the difference between income and costs. Profit
protection was achieved mainly in the last five years
through a strong focus on costs. It appears profit
improvement will be driven by a continued cost efficiency
model coupled with greater returns from customers as
Source: Grant Thornton IBR 2013 growth strategies start to deliver.
* Note 2007-2011 includes PHBs exclusively
At Grant Thornton we believe Irish businesses are
As a small open economy, dependent on the external driving growth as they:
market Irish businesses have felt every change in the global
economy over the last few years. It appears they have • think customer - relentlessly focusing on customer
adapted to downside risk stemming from the uncertain needs
Eurozone outlook, especially trading partner demand, • think talent - rewarding people to deliver
through a forward thinking strategy - analysing the • think smart - embedding smart technology and
competitive landscape in the market, understanding the processes across the business
opportunities not only in their sector but their sub-sector,
and by investing in the future of their company – moving Successful Irish businesses are looking out not in, with
from survival model to revival and indeed growth through customers, talent and the opportunities that smart
exports. technology and processes provide being the sharp end of
the pencil when it comes to driving growth.
This is reflected in IBR 2013 key findings:
• Irish businesses are investing in talent with 92 per cent
of businesses expecting employment to increase or
remain the same in 2013 (2012: 68 per cent), while
Ireland ranks 1st in the world for the availability of a
skilled workforce for the second consecutive year;
• Financial indicators continue to stabilise reflected by 54
per cent of business leaders expecting profit to increase
(2012: 30 per cent) and 48 per cent expecting turnover to
increase (2012: 39 per cent) in 2013;
• Ireland ranks 4th out of the 44 countries surveyed
regarding export growth expectations (+36 per cent),
behind 3 of the fastest growing emerging markets of
Turkey (+50 per cent), mainland China (+44 per cent) Patrick Burke
Partner
and India (+41 per cent);
International Business Report 2013 – Ireland 3
4. International Business Report results
Contents
05 Irish businesses, getting on with it
09 EU and US, our traditional trading partners
12 Global results and emerging economies focus
4 International Business Report 2013 - Ireland
5. Section 1
Irish businesses, getting on with it
Figure 4: Levels of business optimism versus predicted 2013 GDP growth
Balance percentage*
Source: IBR 2013, International Monetary Fund 2012
* Countries circled in blue denote EU members
The challenging domestic economy and continuing GDP growth forecast, according to the International
uncertainty in the Eurozone shows Irish business Monetary Fund (IMF), to be 1.1 per cent in 2013.
expectations to be delicately balanced for 2013. 38 per Irish businesses are ranked the 5th most optimistic
cent (2012: 42 per cent) of businesses remain slightly of the 10 Eurozone countries surveyed and are 9
or very pessimistic about the economic outlook in percentage points above the EU average (27 per cent)
2013 (globally 35 per cent and EU 10 per cent). 36 per for those that are slightly or very optimistic, at 36 per
cent (2012: 30 per cent) of Irish businesses were cent in 2013.
slightly or very optimistic for the economy for the This suggests that Irish business leaders have been
next 12 months (globally 38 per cent, EU 27 per cent). successful in adapting to the continued wave of crisis’s
Figure 4 highlights how business optimism and faced by the Eurozone. Challenging market conditions
Gross Domestic Product (GDP) growth expectations over the last number of years have forced Irish
rank on a global scale for 2013. Improved business companies to become more competitive and
sentiment, as well as modest growth expectations in ambitious, looking out not in.
2013, places Ireland in the lower left quadrant with The nature of the recovery in Ireland, however,
continues to be two speed with exports in the main
International Business Report 2013 - Ireland 5
6. driving corporate growth. The weakening of the euro Figure 6: Irish consumer income & expenditure 2007-2015
€billion - Current Prices
in 2012 - decreasing 9 per cent against the dollar and 7
per cent against the British pound – has given Irish
exporters a strong competitive boost.4 The currency’s
movement has helped to boost exports, which are
expected to have grown by 4.5 per cent in 2012, while
the domestic economy remains flat. 5
IBR 2013 ranks Ireland 4th in the world for export
expectations in 2013 at +36 per cent – a marked
strengthening on 2012 +25 per cent.
