Dublin Economic Monitor - October 2016

Dublin Economic Monitor issue 7

october 2016

in this issue

LATEST DUBLIN ECONOMIC DATA MARKIT DUBLIN PMI KBC/ESRI CONSUMER SENTIMENT DUBLIN’S ECONOMIC PERFORMANCE BROADLY STABLE, DESPITE RISING UNCERTAINTY

F E A T U R I N G PAGE 12

PAGE 14

by Jasmina Behan, Labour Market Economist, SOLAS.

by Caroline Keeling, Chief Executive Officer, Keelings.

LABOUR MARKET IN THE DUBLIN REGION

FOOD FOR THOUGHT – DUBLIN’S AGRI CLUSTER

WELCOME

HIGHLIGHTS 25,000 new jobs were created in the Dublin economy in the year to Q2 2016, despite a rise in the unemployment rate to 7.9% on a quarterly basis.

Residential rental rents in Dublin continued their strong upward trajectory in Q2 2016 with rents for both houses and apartments rising sharply in the period.

Residential property prices rose by 3.8% YoY in July to stand at the highest level recorded since September 2009.

Passenger trips on Dublin’s public transport system fell back to 50 million in Q3 2016 on foot of the strikes.

Housing completions in Dublin remained at a low level in August 2016, with fewer than 360 houses completed in the month.

The Dublin MARKIT PMI Dublin PMI data recorded a sharp increase in business output in Q3 2016, with the construction sector performing particularly strongly.

KBC/ESRI Consumer Sentiment in Dublin continued to weaken in Q3 2016 as Brexit and greater uncertainty regarding the economic outlook dampened expectations.

cover image: cliff road, portrane, fingal. paul raftery design

welcome to the october 2016 issue of the dublin economic monitor

T

he Dublin Economic Monitor is a joint initiative on behalf of the four Dublin Local Authorities, co-ordinated by the City Council. The Dublin Region (4 Dublin local authorities combined) plays an increasingly important role in the economy of Ireland and it is important that its performance is properly tracked. The Monitor is designed to be of particular interest to those living and doing business in Dublin or considering locating here. It is produced by DKM Economic Consultants, with KBC/ESRI delivering the Dublin consumer sentiment data and MARKIT delivering the Dublin Purchasing Managers’ Index (PMI).

In this edition we have a special article from Jasmina Behan, Labour Market Economist at SOLAS covering Dublin’s labour market and future skills needs.

The special article by Caroline Keeling outlines the Argi Food sector and its contribution to the Dublin economy.

You can sign up to our quarterly mailing list and access the Monitor online at www.dublineconomy.ie.

We hope you find the Monitor useful and welcome any feedback to info@leo.dublincity.ie. The next release will be published online on 26th January 2017. Interactive charts from the Monitor are available on the Dublin dashboard www.dublindashboard.ie.

Dublin City Council

Fingal County Council

South Dublin County Council

Dún Laoghaire Rathdown County Council

This document provides general information on the Dublin economy. It is not intended to be used as a basis for any particular course of action or as a substitute for financial advice. The document is produced independently by DKM Economic Consultants; the views and opinions expressed are those of the relevant author, and do not necessarily reflect the views of the Dublin Local Authorities. The Dublin Local Authorities disclaim all liability in connection with any action that may be taken in reliance of this document, and for any error, deficiency, flaw or omission contained in it.

2 //

ECONOMY

GLOBAL ECONOMY

NATIONAL ECONOMY

sterling: euro exchange rate €1.35

Gross Total Expenditure (€bn)

total voted government expenditure & growth patterns 2012-2017f €59

15%

€58

10%

€57

5%

€56

0%

€55

-5%

€54

-10%

€53

-15%

€52

€1.30

2012

2013

2014

Gross Total Expenditure - Left Axis

2015

2016e

2017f

YoY Expenditure Growth (%)

Global economic growth is expected to slow to 3.1% in 2016 before accelerating to 3.4% in 2017, according to the IMF. The forecasted current-year slowdown is the result of the UK decision to leave the European Union, coupled with weaker than anticipated growth in the United States. These events have contributed to further downward pressure on interest rates across developed economies.

Interest rates have remained at low levels for a sustained period, reflecting the difficult economic conditions internationally. The unclear nature of ‘Brexit’ has created greater global uncertainty, particularly in relation to trade and the institutional fallout. This is despite recent clarifications from the British Prime Minister, stating her intention of invoking Article 50 by end of March 2017. Sterling in particular has been affected by this announcement (see chart), and a number of commentators are forecasting parity with the Euro in the near term.

Budget 2017 was introduced by the minority government in midOctober against the backdrop of significant international uncertainty.

The budgetary package was expansionary in nature with a 3:1 split between expenditure increases and tax cuts from the €1.3 billion fiscal space available to the Government. Expansionary measures were spread across a multitude of areas, but the largest outlays were on health, USC cuts and public sector pay increases. The chart shows the strong recent and expected growth in Government expenditure, following a number of years of severe cutbacks.

