A Devastating Blow for the Irish Economy
Thursday, January 08, 2009
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Dell’s decision to close its manufacturing capacity in Limerick and transfer production to a low-cost location in Lodz in Poland will come as a severe blow to the Irish economy….
A quite astonishing statistic from this news article today. It claims that Dell’s operation in Ireland accounted for 5% of the country’s GDP. Dell is Ireland’s largest exporter too. So the loss of around 1,900 jobs (add another 3-4,000 on top from suppliers to the factory) will deal a crippling blow to the local economy.
This is a good example of the multiplier effect - where a change in output and jobs in one business or market can have important second-round effects in related supply-chain industries or the local or regional economy. It has been estimated that the knock-on effect could be between one and three jobs lost elsewhere in the region for every one lost at the Dell plant directly.
A decision like this can’t have been easy, but it sounds like the need to remain efficient and minimise unit costs was the main influence - despite efforts from the Irish government to persuade Dell to change its mind. An excellent example of some of the financial issues that influence the choice of manufacturing location, and also of the impact of such a decision on wider stakeholders.
One of the emerging political issues is whether the Polish government acted contrary to EU rules in a bid to encourage Dell to relocate production. RTE news reports that £European officials are to investigate a €52.7m aid package the Polish Government used to attract computer giant Dell away from Ireland.”
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