I thank the Chairman and members of the Committee of Public Accounts for inviting me to present an overview of Enterprise Ireland's annual report for 2004 and to convey to them some of the significant developments that have occurred since, especially the publication of its strategy for 2005-07, Transforming Irish Industry, which was launched in May 2005 by the Minister for Enterprise, Trade and Employment, Deputy Martin.
I would also like to introduce my Enterprise Ireland colleagues present with me: Mr. Paddy Hopkins, whom members have already met, Mr. Colm Hackett, manager of our regions and entrepreneurship division, Mr. Gerry O'Brien, economist in the policy division, Ms Mary Gallagher, secretary to the board, and Mr. Paschal McGuire, in our public relations department.
The Enterprise Ireland annual report and accounts for 2004 were published on 24 June and outlined its activities during the year, together with the overall performance of client companies. It also provides an update of the various ways in which Enterprise Ireland has worked in partnership with them and other stakeholders in addressing companies' changing needs. Enterprise Ireland's mission is to accelerate the development of world-class Irish companies to achieve strong positions in global markets, resulting in increases in national and regional prosperity. In making that commitment, our efforts centre on several key areas, namely, identifying and facilitating high potential start-up companies, supporting the creation of innovative products and services by investing in industry-driven research and innovation, driving company competitiveness through productivity improvements and maximising export opportunities for our client companies.
I will now address the economic context in which clients operated in 2004. Irish companies showed resilience and determination to succeed and expand in the global marketplace, especially in the face of increasingly challenging external economic factors. These included increasing competitive pressures, especially from low-cost economies in central and eastern Europe, as well as the rapidly growing Chinese economy. The strong euro placed added pressure on Irish exports which were further affected by the weaker trading performance of the dollar throughout 2004. Rising oil prices also had a noticeable effect on Irish companies as energy prices continued to rise. This also placed additional pressure on companies in an already highly competitive global economy.
Regarding export performance by market, in 2004 client companies achieved €10.167 billion in export sales, an increase of 5.6% on 2003. Northern Europe was the strongest export market, with €6 billion in export sales and net growth of 7.2%. The UK part of the northern European territory continued to be the strongest export market, worth €4.63 billion. Exports to the Americas increased by 1%, to €1.1 billion, a commendable total given the strength of the euro against the dollar. A good performance was also seen in southern Europe, the Middle East and Africa, with exports reaching almost €1 billion, up 7.7%. Asia showed the largest percentage growth in exports — 19.6% — bringing total exports to the region to €505.5 million. The German, central and eastern European and Balkan markets had a difficult year, with exports falling by 3.7%, to €705.6 million.
I will now address export performance by sector. The largest export sector was food and consumer retail, which totalled €6.78 billion, up4.1%. The dairy and drinks subsector contributed the most, with €3.56 billion in exports, a rise of 2%. The fastest growing sector was software, services and emergent sectors, with an increase of 10.4% to €1.2 billion. Industrial markets grew 3.8% to €1.9 billion, with the construction and timber subsector performing particularly well, accounting for €713 million with growth of 11.1%.
In 2004, client companies also participated in 77 trade fairs and trade missions. The Irish trade mission to China, led by the Taoiseach, Deputy Bertie Ahern, visited Beijing, Shanghai and Hong Kong and was the largest in the history of the State, involving 121 Irish companies and educational institutions primarily involved in the information and communications technology, educational services, environmental and engineering services, medical devices, and food and drink sectors. Contracts entered into between Irish suppliers and Chinese customers totalled approximately €125.8 million. In addition, four Irish companies announced the acquisition or establishment of ventures in China totalling €42 million. The Irish participants held more than 1,800 meetings with potential and existing customers. A significant level of positive feedback, from both client companies and representative bodies, has been received by Enterprise Ireland and I believe this mission will contribute to increased levels of trade over the coming months and years.
Sustainable business growth and economic development are driven by innovation and the consistent delivery of new, sophisticated products and services to customers around the globe. Encouraging such pioneering activities continued to be a central part of Enterprise Ireland's support to client companies throughout 2004.
During 2004 approximately €50 million was invested in companies to support in-company research and development activities. Some €20 million was approved to support 54 projects in Enterprise Ireland client companies through the research and development initiative scheme, formerly known as the research and development capability scheme. In addition, the research, technology and innovation, RTI, scheme approved more than €30 million in funding to 154 research and development projects within companies in Ireland. As for applied research, Enterprise Ireland provided €14.6 million in funding through its commercialisation fund to commercialise the research output from third level colleges.