-20%

Current Expenditure Growth - Right Axis

Capital Expenditure Growth - Right Axis

€1.25

source: dper

€1.20 €1.15

12/10/2016

02/10/2016

22/09/2016

12/09/2016

02/09/2016

23/08/2016

13/08/2016

03/08/2016

24/07/2016

14/07/2016

04/07/2016

24/06/2016

14/06/2016

04/06/2016

25/05/2016

15/05/2016

05/05/2016

25/04/2016

€1.05

15/04/2016

€1.10

source: central bank of ireland

Within the Euro Area, confidence appears to be largely unaffected

by Brexit thus far, with growth forecasted to reach a stronger than previously expected rate of 1.7% in 2016. Further afield, short-term concerns over China’s economy have abated for now, while emerging Asian economies have shown strong growth. However, weaker commodity prices have hit emerging economies in particular, while uncertainty and considerable downside risks have acted as a drag on many developed economies.

Growth projections for the Irish economy have been reined in since the last issue of the Dublin Economic Monitor, largely as a result of the adverse effects of Brexit. GDP is now expected to grow at a not inconsiderable rate of 4.2% in 2016, before slowing to 3.5% in 2017.

Exports, which have long been a primary driver of economic growth in Ireland, increased by over 34% in 2015 as a result of a number of one-off factors. However this rate is expected to fall back to 3.6% in 2016, reflecting the immediate and negative impact for Irish exports of the depreciation of Sterling.

Unemployment in the Irish economy has dropped steadily over the past number of years and is expected to average 8.3% across 2016. This is forecast to decline further in 2017 as the economy continues to grow. However, the aforementioned issues related to falling exports could hurt employment in businesses which rely on exports to the UK market.

irish macroeconomic growth forecasts

major economies gdp growth forecasts

global uk us euro area germany japan china india source: imf, october 2016.

2015 %

2016 %f

2017 %f

3.2 2.2 2.6 2.0 1.5 0.5 6.9 7.6

3.1 1.8 1.6 1.7 1.7 0.5 6.6 7.6

3.4 1.1 2.2 1.5 1.4 0.6 6.2 7.6

gnp gdp private consumption public expenditure investment exports imports unemployment rate* cpi inflation debt:gdp ratio** source: department of finance, budget 2017.

2015 %

2016 %f

2017 %f

18.7 26.3 4.5 1.1 32.7 34.4 21.7 9.5 -0.3 78.6

7.5 4.2 3.3 5.9 15.8 3.6 5.9 8.3 0.5 76.0

3.3 3.5 2.9 2.4 6.0 4.5 5.1 7.7 1.0 74.3

*source: esri qec autumn 2016. **general government balance.

// 3

DUBLIN ECONOMY

ECONOMIC PERFORMANCE BROADLY STABLE, DESPITE RISING UNCERTAINTY unfolding consequences of brexit act as a drag on the capital's economic performance Economic indicators for the Dublin economy remain generally positive, though the international uncertainty generated by Brexit combined with domestic factors has acted as a drag on certain elements of the Capital’s performance.

Labour markets are often cited as a primary bellwether of the performance of an economy. In light of this, the latest statistics on the Dublin labour market would suggest that the Capital’s economic performance is broadly stable. Total employment rose by some 3,800 jobs QoQ in Q2 2016, but curiously the unemployment rate increased by one percentage point over the same period. These results – which have followed sustained downward movements in the unemployment rate over the previous five years – suggest that the rate of job creation in Dublin did not match the expansion in the Capital’s labour force over the second quarter of the year.

This unexpected rise in the unemployment rate was the largest single increase since the final quarter of 2010 and was mirrored in a softening of Dublin’s consumer sentiment for Q3 2016. Austin Hughes, Chief Economist at KBC Bank Ireland, explains: “The weakening in the Dublin Consumer Sentiment Index largely reflects notably increasing uncertainty about the economic outlook. The UK Brexit referendum played a significant role but so too did worries about layoffs at Intel and a number of high profile industrial relations disputes that weighed on consumer thinking about the jobs market in Dublin.”

This uncertainty and the negative side-effects of a weakened sterling could spread to other sectors of the Dublin economy, most notably in the area of exports. Trade volumes handled at Dublin Port are a good measure of this, and will be interesting to analyse over the coming quarters. Initial results show that total volumes handled at the port declined QoQ for the first time in two years in Q3 2016.

This contrasts strongly to the trend since 2014 where very strong QoQ growth levels became the norm at the port.

The housing market in Dublin has also shown few signs of improvement, with housing completions remaining at a broadly low ebb despite sporadic monthly increases. Such weak supply 4 //

has been a significant contributor to the ongoing housing crisis in the Capital which has resulted in sustained growth in average rents for both houses and apartments. The Government’s Action Plan for Housing and Homelessness, and a first-time buyers’ scheme announced in Budget 2017, are targeted at addressing this crisis, but meaningful results in terms of housing supply will take time.

In a broader context, other sectors of the Dublin economy are performing well. The Dublin Markit PMI business confidence indicators, for instance, show continued growth in Q3 2016.

Andrew Harker, Senior Economist at Markit, comments: “Latest PMI data suggest that the Dublin economy has held up reasonably well following the UK’s vote to leave the EU, with output, new orders and employment all rising at faster rates during the third quarter of the year. The improvement in the rate of job creation is particularly welcome given the marked slowdown seen in Q2. As was the case in the previous quarter, the construction and services sectors led overall growth, with manufacturing production rising at a more modest pace.

