Foreign Direct Investment in Ireland 2018

Source publication: Foreign Direct Investment Annual 2018

Get the data: StatBank BPA34

In Figure 2.1, the United States, Luxembourg and Bermuda are shown to be Ireland’s top three partner countries for inward FDI investments, with investment from the United States at just under €300bn.

In Figure 2.2 however, when we analyse inward FDI positions on an ultimate investment basis, investment from the United States is more than double the level displayed on the immediate investment basis in Figure 2.1. This means that a significant portion of investment had an origin in the United States but entered Ireland from a different country. It is important to note the differences when viewing investment using the two distinct presentations: immediate partner country investment and ultimate controlling parent investment (UCP). Notably, significant portions of investment from Luxembourg and Bermuda are evident when viewed by immediate investor, but they are much smaller when analysed by the geography of the ultimate controlling parent (UCP). Investment from Ireland as ultimate investor, at €92bn, is due to the presence of redomiciled PLCs which are located in Ireland.

Figure 2.3 describes investment from the United States on an ultimate investment basis. The share of US foreign direct investment in Ireland has risen steadily over the period shown, while their FDI positions have grown significantly following a large increase in 2015 relating to the financing of intellectual property in Ireland.

Source publication: Foreign Direct Investment Annual 2018

Get the data: StatBank BPA34

Figure 2.4 shows that Luxembourg receives the largest amount of FDI from Ireland on an immediate partner country basis.

Figure 2.5 shows outward FDI positions on an ultimate controlling parent basis. Outward FDI on an ultimate basis is dominated by the Redomiciled PLCs which are firms that have headquartered in Ireland but have substantial investments abroad and a significant portion of their operations abroad. Outward FDI is shown for the Redomiciled PLCS (under Ireland), the United States, and all other countries are under the 'Other' category.  

Source publication: Foreign Direct Investment Annual 2018

Get the data: StatBank BPA37

Figure 2.6 shows FDI income inflows on an immediate basis, which is profit earned on Irish investment abroad. Investments in Luxembourg, Netherlands and the United Kingdom return the largest amount of FDI profits on an immediate partner country basis.

Figure 2.7 shows Irish FDI income inflows on an ultimate basis. Profits coming into Ireland on FDI are dominated by the redomiciled PLCs; they account for the majority of the FDI profit inflows.

Source publication: Foreign Direct Investment Annual 2018

Get the data: StatBank BPA34

For FDI income outflows, shown in Figure 2.8, Luxembourg, Switzerland, and the United States receive the largest amounts of profits on Irish investments on an immediate partner country basis.

Figure 2.9 shows FDI profit outflows on an ultimate controlling parent basis. This graph illustrates the significant amounts of profits accruing to the United States on their investments in Ireland. In 2018, investors in the United States accrued €66.7bn in FDI income from investments in Ireland. The differences between Figure 2.8 and 2.9 show that while these investments accrue to the United States they pass through affiliates and subsidiaries in other highly globalised countries on their way back to the United States.

Figure 2.10 shows FDI income outflows to the United States over time and as a proportion of total FDI income outflows on an ultimate controlling parent basis. This graph shows a big increase in 2015 for the total amount of income accruing to the United States from investments in Ireland.

Figure 2.11 describes the distribution of FDI income outflows from Ireland. Firms are sorted on their FDI income outflows and then grouped. The graph shows that most of the profits made on FDI in Ireland are accruing to a small number of large firms; this can be seen by the high concentration of FDI income at the top of the distribution i.e. €64bn in income outflows accruing to the top 25 firms in the distribution.

Figure 2.12 shows a time series of FDI income outflows by sector. The graph illustrates that the manufacturing sector receives the highest amount of income on its FDI investments in Ireland.

The Profitability of FDI

The profitability of FDI is measured, as with conventional investment, as the rate of return on the investment. The definition used in this section for the return on FDI is:

Return = FDI Income / FDI Positions

where the equity income return is expressed as a percentage of the total FDI position.¹

This measure, when examined across geography and industrial sectors, can give an indication of which investors are making the most profitable foreign direct investments. It should be noted, however, that many factors (structural, cyclical, firm specific) should be considered when drawing inference from these results.

Where country breakdowns are provided, this analysis provides the return data for countries from which the largest amounts of investment into Ireland arrive.

Source publication: Foreign Direct Investment Annual 2018

Get the data: StatBank BPA34, StatBank BPA37

Figure 2.13 illustrates the rate of return on FDI investment in Ireland is higher than the Irish rate of return on FDI investments abroad.

Source publication: Foreign Direct Investment Annual 2018

Get the data: StatBank BPA34, StatBank BPA37

Figure 2.14 shows the FDI rate of return by immediate partner country of investment. The most notable trend here being the significant decrease that occurred in the FDI rate of return in Ireland from the Netherlands in 2018. This decrease in the rate of return for the Netherlands was caused by a €106bn decrease that occurred in their FDI positions in Ireland on an immediate partner country basis; however, on an ultimate basis, there is no simultaneous large decrease. As seen in Figure 2.2, FDI positions from the Netherlands on an ultimate basis have remained relatively unchanged at €4.7 billion. The increase in 2015 for the rate of return on FDI from Switzerland was due to income increasing from €3bn to €6bn (100% increase) while positions only increased from €10bn to €12bn (20%).

As shown in Figure 2.9, most of FDI income outflows are accrued by investors in the United States. Figure 2.15 illustrates the return on investment from the United States. The large decrease that occurs in 2015 for returns on income on an immediate partner country basis stems from the big increase in the denominator of that figure which is the United States FDI positions, which experienced a large increase that year.