Establishing the Economic Rationale for the Strategic Location of a Regional Logistics Park

prepared by:

Future Analytics Consulting 23 Fitzwilliam Square, Dublin 2

1 Introduction and Approach

This report is intended to provide the economic context to support the strategic location of the proposed Regional Logistics Park within proximity to Carlow urban centre. The following will provide an economic profile of County Carlow and seek to highlight the economic benefits such a development will bring to Carlow and the wider regional context. The economic case for this development is predicated by a number of aspects, but specifically seeks to address a key theme that permeates through a number of government economic policy documents, namely fostering economic growth and competiveness. This is a critical concern for areas like Carlow and the South East Region, particularly in a time of scarce resources, where it is vital that development investment is targeted in the right areas. This report concludes that the subject lands are positively positioned to harness the identifiable potential for a logistics park, and function as a vital conduit for employment- led growth in County Carlow, the South East and the wider national economy.

This report is informed by a profile of the economic performance of Carlow and the South East economic catchment following the collation and analysis of 2006 and 2011 Census datasets on relevant themes such as labour force and industry sector activity. This process adopts a SCOT (Strengths, Constraints, Opportunities and Threats) Analysis of County Carlow as detailed below. Further evidence-based analysis is set out for Carlow and the South East which establishes a number of key conclusions which support the economic feasibility of a regional logistics park located at the subject lands in Carlow. This approach involves collating and analysing road freight and port activity within the South East as well as identifying key businesses and sectors within the region which require effective and efficient logistic support solutions.

2 The Strategic Context of the Location

An effective transport and logistics systems allows for the efficient flow of goods thereby facilitating trade, tourism and memberships of global supply chains and contributing towards balanced local and regional development. Improving logistics performance is at the core of the economic growth and competiveness agenda according to the World Bank1, with policymakers globally recognising the logistics sector as one of the key pillars for development. Improving logistics enhances the competitiveness of logistics-intensive sectors, such as the life sciences sector and component manufacturing, which join multi-national value chains.

In its 2013 published review of transport in Ireland, Engineers Ireland (2013)2 highlighted a dichotomy in Irish transport, with a number of world-class flagship projects, such as the motorway network, alongside other sub-standard transport infrastructure. In order to maximise the economic benefits of M9 Motorway, provisions must be put in place to reinforce this world-class infrastructure

1 The World Bank (2014), “Connecting to Compete – Trade Logistics in the Global Economy”. 2 Engineers Ireland (2013), “The state of Ireland 2012: A Review of Infrastructure in Ireland”.

1 | P a g e and maximise what has been a considerable investment by the State. The development of a regional logistics park at the subject lands would achieve this as well as providing the impetus for more balanced regional development by providing a valuable asset for many of the export-focussed businesses and SMEs in the region.

As illustrated in Figure 1, the subject lands are distinguished by their key strategic location adjacent to the M9 Motorway and N80 National Primary Route. This location provides for a considerable geographic catchment. Drive time analysis (see Figure 2) illustrates the geographic coverage available over a range of time intervals from the subject location. This analysis demonstrates the strategic geographic advantage of the subject lands in providing vital logistics support to a number of key settlements and employment centres within the region.

Figure 1: Strategic Context of Proposed Regional Logistics Park

The presence of a number of high profile multinational as well as indigenous companies within the South East Region is particularly pertinent in terms of the economic feasibility of the proposed use of these lands, with a significant number of these companies based on export-import driven business models. From analysis of some of the most high profile businesses from areas that could feasibly be serviced by the proposed regional logistics park, an identification of the key industry sectors can be

2 | P a g e formed. Using data collated from numerous sources including for example the Irish Times Top 1,000 Companies listing3, a distinct ‘economic corridor’ of high profile enterprises within the South East begins to emerge. This economic corridor or arc (see Figure 3) essentially links the key economic hub of the Greater Dublin Area with counties Kildare, Carlow, Kilkenny, Laois, Tipperary, Waterford and Wexford, and terminates with the vital freight gateways of Rosslare Europort and the Port of Waterford. The presence of important higher education facilities along this arc in the form of Carlow Institute of Technology (CIT), Tipperary Institute and Waterford Institute of Technology (WIT) ensures a healthy environment for further industry collaboration and economic development through spin-out companies developed from higher-level education research initiatives. In addition, their presence also ensures that a number of high skilled and educated labour pools are in close proximity to further economic development in the region.