“The picture in the Dublin economy compares favourably with that seen across the Rest of Ireland, where rates of expansion eased from the second quarter. Whether Dublin can maintain this outperformance remains to be seen given current levels of economic uncertainty, but the economy seems set to meet any future challenges from a position of strength.”

Likewise, the booming tourism sector in Ireland has richly benefitted Dublin Airport as arrivals reached all time highs in Q2 2016. Public transport usage has also risen sharply around the Capital with passenger trips exceeding 50 million for the first time on record in Q1 2016, before falling back slightly in Q2 on foot of strike action and closures within the LUAS service.

Overall, economic temporary closures signals for the Dublin economy are broadly positive though significant concerns remain regarding the nature and side-effects of Brexit. This is likely to persist for many quarters to come.

DUBLIN ECONOMIC INDICATORS

DUBLIN ECONOMIC INDICATORS broad based yoy expansion in dublin employment

employment by broad sector '000s (sa) 700

source: cso qnhs, seasonally adjusted BY DKM

612,000

600 500 400 300

Q2 08

Q2 09

Q2 10

Q2 11

Private Sector Services

Q2 12

Public Sector

Q2 13 Industry

Q2 14

Q2 15

Q2 16

Construction

source: cso qnhs seasonally adjusted. note: individual sector values may not sum to total due to rounding.

dublin & national unemployment rate % (sa) 16%

National Max 15.1%

14%

Dublin Max 13.6%

12% 10% 8% 6% 4%

Dublin

Q2 16

Q3 15

Q4 14

Q1 14

Q2 13

Q3 12

0%

Q4 11

2%

Q1 11

Despite the strong YoY employment growth, Dublin's seasonally adjusted unemployment rate unexpectedly increased by 1 percentage point QoQ in Q2 2016. This raised the unemployment rate to 7.9%, and neutralised gains made over the previous 12 months. Total employment in the Capital rose on both a QoQ and YoY in Q2 but these improvements were offset by increases in the labour force. The September national unemployment rate significantly improved on the Q2 figures to reach 7.9%. Given that Dublin is consistently below the national rate, Dublin’s unemployment rate is expected to have also fallen in recent months.

Q2 07

Q2 10

source: cso qnhs seasonally adjusted

0

Q3 09

q2 ' 16 7.9% 0.0 619.4 +25.6

100

Q4 08

dublin unemployment increases unexpectedly in q2 2016

200

Q1 08

Employment across all of the main sectors of Dublin’s economy increased YoY in Q2 2016. The greatest proportional gains were recorded in Industry and Construction where employment rose by 19.7% and 14.8% YoY respectively. Industry has been a strong performer over the past 12 months with the creation of over 8,900 jobs. More modest growth occurred in the public sector where employment expanded by 2% YoY. Overall private sector services employment grew by 2.5% YoY but fell by 1.2% QoQ (seasonally adjusted).

dublin unemployment (sa) year on year change % points (sa) dublin employment '000s (sa) year on year change '000s (sa)

Max: 632,000

Q2 07

services employment '000s (sa) year on year change '000s (sa) industry & constr, employment '000s (sa) year on year change '000s (sa)

q2 ' 16 529.5 +12.0 82.9 +11.5

National

source: cso qnhs. dublin seasonally adjusted by dkm.

// 5

DUBLIN ECONOMIC INDICATORS uneven employment growth across the services sector private sector services employment '000s (SA)

year on year change '000s (SA) public sector services employment '000s (SA)

year on year change '000s (SA)

q2 '16 374.3 +9.3 153.2 +3.0

employment in services '000s (SA) 600

Max: 527,500

500

400

300

source: cso qnhs. seasonally adjusted by dkm.

Employment in Dublin’s services sector increased YoY by 9,300 jobs or 2.5% to stand at over 527,000 in Q2 2016. This was mainly the result of robust YoY employment growth in Public Administration (+18.6%), with further sizeable expansions recorded in Transportation & Storage (+10.7%), Accommodation & Food (+8.4%) and ICT (+5.2%). On the other hand, employment fell YoY in Education (-8%) and Financial/ Insurance (-3.5%).

200

100

0

Q2 07

Q2 08

Q2 09

Q2 10

Q2 11

Q2 12

Q2 13

Q2 14

Q2 15

Q2 16

Health

Education

Public Admin

Wholesale & Retail

Prof/ Scientific/ Tech

Financial/ Insurance

Transport & Storage

Accommodation & Food

ICT

Other source: cso qnhs. seasonally adjusted by dkm. note: individual sector values may not sum to total due to rounding.

residential property prices reach 7-year peak

140

residential rents continue to accelerate

90 80 70 60

Dublin

Jul 16

Nov 15

Mar 15

Jul 14

Nov 13

Mar 13

Jul 12

Nov 11

Mar 11

Jul 10

Mar 09

40

Nov 09

50

National Excl Dublin

source: cso.

residential rents € per month €1,500

Dublin Apt Max: €1,368

€1,300 €1,200 €1,100 €1,000 €900 €800 €700

Dublin House source: rtb.

