Presentation to the Dublin Chamber of Commerce www.pwc.com 2014 CEO Pulse Survey Presentation to the Dublin Chamber of Commerce Ann O’Connell, Partner, PwC

2014 CEO Pulse Survey 9th year of the Survey 256 Irish CEOs participated Good representation across sectors/FDI and indigenous Irish businesses

2014 CEO Pulse Survey Business confidence higher than 2007 and pre-recessionary times Latest indicators: Irish economy predicted to grow by 3.4% - ESRI, 6 August 2014 Latest exchequer returns are 1bn ahead of budget - Dept of Finance Unemployment currently at 11.2% and falling Continued expansion in manufacturing and services - Latest Investec Manufacturing and Services Managers Indices

2014 CEO Pulse Survey The pendulum has swung 77% of business leaders expect revenue growth compared to 71% in 2008 69% of business leaders expect profit growth compared to 60% in 2008 58% expect to grow the workforce compared to 54% in 2008 Costs are also expected to grow but not at the same pace as revenues or profits Highlights business leaders have a firm eye on efficiencies and competitiveness Maintaining and improving our national competitiveness is key for Ireland and to compete internationally

2014 CEO Pulse Survey Some of the economic and policy threats… Increasing tax burden top concern, because: On Corporate tax side : much debate on international tax regime and global tax initiative led by OECD. Irish Minister looking at ways to enhance the competitiveness of Ireland's tax regime On the personal side - Irish employees now bear a very high burden of tax - entry point to pay 52% is now €32,800. Other concerns: over-regulation; slow growth in developed economies, uncertain economic growth in Ireland

2014 CEO Pulse Survey Some of the business threats… The top business threats are: Rising labour costs – CEOs are concerned about upward cost pressures – we have seen a number of years of wage decline. MNC CEOs also view competitive wage rates and cost competitiveness as key factors in maintaining/attracting investment to Ireland Availability of key skills – a continued global concern also but more of a concern in Ireland Cyber threats – PwC’s recent economic crime survey revealed that the incidence of cybercrime has nearly doubled in the last two years (2014: 45%; 2011: 24%) as fraudsters increasingly turn to technology as their main crime tool. Types of cybercrime include crime committed using computers and the internet. It includes the distribution of viruses, illegal downloads, theft of personal data ie bank accounts etc. Speed of technological change – how business adapt to the latest technologies and embed digital innovations into the DNA of their operations will separate the winners from the losers.

2014 CEO Pulse Survey Business growth opportunities – sticking to what they know best 60% to target existing markets Only 10% plan to target new geographic markets CEOs still wary of scattergun approach and will stick to what they know best

2014 CEO Pulse Survey Focus on exports 66% plan to increase export volumes in the next 3-5 years Of this, 32% plan to increase export volumes more than 10% Irish exports grew 7% in the second quarter of 2014 (CSO, August 2014). This bounce-back is predicted to continue as demonstrated by our survey. Food and beverage doing well – up 10%

2014 CEO Pulse Survey Focus on exports Improvement in the UK is good for Ireland CEOs also cautiously exploring other markets such as China, Middle-East, Brazil, Africa and Japan – but a long burn

2014 CEO Pulse Survey FDI 92% confirmed their investment in Ireland is a success 88% will increase or maintain investment in Ireland, up from 84% last year; FDI comprises some 27% of Ireland’s GDP FDI brought more than 13,000 new jobs to Ireland in 2013. It is estimated that for every 10 Jobs provided by FDI, another 7 indirect jobs are generated. IDA has secured 100 investments in the first 6 months of 2014, up from 70 last year – with an estimated job creation of 8,000

2014 CEO Pulse Survey Factors critical to maintaining and/or increasing Ireland’s attractiveness as a location of choice for FDI Despite the mood of optimism, access to highly skilled people is the most important factor for this investment Recent improvements in our immigration and visa regime should help this 76% of MNC CEOs said competitive wage rates is critical; 56% said improved cost competitiveness is critical

2014 CEO Pulse Survey Talent – 69% said availability of key skills is an issue for growth, up from 60% last year

2014 CEO Pulse Survey Over a quarter reported talent constraints significantly impacted their company’s performance over the last year