Figure 5: Export expectations – 2005-2013
Percentage balance of businesses
Source: CSO, ERSI, Amarach 2012
The challenges faced by the government relative to
the fiscal deficit and debt – public, personal and
corporate, have been well discussed and documented.
* Note 2005-2011 includes PHBs exclusively The issue of the public sector pension reserve which
Source: IBR 2013 started in 2001, through the establishment of the
While there are signs that most sectors of the Irish National Pension Reserve Fund is likely to dominate
economy are stabilising (see figure 2), with Irish discussions on government finances. The office of
outward looking businesses ‘getting on with it’; a Comptroller and Auditor General in 2009 identified
number of challenges in the macro economy remain the liability to be €116bn.8 €116bn references the
ahead. present value of the cash payments that fall to be met
over the next 60 years in respect of pensions earned at
Irish debt levels (public, personal and corporate)
31 December 2009. The assets presently to fund this
continue to diminish the prospects of a macro
liability stand at €14bn.
recovery. Spending cuts and tax hikes have seen
consumer spending remain depressed with the Assets outlined below (see figure 7) have reduced
domestic economy expected to have contracted by 1.5 over the last three years due mainly to the
per cent in 2012.6 recapitalisation of our banks totalling €8.0bn.
Although recent economic data (e.g. retail sales, Public sector pensions now account for 14 per cent
Exchequer returns, manufacturing/services, of the government’s total pay and pension bills. The
Purchasing Managers Indexes) on the Irish economy pension bill has increased 44 per cent since 2008. The
have been positive, domestic demand is expected to cost of funding this position will continue to depress
continue to remain flat on the back of sustained consumer spending in the long-term and likely
household and public sector deleveraging and weak determine the success or otherwise of government
labour markets, with demand expected to fall by 2.2 efforts to stabilise the fiscal position. 9
per cent in 2012 and by 0.6 per cent next year.7 This
trend is expected to continue with no sustained uplift
in personal consumption from 2007-2015 (see figure
6).
4
Bloomberg Businessweek, November 2012
5
National Irish Bank, December 2012
6 8
Central Statistics Office (CSO), Davy Stockbrokers, December 2012 Comptroller and Auditor General, Reports on the Accounts of the Public Services
7
Davy Stockbrokers, December 2012 2011, September 2012
9
Department of Finance: Analysis of the Exchequer Pay and Pensions Bill, 2007-2011
6 International Business Report 2013 - Ireland
7. Figure 7: National Pensions Reserve Fund asset allocation, ensure the best opportunity of securing funding.
2009 compared to 2012
Attracting equity is similarly important.
Assets Sept Assets Sept
2012 (€m) 2009 (€m) Securing access to credit and equity in the ‘new
Total discretionary 5,977 13,857 normal’ will be about having:
portfolio (e.g. equity,
financial assets, • an ability to grow turnover regardless of the general
alternative assets) economic environment, either through adapting to
Total directed portfolio 8,057 7,000 technology and processes changing consumer
(investment in banks)
buying behaviour, the relative market strength of
Total fund 14,034 20,857
the business or through exposure to high growth
Source: National Pension Reserve Fund, 31 September 2012 & 2009 markets;
According to the latest statistics from the Central • strong balance sheets and sustainable cash
Bank, loans to Irish households decreased at a rate of management. Balance sheet performance is
3.7 per cent in the year ending October 2012, becoming as important as operating performance;
unchanged from the rate of decrease recorded at the • the ability to generate returns on capital above its
end of August and September. Lending for house
costs and create long term economic value
purchase was 1.9 per cent lower on an annual basis in
October, while lending for consumption and other continuously improving product and service
purposes and to businesses decreased by 8.6 per cent offerings - moving up the value chain.
