Apple’s decision to establish a data centre is an undoubted boon for Athenry, a small town that, like so many other small towns and rural areas, has seen little substantial investment in recent years. Data centres employ small numbers but 100 permanent jobs will make a significant impact in a town that in 2011 had 4,000 inhabitants, 1,265 jobs and an unemployment rate of 18 per cent. The development was celebrated by An Taoiseach, who sees it as another step in the right direction “… as the Government works to secure recovery and see it spread to every part of the country”. This comment should be understood in the context of the recently launched framework for the development of regional enterprise strategies and the IDA’s stated aim of achieving a better distribution of investment across Irish regions. But what does Apple’s investment in Athenry really mean for the future of small towns and rural areas? Should it be regarded as a potential path to future economic growth for small towns and rural communities or should it instead be seen as a one-off event?
The answer is, neither. Nationally, (and globally) we are witnessing a concentration of employment in urban centres, notably the largest metropolitan centres. Edgar Morgenroth at the ESRI has calculated that in 2011 overall jobs were 11 per cent more spatially concentrated compared to 2006. My own research has shown that in 2012, County Dublin accounted for 71% of all employment in new foreign operations in Ireland (the situation has improved somewhat since).
This preference for larger urban centres has proven to be most evident amongst those knowledge economy companies that the IDA has been so successful in attracting: the born-on-the-Internet companies, digital content developers, financial services, business services, and so forth. These companies require connectivity, both in terms of international airports and Internet-ports. They look for large pools of educated labour and, therefore, like to be located near universities. Educated workers also tend to prefer to live in vibrant cities that possess a high degree of connectivity.
Apple’s decision to locate in Derrydonnell near Athenry should be seen as a special case (though not a one-off event). The main attractions of Ireland for data centre investment include favourable corporation tax, connectivity to the transatlantic Internet backbone and, last but not least, its climate. Cooling is a major cost factor for data centres and companies can achieve significant cost savings by making best use of Ireland’s low-temperature ambient air. Until recently, data centre activity in Ireland was heavily concentrated in the periphery of Dublin, close to the Internet backbone that connects the business parks along the M50. But, after Rackfloor’s decision to locate in Limerick, Apple in Athenry is evidence of an incipient dispersion process that can also be observed abroad. For example, Google is constructing a mega data centre in Eemshaven, arguably the most peripheral spot in the Netherlands. The reason is that high bandwidth connectivity is becoming available in more locations and companies like Apple are establishing their own content networks, allowing for rural locations – where property prices are relatively low – to now become attractive sites. Data centres are able to operate in small towns because they require a relatively small number of IT service workers – I estimate 50 IT service workers of the 100 permanent jobs, with the remainder occupied with support functions and security.
There will be other date centers and other informational economy projects locating in small, or even smaller, urban centres. But there are about 100 urban centres in Ireland that are larger than Athenry, the vast majority of which did not receive any foreign investment in the last decade. And there are another 100 towns and urban settlements that are smaller than Athenry. The point is that small urban centres in Ireland should not focus on foreign investment. Neither should IDA Ireland be asked to promote foreign investments in every town in Ireland. Clearly, the current trend in concentration of foreign investment is too strong and, as stated in its new five-year plan, the IDA is correctly, and energetically, adopting a strategy supporting greater dispersion to the regions. But this cannot, and should not, take the form of investment in every regional town. We must face up to the fact that the character of inward investment has changed and that the time when the IDA could parachute a low value-added assembly plant in every small town in Ireland has gone.
We need to reconsider the space-economy of Ireland, and the roles of urban centres of different size, in the context of the new environment. Concentration of foreign investment in a select number of sizeable regional urban centres, and in Dublin, should be encouraged. If we concentrate social and economic infrastructure we can make these centres attractive for foreign investment. These centres will enjoy cumulative processes and their growth will benefit the wider region.
The centres will function as major regional employment centres for their hinterland. That will involve commuting for some. Currently 38% of the population of Athenry are already commuting into Galway. Provided that we invest in high quality public transport and infrastructure, there is nothing wrong with this.
