Ireland should focus on services for a brighter future

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(Written by Professor Ciaran Murphy (Business Information Systems, UCC)
edited for Career Moves by Calvin Jones

Per head of population Ireland has the unique distinction of being the biggest exporter of services in the world today by quite a margin. That may sound like an extraordinary fact, but it’s exactly what Forfas, Ireland’s national policy advisory body for enterprise and science, says in its report "Catching the Wave – A Services Strategy for Ireland", and is a testament to the efforts of Enterprise Ireland and the IDA in attracting investment in to the sector.

The services sector spans a gamut of service-based industries that include Financial Services; Computer Services and Software; Healthcare Services; Education Services; Tourism; Creative and design services; Maritime Services; Transport; Bloodstock & agriculture; Engineering, Environmental & Architectural Services; Business Services; Professional & Consulting Services; and Research & Development Services. Together these industries contribute a massive 63% of added value to the national economy.

In the decade between 1997 and 2007, the gross value added in the Irish economy almost trebled from €60 billion to €170 billion. Two thirds of that growth was attributed to the services sector, where the value added figure rose from €34 billion to €108 billion.

Two thirds of Ireland’s workforce are employed in service.

Out of a total workforce of just over 2 million, the services sector employs 1.4 million. Between 1998 and 2007, employment in services increased by 520,000. And some 35 percent of workers in the manufacturing sector are also engaged in service-type activities. Services account for 43% of all exports from Ireland, and we’re currently the 10th highest exporter of services in the world, with a 2.7 % share of the world services export market. That’s a remarkable achievement for a tiny country on Europe’s periphery. Between 2000 and 2007 the contribution of services to total Irish exports doubled, from 21% to 43%.

Services provide high-quality employment.

Almost 40% of workers employed in the services sector are classified as high-skill employees, compared with an average of 35 percent across the entire economy. The services sector also makes a very substantial contribution to the Exchequer in terms of corporation taxes and to the Irish economy in terms of domestic expenditure. Add to that the fact that every 100 employees engaged in internationally traded services firms support an additional 99 jobs in ancillary and downstream services, and you begin to see just how significant the services sector is in Ireland.

Today services are the main driver of the Irish economy, and the most likely vehicle for sustainable economic growth, continued prosperity and improved living standards in the years ahead.

Ireland’s export performance in services is largely based on two key sectors – financial services/insurance and computers and software – which together account for around 60% of Ireland’s total services exports. Believe it or not, these sectors overlap to a very significant degree: international financial services companies, for example, employ more information systems personnel than any other category of staff, while conversely computer companies tend to employ large numbers of accounting personnel.

The Econimic and Social Research Institute (ESRI) forecasts that by 2025 services could account for over 70% of Irish exports and for nearly 80% of our GDP. Meanwhile, Forfas has identified the need to greatly increase the amount of research and development in the services sector if Ireland if we are to maintain our world-leading position and build on its success to date.
Building Ireland’s services expertise

Internationally, there has been relatively little research conducted on understanding the fundamental differences between innovation in service and manufacturing industries. Given that services will be the growth engine for Ireland moving forward, it is time for a change in mindset when it comes to the distribution of research funding. Ireland needs to channel more research funding into key service areas to ensure that we have a deep and compelling suite of service competencies. Other countries, like Finland to name but one example, are already investing heavily in services research.

Ongoing opportunity for high-calibre graduates

A vibrant services sector in Ireland will very much depend on a steady supply of high quality, innovative and creative graduates. Despite the economic uncertainty that currently prevails, we can be absolutely certain of one thing: Ireland’s economic prosperity in the future will depend on our success in the services sector. If you’re a student pondering your third-level course choices (or the parent of one), the good news is that the services sector has, and will continue to have, demand for a large numbers of graduates with skills and knowledge in areas related to key service disciplines like business, the financial services and computers & software.