In just a couple of decades, Ireland has built one of the world’s ‘hottest’ medtech hubs. In the second of a three-part series, Irish journalist Gary Finnegan asks whether this position can be maintained in an increasingly competitive world
The beginnings of Ireland’s medtech story can be traced back to an influx of manufacturing firms some four decades ago. But the real explosion in growth kicked off in the 1990s, as multinational manufacturing firms expanded rapidly.
The industry diversified, and Ireland has become a ‘location of choice’ as a European base for shared services operations. In the meantime, a constellation of home-grown stars has developed the much-coveted expertise required to support leading manufacturing plants.
The sector is changing – fast. Within medtech, Ireland has a number of high-growth companies emerging in diagnostics and mHealth, alongside the established producers of orthopaedic and cardiovascular products.
Yet the threat of corporate tax harmonisation, the risk of skills shortages and the potential pressures on competitiveness mean nothing can be taken for granted.
In February this year, the Irish Medical Devices Association (IMDA) published its strategy for 2020, The Global Medtech Hub, which charts a course for the next phase of the sector’s development. Among the key issues the IMDA will focus on are trade barriers, skills gaps and changes to the business environment. It also pledges to help local companies make the most of the medtech clusters that have developed in Ireland.
The Fourth Industrial Revolution will be built on connected machines. This is why facilitating co-operation between sectors such as pharmaceuticals, biotechnology and ICT – and realising the potential for advanced, additive and cell manufacturing – will be essential to the next phase of development, according to the IMDA.
With governments around the world increasingly willing to incentivise foreign investment, Ireland is highlighting the skills and experience built up in the sector. ‘Ireland can lay claim to being one of the locations of excellence in medtech, not just because we have the best of the world’s leading companies but because we have an ecosystem that supports it,’ says Tom Kelly, Enterprise Ireland’s Divisional Manager of Cleantech, Electronics and Life Sciences.
Michael Lohan, Head of Medical Technology and Healthcare Services at Ireland’s Industrial Development Authority (IDA) says the country must stay on top of broad changes at global level. ‘There are some trends to be mindful of, such as the shift towards advanced manufacturing,’ he says. ‘We must continue to be at the forefront in terms of research and development.’
Politicians across Ireland’s political spectrum are looking to high-tech industries as a source of job creation. But some high-skilled companies complain that they have many unfilled vacancies because they can’t find the right people to match their needs. This is a threat to which the industry is already responding. IMDA Director Sinéad Keogh notes that 27,000 people are now working in the sector, making Ireland one of the largest employers of medtech professionals in Europe.
‘Another 2,000 jobs have been announced since 2014, but that’s not enough. We want to make sure that Ireland is an attractive place to work, because the more these companies expand, the greater the skills needs,’ she says. ‘In the broader Irish economy, employment is around 2 million for the first time since 2009, and changes in migration are seeing more people coming to Ireland than leaving.’
The IMDA has developed a Skillnet programme to equip people with the skills demanded by the sector. It is also supporting apprenticeships for technicians and engineers. Individual companies are active, too. For firms like Cook Medical, which arrived in Ireland 20 years ago, a steady stream of graduates is important.
‘We have never failed to fill a position but it would be an area of concern for the future,’ says Alice O’Dwyer, Vice President for HR at the Cook Group Europe. ‘We are involved in initiatives to encourage young people to go into science, technology and mathematics – the STEM subjects – to play our part in developing the skills that will be required.’
The 12.5 per cent corporate tax rate was the centrepiece of the country’s pitch for the medtech, pharma and technology investment that poured into Ireland in the 1990s. This investment continued to flow even during the financial crisis, helping the country to fast-track its exit from a European Union/International Monetary Fund bailout and return to strong GDP growth. As our last article on the Irish medtech scene revealed, the tax benefits are attractive but talent and competition are just as important.
The tax rate is not the lowest in the EU – Bulgaria charges firms just 10 per cent tax on profits – and it is supported by other pro-enterprise policies and a mature education system. The corporate tax regime is jealously guarded by Irish politicians and, while it may irk the public, most people grudgingly accept that it is an effective incentive for job creation. Any radical change to the rate seems unlikely.
The greater risk to the tax regime is external, with both the European Commission and the Organisation for Economic Co-operation and Development (OECD) exploring changes to how global corporations are taxed. While tax rates in Europe are set by national governments, Brussels has pushed for a consolidated corporate tax base (CCTB) which would unify how companies calculate their taxable profits. A 2011 proposal on the CCTB went nowhere but the Commission has reopened the debate.
With freedom to set corporate tax rates guaranteed and the debate focused on the CCTB, Ireland’s business environment seems stable. Perhaps a more pressing concern is the spike in the cost of living that has accompanied the country’s Lazarus-like recovery.
Property prices plummeted during the crash – falling by more than 50 per cent in some areas. While this was a welcome respite for foreign companies seeking to attract talent to Ireland, the construction sector has rebounded more slowly than the wider economy. As a result, the supply of new homes hasn’t kept pace with demand, leading rents to soar once again. The return of double-digit property price growth in 2014 was an unwelcome reminder of the downsides of the Celtic Tiger era but new borrowing limits introduced by the Irish Central Bank appear to have cooled the market.
Companies in Dublin and its commuter belt frequently report difficulty finding suitable accommodation for temporary international staff working on short-term projects. The good news for Ireland’s medtech sector, however, is that it is spread across the country where the cost of living is lower. Significant medtech clusters are to be found in Galway, Cork, Athlone, Limerick, Sligo, Waterford and the Shannon region.
Despite major changes afoot in the medtech sector, Ireland appears well-placed to build on its current advantages. But with lower-cost economies seeking to win investment from established hubs – just as Ireland did in the past – Irish medtech will need to stay on its toes and position the country as the go-to place for delivering value to customers.
Ireland’s medtech industry was built on manufacturing medical devices but has expanded steadily into diagnostics and service provision. At the vanguard of this new wave are companies like Alere, a US-based diagnostics company that has set up in Galway on Ireland’s west coast. The firm specialises in rapid diagnosis of infectious diseases as well as cardiometabolic tests and toxicology assays.
Unlike some long-standing medtech companies in the Galway cluster, Alere doesn’t manufacture products. It does, however, provide a broad range of services including legal, regulatory, procurement, customer support, and finance for Europe, Africa and Latin America.
‘We established our Galway site in July 2011,’ recalls Mark Hengerer, Alere’s General Manager. ‘We were looking to centralise services throughout our European organisation, and Ireland was a good choice for us.’
The company now employs around 140 people on site and is still growing quickly. ‘We’re thrilled to be here. It’s a great area, it’s easy to do business and we are able to find an enthusiastic workforce,’ he says.
He notes that government agencies such as the IDA have been hugely supportive since their first meeting seven years ago and Alere ‘has never looked back’ since taking the plunge.
‘We are focused on creating a better customer experience, so Ireland is a great location for Alere. The demographics are good; it’s an English-speaking workforce used to multinational environments and experienced in areas such as compliance,’ Hengerer explains. ‘Even the time zone is convenient for working with colleagues and customers.’
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