and 4.2 per cent respectively. 10
However the challenge of accessing credit is not Ireland as a place to run and locate a business is
uniquely an Irish one as the western world comes to unquestionable. Ireland’s tax rates, innovation and
term with those three words – too much debt. talent mean it ranks 2nd in the world out of 50
Interestingly, most of our European counterparts see countries for its business operating environment in
access to credit as a far bigger hurdle than here in Grant Thornton’s 2012 Global Dynamism Index
Ireland (see figure 8). (GDI). The IDA’s recent announcement of the
creation of 12,722 smart jobs in 2012 supports
Figure 8: EU access to finance
Ireland’s ranking on the index.
Balance percentage of respondents indicating access to finance
to be more or less accessible, 2012 compared to 2013 Ireland has the highest availability of a skilled
workforce, with Irish business leaders expecting
employment to increase by 38 per cent in 2013 (2012:
15 per cent), with 54 per cent expecting it to stay the
same (2012: 53 per cent).
The findings of Grant Thornton’s research is
positive, but one of the key measures of how a
country is doing is its level of unemployment which
currently stands at 14.6 per cent in Ireland. The labour
market remains very weak despite the recent fall in the
live register. Enterprise Ireland supported companies
Source: IBR 2013 recorded a net jobs gain of 3,804 last year - the highest
increase since 2006 – encouraging as these indigenous
The days of light touch regulation and inexpensive and export led companies create employment in Ireland,
easy access to credit are gone. As the banking sector while growing overseas.
rebuilds itself, credit is less ‘freely’ available and more Talent management and skills development will be
expensively priced. Sourcing finance is essentially a key to the delivery of successful business goals. Ireland
creditor-debtor relationship that needs to be worked has an innovative, well educated workforce that
out with an understanding of mutual dependency. By compares favourably internationally. However, more
understanding a bank’s business model and the must be done to ensure that the right kind of
competitive landscape in which it operates, Irish workforce is available for key roles, particularly in
businesses can develop a value proposition that will growth sectors such as food, technology and life
science.
10 Central Bank Statistics, October 2012
International Business Report 2013 - Ireland 7
8. For Irish businesses with an instinct for growth,
transacting in the local economy, alone, is
unsustainable. Irish businesses that adapt their
business model for the enduring impact of the
European sovereign debt crisis, high growth markets,
credit, technology and talent management will
successfully grow domestically and overseas in the
next decade.
The message is clear; follow the customer and lead
your people.
Figure 9: Key indicators for business growth
2011* 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013
ROI ROI ROI UK UK UK EU EU EU US US US Global Global global
Outlook for the economy -45% -12% -2% -8% -35% -3% 22% -17% -17% 23% 1% -4% 23% 0% 4%
over the next 12 months
Businesses expecting an 42% 31% 38% 26% 21% 22% 32% 27% 24% 20% 20% 19% 25% 22% 23%
increase in exports
Balance percentage** 41% 25% 36% 24% 18% 20% 29% 20% 18% 19% 18% 14% 22% 18% 19%
Businesses expecting an 19% 25% 18% 36% 29% 33% 33% 29% 30% 44% 38% 35% 40% 35% 35%
increase in selling price
Balance percentage -7% 7% 4% 21% 13% 20% 20% 11% 12% 38% 24% 23% 28% 18% 20%
Businesses expecting an 45% 30% 54% 58% 41% 58% 50% 35% 38% 53% 51% 46% 54% 48% 51%
increase in profitability
Balance percentage 19% 15% 42% 41% 22% 50% 37% 13% 19% 44% 40% 28% 40% 31% 35%
Businesses expecting an 42% 39% 48% 65% 48% 58% 60% 43% 42% 68% 59% 52% 65% 56% 57%
increase in revenue
Balance percentage 16% 15% 38% 55% 34% 49% 51% 25% 25% 60% 48% 38% 56% 43% 45%