2014 CEO Pulse Survey Room for improvement regarding certain talent related benchmarks The growing field of HR analytics is a mechanism for enabling evidence-based decision making on people matters – but you need the right information on time to do this! Only 16% have sufficient information on return on investment in human capital Only 24% have sufficient information on staff productivity Only 26% get comprehensive information on employee turnover 51% get sufficient information on labour costs

2014 CEO Pulse Survey Government priorities

2014 CEO Pulse Survey Managing global change – the megatrends and Ireland’s opportunity Technological advances the single most important megatrend in Ireland In general Irish CEOs lag behind their global counterparts in capitalising on global trends As a small open economy, Ireland has huge opportunities

Megatrend 1: Demographic shifts Explosive population growth in some areas against declines in others contributes to everything from shifts in economic power to resource scarcity to the changes in societal norms. Spending of the Global Middle Class in 2005 US$ PPP Source: Data taken from OECD Development Centre Working Paper number 285, “The Emerging Middle Class in Developing Countries, January 2010. 2009 $21.3 trillion 2030 $55.7 trillion Annual population growth rate 2010 – 2050 (medium variant) Proportion of the world population aged 60 years or more Source: UN Department of Economic and Social Affairs Source: UN report World Population Ageing 1950 - 2050

Megatrend 2: Shift in global economic power The focus of global growth has shifted. Western economic dominance is a relatively recent phenomenon and the developments we see are essentially a rebalancing of the global economies. Economic centre of gravity; 1965 – 2050 GDP, market exchange rates Note: Orange indicates earlier years, Maroon indicates later years. Source: Data taken from OECD Development Centre Working Paper number 285, “The Emerging Middle Class In Developing Countries,” January 2010. Western economic dominance is a recent development GDP of G7 and E7 countries at US$ PPP Source: PwC Analysis Source: PwC Analysis

Megatrend 3: Accelerating urbanisation In the 1950s, less than 30% of the world’s population lived in cities. Currently, that proportion has risen to 50% and, by 2030, the UN projects that some 4.9 billion people will be urban dwellers. By 2015, the UN estimates that there will be 22 mega-cities – those with population of 10 million or more – with 17 located in developing economies. World urban population by major region Source: World Urbanization Prospects: 2011 Revision, Produced by the UN Department of Economic and Social Affairs 2010 $3.8 billion 2030 $4.9 billion Percentage of population in urban areas, 2030 World urban population Source: UN Department of Economic and Social Affairs Source: World Urbanization Prospects: 2011 Revision, Produced by the UN Department of Economic and Social Affairs

Megatrend 4: Climate change and resource scarcity Scarcity of resources and the impact of climate change are of growing economic concern. Demand for energy is forecast to increase by as much as 50% by 2030, and water withdrawals by 40%. The Food/ Water/Energy Nexus Water It takes 1,200 l of water to produce 1 kg of grain 7% of global energy consumption is used for delivering water. Food Energy 1-2% of cropland is needed to produce biofuels With a population of 8.3 billion people by 2030 we’ll need… Projected water scarcity in 2025 50% more energy 40% more water 35% more food Source: International Water Management Institute Note: Orange indicates earlier years, Maroon indicates later years. Source: OECD; Dan Hammer, Center for Global Development

Megatrend 5: Technological breakthroughs Venture capital and private equity attractiveness index Source: The Global Venture Capital and Private Equity Country Attractiveness Index, IESE Business School, 2013 Breakthroughs in nanotechnology and other frontiers of research and development are increasing productive potential and opening up new investment opportunities. The beginning of the “internet of things” Source: Cisco Internet Business Solutions Group, April 2011 “SMAC”

Summary Economy is turning the corner Confidence is somewhat restored Most companies are going for growth (revenues, profits, employment) FDI flow continues; Exports on the increase But, concerns around talent and increasing cost base Ability to attract, retain and reward talent is critical for growth FDI comprises some 27% of Ireland’s GDP FDI brought more than 13,000 new jobs to Ireland in 2013. It is estimated that for every 10 Jobs provided by FDI, another 7 indirect jobs are generated. IDA has secured 100 investments in the first 6 months of 2014, up from 70 last year – with an estimated job creation of 8,000

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