CONSULTANTS at McKinsey have drawn up a sobering analysis on the Irish economy, highlighting a declining education system, lack of scale in Irish companies and a culture of “jobs for the boys”, writes Gavin Daly.
The research, by the McKinsey Global Institute and the Dublin office of the business consultancy, warns that low corporation tax will not be enough to lure foreign direct investment in the face of “an intense new wave of global competition”.
Ireland, it says, is “squarely in the crosshairs of competitors”.
The report into the value of Ireland’s global connections says that “Irish policymakers and businesses will need to step up their efforts to remain globally relevant”. Low corporate tax rates were “not a long-term strategy for FDI”, because they could be copied or undercut, McKinsey said.
“Government agencies around the world are chasing foreign investment. They have studied the IDA [Ireland] playbook and the bar is moving ever higher.” The research was funded by McKinsey’s own partners and was not commissioned by an outside business or institution. In its most damaging finding, it says Ireland “urgently needs to turn its attention to its educational standards”.
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The “erosion” of education means Irish universities do not feature near the top of international rankings and the achievement of second-level students “has been lacklustre”, it says. On Irish business, it finds that companies “have a tradition of ‘jobs for the boys’”, resulting in “relatively homogenous workplaces, especially at senior levels”.
There was a passive “build it and they will come” attitude to finding international talent, said McKinsey. “The highest priorities include ensuring the availability of scientists and engineers, developing physical infrastructure, and controlling the cost of living.”
While McKinsey ranked Ireland as the 14th most- connected country in the world, it said the number was skewed by “high licensing and royalty fees that pass in and out of Ireland without creating material jobs or investment”. It described the country as a “way point” for international trade, rather than a source or final destination.
In 2012, 80% of Ireland’s flows of goods, services and finance were with Europe and North America, even though “the world has been rebalancing towards Asia”, McKinsey said. “Too few Irish companies are scaling up and competing globally. When they do, they focus heavily on traditional markets and trading partners. Faster growth opportunities are being left on the table.”