Dublin Apt

National ex Dublin House

National ex Dublin Apt

Q2 16

Q4 15

Q2 15

Q4 14

Q2 14

Q4 13

Q2 13

Q4 12

Q2 12

Q4 11

Q2 11

Q4 10

Q2 10

€500

Q4 09

€600 Q2 09

Upward momentum in average rents for houses and apartments in Dublin continued in the second quarter of 2016. Average house rents rose by 7.5% or €104 YoY to stand close to €1,500 per month, and this was the 13th consecutive quarterly increase recorded. Average rents for apartments rose at a stronger YoY rate of 9.8% or €122 in the quarter to reach €1,368. Average rents for houses and apartments in Dublin were 97.4% and 87.7% higher than the equivalents around the rest of the country, respectively.

Dublin House Max: €1,492

€1,400

Q4 08

q2 ' 16 1,492 +104 1,368 +122

source: rtb.

6 //

100

Q2 08

dublin house rent € per month year on year change € dublin apartment rent € per month year on year change €

110

Jul 08

The residential property price index was substantially revised in September 2016, and now includes both mortgage-based and cash-based transactions. Under the new index, property prices in Dublin rose by 3.8% YoY in July, following a mixed first half of the year. Prices in the Capital in July stood at the highest level recorded since September 2009. Growth was considerably stronger outside Dublin where prices increased by over 11% YoY in July.

120

Nov 07

source: cso. note: this index now includes both cash -and mortgage based transactions.

Dublin Max 134

130

Mar 07

jul ' 16 87.3 +3.8 78.9 +11.3

Q4 07

property price index dublin year on year % change property price index national excl dublin year on year % change

residential property price index (2005 = 100)

DUBLIN ECONOMIC INDICATORS

city centre office rents rise in q3 2016

source: CBRE

120

City Centre Max = 113.7 South Suburbs Max = 110

110 100 90 80 70 60

Q3 16

Q1 16

Q3 15

Q1 15

Q3 14

Q1 14

Q3 13

Q1 13

Q3 12

Q3 11

City Centre

Q1 12

Q1 11

Q3 10

Q1 10

Q3 09

Q1 09

Q3 08

Q1 08

40

Q3 07

50

Q1 07

Office rents in Dublin City Centre increased by 4.2% QoQ in Q3 2016 to stand at the highest level recorded since Q3 2008.

The index reached 109.0 in the quarter and this was 14.2% above the same quarter in 2015. In the South Suburbs, office rents remained stable for a sixth consecutive quarter in Q3 2016.

Although rents have not risen in the South Suburbs in over a year, they remain at peak levels.

Q3 06

city centre office rent index year on year % change south suburbS office rent index year on year % change

q3 '16 109.0 +14.2 110.0 0.0

dublin office rents index (2006 = 100)

South Suburbs

source: cbre.

office vacancies fall following minor increases in q2 vacancy rate % dublin 2/4 year on year change % points vacancy rate % dublin suburbs year on year change % points

q3 '16 5.2 -0.9 10.8 -2.2

dublin office space vacancy rates % 30%

Dublin Suburbs Max = 25% Dublin 2/4 Max = 20.6%

25% 20% 15%

source: cbre.

10%

Dublin 2/4

Q3 16

Q4 15

Q1 15

Q2 14

Q3 13

Q4 12

Q1 12

Q2 11

Q3 10

Q4 09

Q1 09

0%

Q2 08

5%

Q3 07

Following minor increases in Q2 2016, office vacancy rates in Dublin fell in Q3 2016. The largest decrease QoQ was in the Dublin 2/4 postcodes where the vacancy rate fell by 0.9 percentage points (pp) QoQ to stand at 5.2%. This was also 0.9pp below the same period in 2015. The vacancy rate for the Dublin suburbs fell by 0.4pp QoQ and by 2.2pp YoY to stand at 10.8% at the end of Q3 2016.

Dublin Suburbs

source: cbre.

50 49 48 47 46 45 44

Q2 16

Q4 15

Q2 15

Q4 14

Q2 14

Q4 13

Q2 13

Q4 12

42

Q2 12

43 Q4 11

Passenger trips on Dublin's public transport system fell back to a seasonally adjusted total of 50 million in Q2 2016, from a peak of over 51 million in Q1. The decline is likely to be largely attributable to 7 days of strike action by Luas staff, as well as the closure of a section the Luas Red Line for six weeks to facilitate Luas Cross City works. Trip numbers were still the second highest recorded in the series, and 3.4 million up on the same quarter in 2015.

51

Q2 11

source: nta seasonally adjusted by dkm.

52

Q4 10

public transport million trips (sa) year on year change (sa)

q2 '16 50.0 +3.4

public transport million trips (sa)

Q2 10

public transport trips fall back in q2 2016

source: nta. seasonally adjusted by dkm.

// 7

DUBLIN ECONOMIC INDICATORS arrivals at dublin airport reach new peak in may 2016

1,200,000

jun '16 1,124.8 +89.3

source: cso, seasonally adjusted by dkm.

Max: 1,138,500

1,100,000 1,000,000 900,000 800,000 700,000 Severe Winter Weather

600,000

Jun 16

Aug 15

Oct 14

Dec 13

Feb 13

Apr 12

Jun 11

Aug 10

Oct 09

Dec 08

500,000

Icelandic Ash Cloud

Feb 08

Monthly passenger arrivals at Dublin Airport remained above the 1 million mark (seasonally adjusted) in June 2016 to cap another strong quarter for the airport. Arrivals of 1.12 million passengers in the month represented YoY growth of 8.6% or over 89,000 passengers. The airport posted its strongest month on record in May 2016 with 1.14m passenger arrivals. This sustained growth has been cited as a main driver of the airport’s recently announced plan to deliver a new runway by 2020.