* PHB exclusively 2011
** Balance percentage of those indicating optimism against those indicating pessimism
Source: IBR 2013
8 International Business Report 2013 - Ireland
9. Section 2
EU & US, our traditional trading
partners
Figure 10: Outlook for the economy over the next 12 months – EU, US and Eurozone members
Balance percentage of businesses indicating optimism against those indicating pessimism
Ranking Very Slightly Neither optimistic Slightly Very Don’t Balance Y-o-Y
optimistic optimistic nor pessimistic pessimistic pessimistic know change
1 Germany 8 39 27 26 - - 21 - 25
2 Estonia 2 42 30 22 4 - 18 -*
3 Denmark - 26 60 10 2 2 14 + 14
4 Belgium 6 38 20 24 8 4 12 + 34
5 Latvia - 34 40 22 4 - 8 -*
6 Lithuania 2 28 38 22 6 4 2 -*
7 Ireland 2 34 26 28 10 - -2 + 10
8 United Kingdom 2 32 29 30 7 - -3 +32
9 Poland 2 18 46 30 4 - -14 - 26
10 Sweden - 15 54 29 2 - -16 -8
11 Italy 2 20 32 38 8 - -24 -4
12 Greece - 12 34 32 22 - -42 0
13 Netherlands 2 14 26 46 12 - -42 -2
14 France - 13 24 47 15 1 -49 -3
15 Finland - 12 24 60 2 2 -50 -2
16 Spain 1 11 8 48 31 1 -67 -5
Eurozone 3 23 25 38 10 1 -22 -6
EU Average 3 24 28 35 9 1 -17 0
United States 7 29 24 29 11 - -4 -5
Global Average 8 31 26 25 10 - 4 +4
* First year in survey
Sources: Grant Thornton IBR 2013
The European Union and the United States are 2012 survey of unemployment in the Eurozone found
Ireland’s two largest trading partners representing that the recession had pushed unemployment up to a
approximately 59 per cent and 20 per cent of total record 11.7 per cent. The figures also revealed that no
Irish goods exports.11 The protracted negotiations fewer than 20 EU states have recorded increases in
over how to resolve both the sovereign debt crisis in unemployment compared to a year earlier.13
the Eurozone and the fiscal cliff in the United States While the short-term outlook for the EU remains
have significantly eroded business confidence in both fragile, growth and business expectations diverge
economies. Weakening trading partner demand is markedly between countries (see figure 10).
expected to weigh more heavily on Ireland’s external Businesses in Germany, Estonia and Denmark are the
sector during 2013, which together with the lack of most optimistic in the EU at +21 per cent (2012: 46
support from the domestic economy is forecast by the per cent), +18 per cent14 and +14 per cent (2012: 0
IMF to result in moderate GDP expansion of 1.1 per per cent) respectively. While optimism in Spain
cent. remains the lowest in Europe at -67 per cent (2012: -
According to the European Commission, GDP is 62 per cent) exacerbated by the highest unemployment
set to contract by 0.3 per cent in the EU and 0.4 per in Europe at 25 per cent and youth unemployment
cent in the Eurozone in 2012, with a gradual return to levels heading towards 60 per cent.15
GDP growth in 2013 at 0.4 per cent in the EU and 0.1 However, those businesses that were slightly or
per cent in the Eurozone.12 Unemployment in the EU very optimistic about business expectations in
is expected to remain high in 2013. Eurostat’s October
13
Eurostat, October 2012
11 14
Central Statistics Office – January to October 2012 First year in the IBR
12 15
European Commission Autumn Forecast 2012 Eurostat, November 2012
International Business Report 2013 - Ireland 9
10. Germany have fallen significantly year-on-year, down Figure 11: Estimated effect of housing on year-on-year US
real GDP growth
15 per cent to 47 per cent, indicative that the trend
towards recession is hitting core European countries
and industries – debtors need creditors too. The on-
going travails of the Eurozone, and the slowdown in
high growth markets such as Brazil and India and only
tentative signs of re-emergence of China’s economic
growth engine, are having a major impact on business
confidence in the 2nd biggest export economy globally
(export expectations in Germany have fallen 19 per
cent to +15 per cent in 2013).
