Manufacturing sector forecasts wage and employee growth

• Attracting and retaining talent (67%), the cost of energy (47%), and the availability of housing for employees (47%) among top challenges facing the sector
• Increased investment in sustainability, digitisation, research and development and capital investment expected.

Ibec, the group that represents Irish business, has today launched the findings of their 2023 Manufacturing in Ireland report, which shows that manufacturers are cautiously more optimistic about the business environment compared to 2022. The report underlines that competitiveness and the cost of doing business in Ireland are significant issues for the manufacturing sector.

According to the report, attracting and retaining staff is identified by 67% of business leaders as a major challenge, with 72% expecting to see wage increases. This will pose a challenge for businesses over the short term, given full employment with 32% expecting to hire more employees, on top of the regulated labour cost increases scheduled in 2024.

In addition, manufacturers expect operating costs to continue rising, with 51% expecting an increase in raw materials, 51% for transport, and 29% for energy.

Speaking on the report Sharon Higgins, Executive Director, Membership and Sectors in Ibec said: “We welcome the findings of the manufacturing report as it highlights that the manufacturing industry is committed to sustainability and digital technology. There is widespread participation in sustainability (85%) and digitalisation (68%) initiatives, with half of organisations involved in each of these expecting to save money as a result.

“90% of companies agreed that sustainability, is a priority for their business. Given the priority attached to sustainability and impending reporting directives, 85% are introducing initiatives in the next 1-2 years that will lessen their environmental impact and address customer expectations.

“We are also welcoming an exciting new era. Ireland is well-placed to use the potential of Artificial Intelligence (AI), robotics, and other cutting-edge technologies. Our investments in research and development, with 29% expecting to increase investment in R&D in the short term, along with our technology ecosystem, place us in a position to be frontrunners in these new developments.

“70% of companies ranked digitalisations as a priority for their business, with 68% of businesses surveyed saying that they would introduce digitisation initiatives in Ireland in the next 1 to 2 years. 88% said this was to improve work practices and increase efficiency.

“Government needs to continue to invest in the twin transition - digitalisation and sustainability – as well as R&D, to ensure we can continue to move manufacturing sites up the value chain to enable Ireland to compete globally.”

Future investment

Sharon Higgins added: “This time last year, the sector faced an uncertain period entering winter against the backdrop of ongoing inflation. The sector was acutely impacted by the threat of energy shortages, escalating energy costs, and supply chain issues. While global conflict remains prevalent, energy availability is secure, and supply chains are approaching more normal levels. Overall, we are seeing that confidence is up in the sector while leaders remain cautiously optimistic. Ibec continues to advocate for areas that require attention to ensure that the conditions remain for the sector to flourish here, including upskilling for future skills such as AI and digitalisation, supporting businesses' transition to carbon neutrality, and continuing to improve the accessibility of the R&D Tax credit.”

The report is a call to action to ensure our policy environment is fine-tuned to our current and future needs. The world may be uncertain, but with the right policies and recommendations, we can deepen investment and innovation, securing a prosperous future for all.”

The 2023 Manufacturing in Ireland Report is available to download here.