In 2004 Enterprise Ireland conducted a review of all start-up companies supported since 1989. This showed that, of the 470 companies supported, 76% were still trading, 4% had been taken over and only 20% had been closed. The surviving companies have sales of about €1 billion and employ more than 7,000. The results show a high survival rate for Enterprise Ireland supported start-ups. They support Enterprise Ireland's approach to delivering customised initiatives for start-ups, such as assistance with achieving first reference sales.
During 2004, Enterprise Ireland supported what was then a record 65 new high potential start-up companies. These will create approximately 1,900 new jobs in their first three years across all sectors, with particular buoyancy in information and communications technology, health care and life sciences. They also represent a good regional spread, with 43% based in regions outside Dublin and 26%, equivalent to 17 start-ups, located in the Border, midlands and west, BMW, region.
A key objective in Enterprise Ireland's strategic plan is the development of companies of scale. It has embarked on an initiative to accelerate the growth and development of companies which have the potential to grow to significant scale and established a scaling division to work with an identified group of small to medium-sized enterprises, SMEs, to assist their growth into large international companies.
On the employment and regional development front, client companies created 11,898 jobs in 2004 according to the Forfás employment survey for 2005 which is now being completed and is in the process of being analysed. It will be published in the coming months. Early indications, which are subject to change, are that 67.8% of all job gains were created in companies located outside Dublin and 36% of job gains were companies located in the BMW region community enterprise centres, CECs.
Enterprise Ireland continues to encourage entrepreneurship at grassroots level through its support for the community enterprise centres. The CEC programme aims to enhance the development of an enterprise climate in areas where it may be lacking or under-developed. To date, Enterprise Ireland has approved more than €34 million and paid out more than €22 million for some 137 CEC projects, including 107 new centres and 30 expansions to existing programmes. Of the 137 projects, 20 are at various stages of planning or construction, 112 are located outside Dublin city and eight were completed in the regions in 2004. Seven new CECs were completed that year in Macroom, Carlow, Lismore, Easkey, Ballyshannon, Moville and Emyvale and the centre in Ballina was expanded. The CEC initiative continues to be rolled out with 12 under construction, of which three were completed in 2005.
During 2004 Enterprise Ireland was engaged in a comprehensive review of its strategic direction. The strategy was devised in parallel with the deliberations of the enterprise strategy group. On 24 February 2005 the Minister for Enterprise, Trade and Employment, Deputy Martin, launched the enterprise action plan, following Government approval for its recommendations. The plan outlines how the enterprise strategy group's report will be acted upon.
Enterprise Ireland's strategy was officially launched in May 2005 by the Minister. The plan, entitled Transforming Irish Industry — Enterprise Ireland Strategy 2005-07, is designed to ensure that the opportunities for growth are maximised throughout all sectors and regions and that relevant support is provided for the agency's client companies to meet the increasing challenges faced in the global market.
The strategy repositions the agency better to serve the changing needs of its client companies. Central to the strategy is a sharp focus on growth opportunities, both for individual clients and for targeted new sectors. Delivering on this strategy requires an optimum combination of one-to-one company activity together with sectoral and group initiatives.
Enterprise Ireland's activities are aimed at assisting its client companies to compete and grow by working in partnership to develop their key capabilities in internationalisation, export growth, research, innovation, technology, competitiveness, productivity and management. The key objectives of the agency's interactions with clients are to develop quality, sustainable and scalable start-ups, assist companies in achieving international scale, promote industry-led research and development and grow exports strongly.
As for progress to date in 2005-06, the Forfás employment survey for 2005 is being completed and is in the process of being analysed. It will be published in the coming months. Early indications, which are subject to change, are that 12,212 new jobs were created in client companies, of which 8,680 were first-time job gains. When set against losses of 12,430, the net decline in employment in 2005 appears, on the basis of the preliminary analysis, to be 218, an 83% improvement on the 2004 outturn.
On the export front, comparable figures for 2005 will not be available until April 2006 when the ABR survey is completed. However, the indications are that strong export growth has taken place in 2005 across a number of key industry sectors, including software and financial services, life sciences and food, with construction and engineering sectors maintaining their performance levels.