Business outlook in the EU countries constitutes 7
out of the bottom 10 of Grant Thornton’s Global Sources: S&P Dow Jones indices (prices), Goldman Sachs (GDP), The Wall Street
Journal
Optimism Index (see figure 1), with only four
(including Ireland) of the EU countries surveyed in
New orders rose at the fastest rate since March 2011,
IBR 2013 registering an increase in the balance
driven by domestic demand. Business confidence,
percentage of those that are optimistic over those that
however, remains fragile in the UK and could easily be
are pessimistic year-on-year.
derailed by any further setbacks in key export markets,
In contrast, there are signs that the US economy is
notably any resurgence of the Eurozone debt crisis.
improving. In December 2012, employers added
Britain’s economy also faces headwinds from a
155,000 new workers; encouraging considering the
long-term government austerity programme and
looming government budget crisis that many feared
inflation that has proven slower to fall than the Bank
would bring recession in 2013 if not resolved. This
of England had forecast, eroding consumer spending
concern was reflected in IBR 2013 findings, with
power. The latest Bank of England forecast for 2013
business outlook decreasing 5 per cent to -1 per cent
GDP growth stands at 1 per cent, with any recovery
for 2013.
likely to be slow and protracted.18 This echoes the
In addition, an improving housing market is
comments of the Governor of the Bank of England
buoying consumers’ spirits and giving the economy its
Sir Mervyn King in June 2012, when he said: “When
biggest lift since the real estate boom with economists
the crisis began in 2007 and 2008, most people
revising up its expectations that the US economy may
including ourselves did not believe that we would be
grow by 2.0 per cent in 2013 (see figure 11).16
still right in the thick of it, in the middle of it, quite
this late. All the way through, I’ve said ………that I
The United Kingdom has seen the largest percentage
don’t think we are yet half-way through.”
rise in business expectation year-on-year in the UK
Europe at best is expected to face a sustained
from -35 per cent to -3 per cent in 2013. Improving
period of low growth, austerity and lack of unity.
business sentiment was reflected in December 2012,
Many economists believe that Europe may face a lost
when British factory activity jumped unexpectedly to
decade or two similar to that which occurred in Japan
grow at its fastest rate since September 2011,
in the 1980s and 1990s. If this is the case, Irish
according to the Markit/CIPS manufacturing
business leaders need to maximise their resources
Purchasing Managers’ Index (PMI).17
effectively and target consumer segments with the
most disposable income and the highest possible
margin growth.
Dynamic Irish businesses will always find value, by
understanding the market, sector or subsector they are
trading to – in terms of regional demand, shifting
demographics, urban consumption centres and
technology adaptation (m-technology and e-
commerce).
16
Wall Street Journal, January 2012
17 18
The Markit/CIPS Manufacturing Purchasing Managers' Index (PMI), December 2012 Bank of England, November 2012
10 International Business Report 2013 - Ireland
11. Changes in consumer and business trends are percentage of over 65s, and the highest child and
occurring rapidly. Segmenting your target market by working age population in the European Union.
income, demographics, new customer needs and Figure 13 provides an outlook on the dependency
competition can enable growth, where unemployment ratios in selected EU economies in 2010.
is high and domestic demand subdued.