Apr 07

total arrivals '000s (SA) year on year change '000s (sa)

dublin airport arrivals '000s (sa)

source: cso. seasonally adjusted by dkm.

weak and inconsistent growth in house completions

source: declg. seasonally adjusted by dkm.

2,000

Max: 1,900

1,800 1,600 1,400 1,200 1,000 800 600 400

Aug 16

Nov 15

Feb 15

May 14

Aug 13

Nov 12

Feb 12

May 11

Aug 10

Nov 09

Feb 09

May 08

0

Aug 07

200 Nov 06

Housing completions in Dublin remained at a relatively low level in August 2016, with fewer than 360 houses completed in the month (seasonally adjusted). In the first eight months of 2016, growth in housing supply has been weak and inconsistent, with 2,669 houses completed in the Capital. This was an increase of over 850 units YoY but the current housing crisis indicates that significantly stronger supply is needed. The largest proportions of completions over the eight month period occurred in the Fingal (38.6%) and Dublin City (27.6%) local authority areas.

Feb 06

total housing completions (sa) year on year change (sa)

aug '16 359 +131

dublin housing completions (sa)

source: declg. seasonally adjusted by dkm.

dublin port tonnage million tonnes (sa)

dublin port throughput remains stable

9.0 Max: 8.7 million tonnes

8.5

7.0 6.5

Min: 6.3 million tonnes

6.0

source: dublin port. seasonally adjusted by dkm.

8 //

Q3 16

Q3 15

Q3 14

Q3 13

Q3 12

5.0

Q3 11

5.5

Q3 10

Activity levels at Dublin Port remained largely stable QoQ in Q3 2016 with a seasonally adjusted total of 8.7 million tonnes of cargo handled in the quarter. Despite low quarterly growth, this total represented a robust YoY increase of 400,000 tonnes or 5.3%. Growth at the port has been relatively flat across 2 016 compared to the very strong year in 2015. Brexit may have further implications to this end as trade between Ireland and the UK is affected, most notably for port trade on the Irish export side.

7.5

Q3 09

source: dublin port. seasonally adjusted by dkm.

8.0

Q3 08

yoy change million tonnes (sa)

q3 '16 8.7 +0.4

Q3 07

dublin port million tonnes (sa)

DUBLIN’S INTERNATIONAL RANKINGS

DUBLIN’S INTERNATIONAL COMPETITIVENESS HIGHLIGHTED BY BENCHMARKS Internationally published benchmarks are a useful means of measuring a city’s performance relative to its peers, and recent indicators for Dublin confirm the city’s strong showing across a range of dimensions (see table below).

The benchmarks listed focus on a number of areas – attractiveness for FDI, the real estate market, quality and cost of living, business environment, university quality, start-up environment and tourism.

Dublin city’s ranking in the 2017 Global Financial Centres Index has increased by 8 places to stand at 31st in the world. The Index, which assesses centres’ specialities in areas including insurance, asset management, banking and professional services, was mainly generated in the lead up to the Brexit vote. The authors of the report accompanying the Index added: “Early indications following the Brexit

referendum result are that decision-makers are looking around and considering Luxembourg and Dublin as potential locations if they need to leave the UK” Dublin’s attractiveness as a financial centre was also underlined in the 2016 PwC Global Economy Watch report, where the city ranked 2nd in Europe, behind London, in terms of attractiveness of destinations for financial services.

Knight Frank’s Global Cities Report for 2017 meanwhile highlights how Dublin is the 6th most expensive city in the world for start-ups in terms of property costs.

However, Dublin was less costly than rival tech cities such as London, New York and San Francisco. Dublin also fell one place in an Index of Europe’s Biggest Startup Cities, but remains within the top 10 in 8th position.

Meanwhile, Dublin is now rated as the

third best city in the world in the JLL City Momentum Index. This Index assesses the provision of dynamic infrastructure and real estate projects which contribute to a city’s competitive advantage.

Dublin was also rated highly in the Condé Nast Traveler Friendliest Cities in the World Index for 2016. The city ranked in third place, down one place on 2015, in tourists’ perceptions of the welcome they received.

On the negative side, Dublin’s hotels have been ranked as the second most expensive in Europe by HRS hotel group. Rates had grown in the Capital by almost 70% YoY according to HRS. More worryingly, all of Dublin’s universities fell in the QS World University Rankings for 2016/2017. Trinity College Dublin was the only university in the top 100, though it fell 20 places from 2015 to rank 98th in the world.

d u b l i n ' s l at e s t i n t e r n at i o n a l r a n k i n g s SOURCE FDI Intelligence European Cities and Regions of the Future 2016/2017 Global Financial Centres Index (GFCI) PwC Financial Services Attractiveness Indicator

BENCHMARK CRITERIA Socio-economic Business environment, financial sector development, infrastructure, human capital, reputational & general factors; online survey Connectivity, law, business environment, people, critical mass, financial infrastructure

YEAR

RANKING CHANGE‡

2016

3, 5*

▲

2017

31

▲

2016

2

-

PwC Emerging Trends in Real Estate Europe 2016

Real estate investment, development

2016

3

JLL City Momentum Index

Real Estate

2016

3

► ▲

IMD World Competitiveness Yearbook Rankings (Ireland)