Clearly, some areas will be outside the commuting range of the large centres. But all urban centres will potentially have an important economic and employment role. Foreign companies account for only 9% of employment in Ireland. Smaller regional centres should focus on indigenous opportunities such as indigenous private enterprise, public sector jobs, farming, off-farm employment, and tourism. Indeed, the indigenous sector beyond Dublin is performing very well, with 70% of net job gains of Enterprise Ireland clients over the past year occurring outside Dublin.
Chris.vanegeraat@nuim.ie
Ireland after NAMA 
March 11, 2015 at 5:47 pm
My public service career was punctuated by political failures to take regional policy seriously. When I joined the Dept. of Finance, my job was to pretend to the European Commission that we had a regional policy (this was long after the Buchanan Report had politicians running for cover, and every one-horse town had been deemed to be a priority).
We went through an at best half-serious consultation process with the regions created out of thin air to satisfy the Commission as one of the conditions to draw down the doubled structural funds under the Delors packages. People were listened to, and reports drawn up, but I don’t think they had any influence on resource allocation.
I left in 1989 just as the ERDO Report said we needed to plan for three Tallaght-sized satellite towns just to cope with clearly foreseeable population growth – and that was before the Celtic Tiger population growth went through the roof. All we got was spec-built urban sprawl.
Since then we had the glorious Fianna Fáil Spatial Strategy which was completely ignored in the gadarene rush to fit random bits of government departments into office space in not-quite-random towns that had no relationship to the Strategy.
Now we have the present Coalition in a slow bicycle race to avoid taking any regional-policy decisions before the next election. And then there’all always be another election in the offing.
The only half-serious regional planning agency in the country is the IDA which tries to get on with the job in the absence of any officially endorsed and implemented national strategy. Previously, it could count on the State-owned or -financed utilities (ESB, P&T, Local Authorities for roads and water services) to provide infrastructure in response to inward investment. That facility no longer exists.
Unfortunately the IDA (like the politicians it feeds with job-announcement photo-ops) is fatally addicted to FDI, and will find it increasingly hard to deliver. The result will be even more concentration in “greater Dublin” which will continue to spread till it reaches the Shannon.
April 3, 2015 at 6:42 am
Thanks for the article.
You mention that “foreign companies account for only 9% of employment in Ireland.”
9% is surprisingly low. Grateful if you could provide a source as I’d like to investigate this further.
April 13, 2015 at 7:53 am
For foreign employment (permanent and short-term 2013 = 172,326) see Forfas employment survey.
Click to access 14042014-Annual_Employment_Survey_2013-Publication.pdf
For total employment see CSO
April 16, 2015 at 10:00 pm
Thanks to greenandmusty for refreshingly candid insider confirmation of what at least some of us knew already. You are correct in what you say about the IDA taking its regional remit seriously – for several years after the launch of the NSS, in its annual reports it virtually pleaded with the government to implement the strategy, as it knew that its efforts to spread inward investment were profoundly dependent on the development of the gateway centres. Eventually it threw in the towel on that one.
However, it is somewhat unfair to say that the IDA is “fatally addicted” to FDI, given that it exists entirely to attract FDI to Ireland (and does a very good job at it). The failure to shift the focus of enterprise development from FDI to indigenous enterprise lies elsewhere in the state apparatus.
As regards the proportion of employment accounted for by foreign firms, the Forfás employment survey is confined to state-assisted firms and therefore excludes key sectors such as retailing and real estate, as well as many firms in other sectors. There is no information source that I am aware of on employment in non-assisted foreign firms.
April 20, 2015 at 3:37 pm
@Proinnsias: I was using the name IDA loosely in its historic sense to include what is now Enterprise Ireland. Perhaps I was implicitly regarding the present IDA as ‘Continuity IDA’, and accusing the overall entity of having failed to do enough to develop indigenous industry, though even that implication is a reflection on the culture of a society that seems to have gone from over-reliance on protectionism to over-reliance on FDI.