Across western society, an ageing population (see Irish businesses need to have a sustainable business
figure 12) combined with low fertility rates is creating model to ensure that they meet changing customer
significant challenges and opportunities in the needs. Considering the changes in demographics (e.g.
marketplace. age, distribution of income, household size and
intergenerational households), Irish senior executives
Figure 12: Age demographics across (selected) EU27
countries 2011*
need to consider whether to invest a large proportion
of research and development and marketing
expenditure on younger age groups (0-18 & 18-30),
older age cohorts or both. The underlying economic,
social and demographic changes occurring in Europe
mean businesses will need to relentlessly think
customer.
The working age population in Europe and North
America is declining. The average working ages
continue to rise, with the war for talent becoming
global. Talent is no longer a commodity: increasingly
competitive global markets, skill shortages and
demographic trends, mean businesses need to think
*EU27 figures 2010
Source: Eurostat
talent to execute strategy.
Innovation increasingly will be focused on the
This demographic shift will require entirely new needs of different generations. Those in the middle
approaches on the part of both policy makers and (30-49 demographic) are saddled with household debt
business leaders. Western governments will have to and negative equity. Business leaders will continue to
tackle societal issues (e.g. rising healthcare expenses, face lower revenues and weaker order books (see
public sector pension deficits, and older age figure 14), if they are unable to adapt to the
dependency ratios), while business leaders will need to opportunities that smart technology and process
be opportunistic when devising new product strategies provide in segmenting their customer in traditional
that cater to this demographic. By 2060, 30 per cent of overseas markets.
all EU citizens are forecast to aged 65 years or over.
In contrast, Ireland is presently experiencing a baby
boom, and by 2060 is predicted to have the lowest
Figure 13: EU (selected) median age and age dependency ratios, January 2010
Median Dependency ratio Population aged 80 or over
age Young age Old age Total
EU - 27 40.9 34.8 28.4 63.2 4.7
Denmark 40.5 41.2 27.5 68.8 4.1
Germany 44.2 31.0 34.1 65.1 5.1
Spain 39.9 31.3 26.6 57.9 4.9
Ireland 34.3 44.9 18.5 63.4 2.8
France 39.9 41.5 28.6 70.2 5.3
Italy 43.1 31.2 33.3 64.5 5.8
Netherlands 40.6 38.9 25.1 64.0 3.9
Sweden 40.7 40.1 31.0 71.0 5.3
Source: Eurostat, Amarach Research
International Business Report 2013 - Ireland 11
12. Section 3
Global results and emerging
economies focus
Figure 14: Expectations of order books versus revenues
Balance percentage*
Source: IBR 2013
* Countries circled in blue denote EU members
At a global level, using purchasing power parity,19 business confidence for 2013 – the top right hand
the share of emerging markets in world GDP is to quadrant.
surpass 50 per cent in 2013.20 As a result, businesses Weaker order books and higher revenues in
in many emerging economies look well placed for China indicate that falling property prices, banking
increased demand and higher revenues. Figure 14 impairments, decreasing exports and an economy
illustrates the relationship between revenue and driven by investment rather than consumption
demand in the 44 economies surveyed. In spite of continue to weigh heavily on business leaders
revised downward GDP growth in many emerging minds.
economies in 2012, both economic indicators A hard landing for China’s domestic economy is
remain strongest in these markets, reflecting strong now seen as increasingly unlikely. After GDP
growth had slowed for seven consecutive quarters,
19
The differences in cost of living
growth picked up in the final quarter of 2012.