Economic performance, government efficiency, business efficiency & infrastructure

2016

7

▲

Mercer 2016 Cost of Living Survey

Cost of consumer goods & services

2016

47

Mercer 2016 Quality of Living Survey

Environmental/socio-economic

2015

33

QS World University Rankings

University quality

2016/17

98**

Knight Frank Global Cities Report

Property costs for start-ups in tech cities

2017

6

EU Startups Europe’s Biggest Startup Cities

Startups registered, visitors

2016

8

HRS Survey of European Hotel Prices

Average nightly hotel price

2016

2

Condé Nast Traveler Friendliest Cities in the World

Tourists’ perception of friendliness

2016

3

▼ ▲ ▼ ▼ ▼ ▼

*dublin city ranked third, dublin region ranked 5th. **tcd. ‡change on previous publication of the relevant benchmark. an upward-pointing arrow denotes an improvement.

9 //

KBC / ESRI CONSUMER SENTIMENT INDEX

perceptions of current conditions improved current conditions q3 2016 year on year change quarter on quarter change

120 100 80

Dublin

Q3 16

Q1 16

Q3 15

Q1 15

Q3 14

Q1 14

Q3 13

Q1 13

Q3 12

Q1 12

Q3 11

40

Q1 11

60

Q3 10

Dublin's Consumer Sentiment Index continued to weaken in Q3 2016. The decline can in part be attributed to the unexpected Brexit referendum result, a more negative assessment of future employment prospects and the general economic outlook. There was a general weakening in how households view their current and future financial situation in Q3; but households do consider themselves to be in a better financial situation than this time last year.

140

Q1 10

154.2 -2.7 -1.6

Q3 09

150.1 +2.9 -3.1

160

Q1 09

q3 2016 year on year change quarter on quarter change

dublin

180

Q3 08

consumer sentiment

National excl. dublin

Dublin sentiment overall Base 2003 = 100

Q1 08

continued decline in consumer sentiment in q3

National excl. Dublin

Dublin current conditions 130

dublin

National excl. dublin

115.2 +14.3 +7.3

127.0 +9.7 +6.7

Base 2003 = 100

120 110 100 90 80 70 60

Dublin

consumer expectations in dublin decline

230

Q3 16

Q1 16

Q3 15

Q1 15

Q3 14

Q1 14

150 130 110 90 70

Dublin

National excl. Dublin

The KBC/ESRI sentiment index is based on responses from consumers about general economic conditions and their household finances. A more detailed commentary is available at www.kbc.ie/Blog

Q3 16

Q1 16

Q3 15

Q1 15

Q3 14

Q1 14

Q3 13

Q1 13

Q3 12

Q1 12

Q3 11

Q1 11

30

Q3 10

50

About

10 //

Q3 13

170

Q1 10

The fall in consumer expectations in recent quarters has largely been a result of worsening perceptions in the outlook for the economy as well as future employment prospects with Brexit likely playing a major role. Notwithstanding the decline, the majority of consumers continue to remain positive in their view of the economy over the next year. Approximately 53 per cent are positive in relation to the economic outlook compared to 18 per cent who envisage a deterioration.

190

Q3 09

180.2 -14.5 -9.6

210

Q1 09

National

dublin excl. dublin 187.8 -9.6 -14.4

Q1 13

Dublin expectationS

Q3 08

q3 2016 year on year change quarter on quarter change

National excl. Dublin

Base 2003 = 100

Q1 08

consumer expectations

Q3 12

Q1 12

Q3 11

Q1 11

Q3 10

Q1 10

Q3 09

Q1 09

40

Q3 08

50 Q1 08

Perceptions of current finances remained relatively flat compared to Q2 2016, however, consumers appear to have a more positive view of the current buying climate with respect to large household purchases. This was the main driver of the increase in the index of current conditions this quarter.

DUBLIN MARKIT PMI dublin business output rises sharply again in q3 overall markit pmi

dublin

overall markit dublin pmi (sa) 65

national excl. dublin

60

q3 2016

58.1

57.7

55

year on year change

-2.2 +0.5

-3.4 -0.2

50

quarter on quarter change

increasing rate of growth ▲

50 = no change

45

rate of growth in new orders picks up

40 35 30

Q3 16

Q2 15

Q1 14

Q4 12

Q3 11

Q2 10

Q1 09

Q3 06

Q2 05

Q4 07

National excl. Dublin

overall pmi new orders (sa) 65

national excl. dublin

60

q3 2016

58.3

56.1

55

year on year change

-0.9 +0.4

-5.1 -1.6

50

quarter on quarter change

Q1 04

Dublin

dublin

new orders

increasing rate of contraction ▼ Q4 02

25

Q3 01

The latest Dublin PMI data signalled a further sharp increase in output in Q3 2016. At 58.1, the latest reading was slightly higher than the 57.6 seen in Q2, and was stronger than that seen in the Rest of Ireland. Across sectors, the strongest increase was again seen with construction firms, albeit the rate of expansion was marginally weaker than in Q2. The rate of growth in services was sharp and unchanged. Manufacturing remained the weakest performer, seeing a much slower increase in output than either services or construction.