Figure 2: Drive Time Analysis Map from Proposed Logistics Park

3 The Irish Times Top 1000 – Our Guide To Irish Business - http://www.top1000.ie/companies

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Figure 3: Graphical Representation of Economic Arc within the South East

Figure 4 depicts the wide geographical context of export-import driven economy of this South East region and illustrates succinctly the economic rationale for the proposed regional logistics park at Carlow. Its location at the heart of this economic arc, in tandem with the high level of connectivity served from this location, ensures that Carlow is well placed to facilitate a key logistics hub considered vital to supporting these enterprises. Crucially, a regional logistics park at this location would provide considerable support, in a regional context, for those existing logistics facilities and distribution centres with close links to the Greater Dublin Area and Dublin Airport and Dublin Port in particular. This supporting role, in a national context, will ensure that the proposed regional logistics park at Carlow fulfils a vital role in the national agenda for improving competiveness and economic connectivity.

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Further analysis of companies within this defined South East economic region reveals that the region has proven to be an attractive location for certain types of industries that have formed strategic clusters. In particular, the life sciences sector (which includes the pharmaceutical, bio-pharma and medical technology sub-sectors) is a significant employment generating sector within the region along with the agri-business sector which has a longstanding pedigree as an employment base within the South East. A key characteristic of these industries is their export-based business models and an inherent reliance on effective logistics and distribution solutions to function efficiently. Accordingly, the provision of a regional logistics hub at the subject lands would provide a valuable contribution to the future development of these existing industries in the region. Figure 4 provides an illustration of the key employers based in the South East classified by industry sector. It is noticeable from this figure that there is a high degree of balanced regional development already in existence in the South East.

Figure 4: Key Employers and Sectors Identified within the South Eastern Economic Corridor

Crucially, a common theme associated with those enterprises illustrated in Figure 4, is a strong export-import based environment. This further reiterates the importance of a regional logistics park in Carlow, where its location offers the most effective and efficient ‘centre of action’ position to facilitate logistics support to the existing industries within the South East and offers further

5 | P a g e motivation for companies to locate their international, regional or divisional bases to the area. Historical analysis of industry agglomerations reveal that commercial enterprises tend to cluster together in order to achieve ‘economies of scale’ and derive the benefits associated from ‘synergy effects’, ‘complementarities’ and the use of a developed infrastructure. The presence of these various industry agglomerations throughout the South East, allied to the potential for increased clustering effects within the region, further emphasises the requirement for an effective logistics support hub to serve the South East.

Active policy implementation within Ireland has historically been a significant catalyst in forming and developing economic clusters and industrial agglomerations in Ireland. An important agency in facilitating these agglomerations has been the IDA, particularly in attracting Foreign Direct Investment (FDI) to locations within the State, many of which are existing clusters of similar enterprises or service-based businesses. This is evident in the case of the South East with a number of FDI multi-national companies located on IDA owned sites. A key element in attracting such investments for developing industry agglomerations are the infrastructure supports to meet the demands of the industry agglomerations.

Much of the applied research available agree that the agglomeration process tends to be self- reinforcing, with incoming enterprises influenced by the presence of existing agglomeration economies. Incoming firms recognise the benefits offered at existing locations and, accordingly, are incentivised to locate there, hence adopting a strategy of risk minimisation and accruing the benefits from shared availability of services and infrastructure. Given the self-reinforcing nature that typify such agglomerations, there would appear to be significant merit in safeguarding the subject lands at Carlow to provide critical logistics support to enable access to the key international gateway for the State and strengthening enterprise support structures which are critical to retaining and attracting FDI into the locality.

A logistics park in this location will provide enhanced access to international markets for a range of enterprises comprising large multi-national organisations as well as the indigenous SME sector. With an emerging review of the Government’s National Spatial Strategy, there is a clear rationale for the identification of strategic, priority sites within the county and region, sites which are capable of enabling further employment and economic activity in a sustainable manner. The subject lands are clearly of significant potential in this respect and their promotion augments the growing recognition of the importance of high quality transport and logistics systems in fostering economic competiveness in a regional, national and international context.

3 The Economic Profile and Rationale of the Area and Wider Location

A profile of the economic performance of Carlow and the South Eastern Economic Catchment area feasibly serviced by a regional logistics park at the subject lands is presented here following the collation and analysis of 2006 and 2011 Census datasets on relevant themes such as labour force, labour force quality and industrial sector activity. This South Eastern Economic Catchment encompasses Counties Carlow, Kildare, Laois, Kilkenny, Tipperary, Waterford and Wexford. The development of a SCOT Analysis provides an understanding of a number of key economic

6 | P a g e characteristics relevant to the area, county and the wider South Eastern Economic Catchment. Some of the key economic issues which permeate this analysis are:

 The importance of a strong urban and rural employment and economic structure;  The creation and maintenance of strong links between urban centres and sub-regional localities;  The development of local and regional economic specialisations; and  The enhancement of these specialisations around localised clusters of linked activities.