20
IMF’s World Economic Outlook 2011
12 International Business Report 2013 - Ireland
13. However, the country is on track for its weakest in the 2000-2011 period for Asia, Middle East,
economic expansion in more than a decade, with Africa, and Latin America.
economists predicting growth of less than 8 per
cent in 2012. Figure 16: Percentage of GDP exports to emerging
markets (selected EU countries)
The gradual recovery in global business optimism is
largely been driven by emerging and developing
economies. The shift of economic power flowing
toward high-growth emerging markets has
intensified with the world’s largest mature
economies increasingly dependent on the strength
of the economies in Asia, Latin America, the Middle
East and Africa for the health of the global
economy. Regional optimism levels in Latin
America +69 per cent (2012: +61 per cent),
BRIC+39 per cent (2012: +34 per cent) and APAC
ex. Japan +28 per cent (2012: +23 per cent) has Source: Citi Research, IMF
improved year-on-year, remaining robust in spite of
These regions represent future global growth, and
the challenging economic conditions in Europe and
are also the regions that are more suited to a
North America.
number of our indigenous exports, which success
Figure 15: Business outlook 2013 compared to 2012
has a significant economic multiplier effect in
Balance percentage of optimism/pessimism by region creating jobs, demand and consumption in the
domestic economy (e.g. agri-food sector, clean
technology).
Therefore, it remains an on-going concern that
approximately 4 per cent of Irish exports are going
to the BRIC economies (see figure 17).21 High
growth markets, as well as other developing
economies, constitute 8 out of the top 10
economies in Grant Thornton’s Global Business
Optimism Index 2013 (see figure 1).
Source: IBR 2013
Figure 17: Irish exports of good to BRIC countries
Percentage of grand total by value
IBR 2013 shows that international expansion is no
longer a one-way street. Increasingly cash-rich
businesses in emerging economies are looking for
expansion opportunities in mature markets, whether
through opening up premises or buying distressed
assets. Businesses in Turkey (59 per cent), Russia
(37 per cent), India (33 per cent) and China (27 per
cent) are looking at opportunities in Western
Europe; while 33 per cent of Latin American
businesses are looking at North America.
Figure 16 illustrates exports to emerging markets
(2000-2011) as a percentage of GDP demonstrating Source: Irish Exporters Association 2011
the low exposure of weaker European economies to
external growth and their reliance on internal and Both growth and interest rates remain low in
Eurozone demand. It is clear that Irish trade mature economies, and many businesses in
diversification needs to increase from the traditional emerging markets are looking for foreign direct
markets of the UK, US and Western Europe, as investment that provides technology, process, skills
Ireland’s exports as a share of GDP have declined
21
IEA end of year trade statistics 2011
International Business Report 2013 - Ireland 13
14. and knowledge transfers - all growth opportunities Figure 18: Top 10 markets for Irish exporters 2013
for high value Irish exports.
Country /Region Percentage
However, it is encouraging to see that Irish Western Europe 39%
businesses as well as the Irish government have North America 21%
turned their direction to fast growing emerging Eastern Europe/Middle East 21%
markets. Trade missions to China, Brazil and South China 15%
Africa in 2012 has helped to gain traction for Irish India 15%
businesses in these markets. Australia/New Zealand 10%
South Africa 6%
Ireland has the capacity for high value exports to
Russia 6%
these markets (e.g. food and agriculture, clean
Brazil 6%
technology and financial services). Overcoming
Other Africa 6%
legislative/regulatory hurdles in these markets, as
Source: IBR 2013
well as securing access to finance will remain the
core challenges for Irish businesses if they are to Emerging markets continue to adopt western
capture a slice of these high growth markets. products and lifestyles as their middle class explodes
According to the Irish Exporters Association in size and potential.
Survey and International Trade Finance Review The issue for businesses to capitalise on this
2012, 71 per cent of Irish exporters are targeting opportunity is that they generally need three assets:
new markets. 2013 IBR finds that 21 per cent of • time;
Irish businesses expecting to grow their business
• money and;
internationally are considering expanding into
• an established brand/product
Eastern Europe/Middle East, 15 per cent into
China and India and 6 per cent into Russia and
Brazil (see figure 18). Facing weak growth rates at While the opportunity is large new markets
home, it is positive to see business leaders in Ireland require significant investment in time, talent,
looking for international expansion opportunities in resources and effort to reap the rewards.
higher growth economies.
14 International Business Report 2013 - Ireland