increasing rate of growth ▲

50 = no change

45 40 35 30

Dublin

65

national excl. dublin

60

q3 2016

58.1

55.1

55

year on year change

-0.1 +3.5

-1.6 -1.5

50

quarter on quarter change

Q3 16

Q2 15

Q1 14

Q4 12

Dublin

overall pmi employment growth (sa)

dublin

employment growth

Q3 11

National excl. Dublin Rest of Ireland

rate of job creation rebounds

Q2 10

Q1 09

Q4 07

Q3 06

Q2 05

Q1 04

increasing rate of contraction ▼ Q4 02

25

Q3 01

The rate of growth in new business also quickened slightly during Q3. New orders in Dublin rose substantially, extending the current sequence of growth to four years. Companies in Dublin also saw a faster rise in new business than their counterparts in the Rest of Ireland, where the rate of expansion eased to a ten-quarter low.

increasing rate of growth ▲

50 = no change

45 40 35 30

Dublin

Q3 16

Q2 15

Q1 14

Q4 12

Q3 11

Q2 10

Q1 09

Q4 07

Q3 06

Q2 05

Q1 04

Q4 02

25

increasing rate of contraction ▼ Q3 01

The rate of job creation in Dublin quickened markedly in Q3 2016, having eased to an 11-quarter low in Q2. Employment rose sharply, and at a broadly similar pace to that seen in the first three months of the year. In contrast, the Rest of Ireland signalled a weaker increase in employment than in Q2, and was notably slower than in Dublin.

National excl. Dublin

about

The Dublin Purchasing Managers’ Index® (PMI) series is produced by Markit Economics, an independent research company that produces highly-regarded surveys of business conditions in nations around the world www.markit.com // 11

SPECIAL REPORT

Labour market in the Dublin region

BY JASMINA BEHAN LABOUR MARKET ECONOMIST, SKILLS AND LABOUR MARKET RESEARCH UNIT, SOLAS

Overview of Dublin’s Skills Shortages With employment levels of almost 620,000, the Dublin region accounts for just over 30% of the total employment in Ireland.

Moreover, recent employment growth has been the strongest in Dublin, with participation and employment rates ahead of other regions.

However, the recovery in the Dublin region is not equally spread across all segments of the labour market, with employment growing fast in some sectors (e.g. ICT), while slowly in others (e.g. Public Administration and Defence (PAD)) (Figure 1). Such uneven growth across sectors and occupations is resulting in different levels of demand for different skills. However, the issue of availability of skills is not just a matter in relation to growing sectors but also in relation to employment attrition that occurs due to retirements and other exits into economic inactivity that affects sectors.

Expansion and replacement Expansion demand arises from growth in economic activity and it is therefore important to ensure that an adequate supply of skills

is available to support it. It is estimated that, in the Dublin region, growth will result in an additional 15,000 persons in employment annually (Figure 2). However, with the exception of the construction and ICT sectors, where expansion is expected to be the main component of the demand, in all other sectors, expansion is expected to account for less than half of the total job openings. In fact, the most significant component of the demand arises from replacement of those who leave (due to retirement, illness, full time study etc.), which for the Dublin region is estimated at over 40,000 annually. Nonetheless, although smaller in magnitude, meeting skill needs arising from expansion demand is imperative, not least because most expanding sectors (e.g. pharma, ICT) are generating wealth through exports of high value added goods and services, and are therefore critical for sustainable growth.

Understanding demand for skills is important for job seekers and students, but also for policy makers in the areas of education and training, career guidance, labour market activation,

Figure 1 - Estimated employment growth in the Dublin region by sector, 2012-2020 Food processing Education Health PAD Trad.manuf.

High tech manuf.

Transport Professional services Other market services Distribution Financial services ICT Construction Accom. and food

source: solas, 2016

12 //

4,000

8,000

12,000 Total Persons

16,000

20,000

24,000

“

Economic recovery has resulted in the tightening of the labour market in a number of areas, with skills shortages intensifying in ICT while shortages are emerging in The construction sector

”

Figure 2 - Estimated components of annual labour demand in the Dublin region by sector (2012-2020) Food processing Trad.manuf.

PAD Education High tech manuf.

Health Accom. and food Other market services Professional services Transport Financial services Distribution ICT Construction

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Total Persons Expansion arising from growth

Replacement of retirees, leavers, etc

source: solas, 2016

Shortages In particular, there is a shortage of the following skills in the Irish labour market: Professionals/associate professionals – ICT (software developers, cloud, databases/big data, testing, security, technical support, networking and infrastructure) – Engineering (production, process, quality, validation, product design/development, electronic, electrical, mechanical and chemical) – Science (analytical development chemist, formulation scientist, microbiologist, QC analyst/validation technician) – Business & finance (risk, compliance, accounting, business intelligence, data analytics) – Health (doctors, nurses, radiographers, niche area specialists (e.g. audiologists), managers) – Construction (surveyors, project managers) Clerical (multilingual financial clerks in fund accounting/ administration, credit controllers, payroll specialists) Skilled trades (chefs, tool making, welding, butchers/de-boners, steelerector) Sales (technical sales, multilingual customer support) Operative Drivers (fork lifts and special vehicles) immigration and enterprise development. It is critical in achieving an alignment of skills on offer and labour market needs.

