Cork. Donegal. Portlaoise. Athlone. Sligo. These locations all featured as the homes for new multinational investment projects, mainly from US companies, announced by IDA Ireland last month. In July last year there were announcements in Cork and Waterford, but the rest were all heading for Dublin. Something is changing. And the Dublin house price squeeze and the familiar tale of high prices and soaring rents is a significant part of this story.
Many of the major players will still look to locate in the big urban hub that is Dublin – this kind of clustering is the way a lot of industries work, offering them the key advantage of access to pools of skilled staff in their sector. But slowly over the past few years we have seen high costs becoming a key factor in pushing companies – or parts of companies in many cases – out of Dublin city centre. Some have set up operations in the outer suburbs, looking for a balance of lower cost but still access to the city centre.
Now, increasingly, the regional option is coming into play. When your employees are struggling to afford rent on a wage of €40,000-€50,000, then you are forced to consider your options. And with the IDA trying to promote the regions and somewhat better grants available, there are pull factors as well as the push caused by costs.
Foreign direct investment (FDI) is not the be all and end all of economic development, of course and bodies such as the National Competitiveness Council argue that we are overly reliant on it and vulnerable to international tax changes or problems in key sectors. In the past, big regional multinational closures have also dealt heavy blows.
Difficult sell
But whatever way you slice it, the influx of FDI into Dublin has been a huge part of the region’s development and getting firms to look at other locations has been a difficult sell for the IDA. As the agency’s own 2017 end-of-year statement put it: “Convincing international investors to consider locations outside of Dublin continues to prove challenging with multinational companies increasingly looking to invest in bigger communities globally.”
However, slowly but surely more regional investments are coming on the map.Some of the projects are not too surprising – Cork has long been a pharma hub, for example, and some other announcements are expansions of existing plants. Others are more notable, in terms of signalling change, including significant investments in Sligo,the mid-west, Dundalk and Longford, among others. Some 51 of the 114 IDA jobs announcements in the first half of the year were outside Dublin and 344 projects have gone to regional centres in the past 3½ years, roughly equal to the total for the previous five years.
The key point for the companies coming here in areas such as tech and financial services is being able to attract people with the right skills, not only from Ireland but also from around Europe. And so Brexit has helped the effort to attract firms here, as some are favouring Ireland over the UK, fearing that controls on immigration will deter – or stop – people from migrating there for work. It is all about access to “talent”. And even better-paid employees are now finding that moving to the capital is a financial stretch.
Little wonder. Rental Tenancy Board figures for the first quarter show Dublin rents for new tenancies of over €1,500 on average, more than twice those in a regional location such as Sligo. Daft.ie data suggests city centre Dublin rents approaching €2,000 a month, compared with €700-€800 in many regional locations. And they are still rising.
Social problems
These rents are creating a huge social problem – and also an economic blockage. The level of pay employees require to be able to afford to rent – and live – is rising and this is tipping the scales for many firms. Attracting people to come and work in Dublin for €45,000-€50,000 is now problematic, because of the cost of housing. On any calculation, paying over €1,500 a month is going to stretch someone earning €45,000 a year or even €50,000. This has swung the dial for some companies in favour of regional locations.
Big recruiting companies are noticing. Trayc Keevans, FDI director at Morgan McKinley, says that over the past 18 months firms are increasingly considering regional locations, where employees face a more reasonable cost of living and companies can operate at a lower cost base. Big financial companies are still looking to Dublin, she says, but in tech, highly sought talented employees "are embracing the lower cost of living, reduced commute, affordable quality rental and purchase properties" available in other locations, when this comes with access to high-quality jobs.
The housing crisis is the most pressing issue facing the Government, but whatever policy is used to deal with it is going to take time. The market has failed and the State has failed, with obvious social consequences and economic knock-ons. But if part of this is increasing investment in regional Ireland, then we should do what we can to take advantage of this. For the Government, getting its act together on the rural broadband plan – now in huge difficulties – and pushing ahead with the national investment programme plan to develop the regional cities are the two obvious measures.
The regions are the part of our economy most exposed to the risks from Brexit, due largely to their reliance on the food sectors and SMEs. New multinational investment is not the answer to all the problems for the regional economy, but with Brexit on the horizon and high costs inhibiting investment into a choking Dublin economy, there is an obvious opportunity here which we should do all that we can to grab.