A network of Regional Skills, led by the Department of Education and Skills, Fora will facilitate the engagement between regional employers and education and training providers to ensure that the supply of skills is adequate to meet the needs of the local labour markets. To connect with the Dublin Region Skills Forum, visit - http://www.regionalskills.ie/Regions/dublin/ SOLAS, the Further Education and Training Authority, a statutory agency under the aegis of the Department of Education and Skills, is responsible for funding, coordinating and providing strategic direction to the Further Education and Training sector in Ireland.

// 13

SPECIAL REPORT

Food for thought – Dublin's agri cluster CAROLINE KEELING CEO, KEELINGS

When we think of the sectors that drive the Dublin economy, clusters such as tech, finance and life sciences come to mind. While these industries have been at the heart of the region’s recent growth story, we shouldn’t lose sight of some of the more traditional sectors that have brought prosperity across Dublin and its hinterland for generations and which can further add to growth into the future.

In particular, the capital’s long association with agriculture, horticulture and food production is a major economic force creating business opportunities, sustaining jobs and enriching communities across the region.

Analysis shows that Dublin accounts for one fifth of the total economic contribution of agri-food nationally. The sector sustains over 8,000 jobs in the region but, crucially, these are high valueadding jobs: on average each agri-food position in Dublin contributes over €178,000 to the national economy, compared to about €55,000 on average across all other regions. The high- value nature of the jobs, mainly in food and beverages manufacturing firms, implies that the sector in Dublin is considerably more productive than the national average.

In terms of primary production, there are about 800 farms in Dublin, with approximately 118,000 hectares of land categorised under agricultural use. Dublin is a major contributor to national output, as shown in the table opposite. crop potatoes Field vegetables protected fruits and vegetables

% national output grown in dublin 15 47 37

Source: Fingal County Council

Added to this, fishing is a substantial sub-segment in Dublin, with Howth being one of six national Fishery Harbour Centres and a key source of employment. There are challenges on the horizon

however. In June, the UK’s vote to leave the EU sent an immediate shock-wave through the sector. The impact of the appreciation of the euro against sterling was a sudden and substantial blow to our international competitiveness. The UK is Ireland’s primary destination for agri-food exports and as the wider consequences of Brexit unfold it will be pivotal to have a robust policy response to buttress the sector’s contribution to Dublin’s prosperity. Conversely, Ireland is an important market for UK food exporters and the overnight improvement in their competitiveness must be seen as a threat to Irish producers trading in the domestic market.

Last year, the Government published Foodwise 2025, its medium-term strategy to maximise growth opportunities in agrifood. The changed external environment in the interim means that the key strategic pillars – competitiveness, human capital, innovation and new market development – are now all the more relevant. In addition, the Dublin Regional Action Plan for Jobs (which I chair) can also help create the conditions for the sector to thrive.

Local policy-makers can help ensure the sector is fit to compete both on and off the island. The Fingal Local Economic and Community Plan highlights the contribution of agri-food and involves a more strategic approach to supporting the sector. Across the region, initiatives such as the Dublin Food Chain are to be welcomed in terms of helping businesses at all points in the value chain.

While the outlook is uncertain and global challenges loom, a concerted policy response and a partnership approach with the industry will help the agri-food sector in Dublin to deliver continued prosperity across the region.

1. The Geographical Spread and the Economic Impact of Food Harvest 2020 – A Regional Perspective. Mary Carey and Cathal O’Donoghue.

14 //

ECONOMIC SCORECARD

dublin: economic scorecard october 2016 Note: These "petrol gauge" charts present the performance of the particular indicator relative to a range of performances from most positive (green) to least positive (red). Each gauge presents the latest value compared to the peak value and the trough value over the last decade (except for public transport trips which cover the past 5 years). The Commercial Property gauges are red at the high and low extremes, in recognition of the undesirability of rents and vacancy rates that are either too high or too low. .

economy

markit business pmi q3 2016

46

8

52

40

64

kbc/esri consumer sentiment q3 2016

10

6

58

58.1

34

unemployment rate q2 2016

100 12

70

7.9

4

3 month moving average (sa)

120

14

% (sa)

140

150

53

160

index (2003 = 100) (sa)

transport airport arrivals june 2016

820

920

7.3

710

1,030

1,125

610

seaport cargo q3 2016

'000s/month (sa)

46.0

7.7

6.8

8.2

8.7

6.3

public transport trips q2 2016

44.4

42.7

million tonnes/quarter (sa)

47.7 49.3

50.0

51.0

million trips/quarter (sa)

residential property average residential rents q2 2016

1,130

1,200

1,050

972

residential property price index Jul 2016

87

1,280

1,364 â‚Ź/month

800

103

71

55

housing completions aug 2016

119

87.3

135

index 2005 = 100

1,200

400

1,500

359

60

1,910

units/month (sa)

commercial property dublin city centre office rent q3 2016

450

520

645 â‚Ź/sq.m.

673

9

4

dublin suburbs office vacancy rate q3 2016

20

15

600

370

296

dublin 2/4 office vacancy rate q3 2016

16 14

25

5.2 %

19

30

22

10.8

25

%

sources: cso, except consumer sentiment kbc/esri; pmi markit; seaport cargo dublin port; public transport nta; residential rents rtb; commercial property cbre research

// 15