These characteristics are seen as central elements in the strategic approach to balanced and sustainable local and regional development as advocated in the European Spatial Development Perspective (ESDP, 1999) and play a pivotal role in the economic development process. Figures 5 and 6 provide a summary of the key economic statistics of the county and South Eastern Economic Catchment.

Figure 5: Summary Statistics Relating to Labour Force and Unemployment in County Carlow. (Source: CSO, 2011)

As illustrated in Figure 5, Carlow previously represented an excellent bellwether for the employment performance within the South Eastern Economic Catchment, based on analysis of the 2006 Census results. However, analysis of the 2011 Census results highlights a growing disparity between Carlow and the South Eastern Economic Catchment in terms of unemployment rate and labour force quality.

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Figure 6: Labour Activity by Industry Sector for Carlow and the South Eastern Economic Catchment. (Source: CSO, 2011)

Labour activity according to industrial sector is similarly matched between Carlow and the South Eastern Economic Catchment with a strong presence of manufacturing, commerce and trade and professional services within both areas. Whilst the industrial sector classification used in Census data is considered broad, these dominant sectors in Carlow and the South Eastern Economic Catchment would indicate a significant export and logistics orientated dynamic within industries in these areas.

As discussed, the key findings of this analysis provided the basis for a consolidated SCOT Analysis of County Carlow. This analysis provides an informative overview of current performance and a focussed synopsis of the key issues regarding economic development within the county and region.

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Key Outputs of SCOT Analysis of County and Region

STRENGTHS CONSTRAINTS Socio-Economic Socio-Economic  Increasing population.  High level of unemployment county-wide.  Presence of a higher education facility in CIT with good  High youth unemployment. connectivity to other higher education facilities such as  High dependency ratio within the county. WIT and the Tipperary Institute. Industry  Good education levels.  A number of business closures throughout the recession  Excellent potential for ‘triple helix’ collaboration. years such as Kepak and Braun plants. Industry  Reliance on sectors located outside Carlow for  Significant existing presence of MDCs within Carlow and employment. surrounding region. Agri-Business  Strong presence of SME sector.  Viability of sector is greatly influenced by a number of  Strong presence of manufacturing and commerce and externalities such as the future direction of CAP, EU retail trade industries. and trade legislation climate and can be viewed as volatile Agri-Business as a result.  Geographic position favourable to farming. Transport and ICT Infrastructure  High percentage of good quality agricultural land.  Limited public transport access.  Percentage employed in agriculture sector is significantly  Limited broadband in some rural areas with connectivity higher than the national mean. varying through county. Transport and ICT Infrastructure Tourism and Services  Good road network connectivity to Dublin, Waterford and  Seasonality characteristic of tourism and tourism-sectors. Rosslare Europort.  Improved availability of broadband. Tourism and Services  Strong tourism and heritage assets within Carlow.  Number of cultural events held in Carlow all year round. OPPORTUNITIES THREATS Socio-Economic Socio-Economic  Identification of skills shortage and up-skilling/re-training  Emigration and skill shortages. of population.  High unemployment rate within the county.  Proactive local agencies. Industry Agri-Business  Significant reduction in the manufacturing sector within  Opportunities to develop the agri-food sector more. the county.  Potential to develop the dairy sector significantly with the  Failure to attract new business/enterprises to Carlow. abolition of milk quotas in 2015.  Pressures to increase corporate tax rate at a national level Industry may have significant impacts to the future attraction of FDI  Presence of a significant multinational such as MSD, to the country and county. together with other life sciences companies in the South  The impact of patent expirations on innovative industries East raising potential for further industry agglomeration. such as the bio-pharma and ITC.  Excellent agri-business pedigree within county producing  Uncertainty regarding wider international economic high value agricultural output. situation.  Further opportunities for local and regional branding  Declining reputation of universities in Ireland. within the agri-business and food sectors. Transport and ICT Infrastructure  Identification of new sectors for future employment.  Limited public transport access with dependency on as the  Increased opportunities for further triple helix main mode of transport. collaboration through the presence of CIT.  Inadequate broadband coverage in rural areas which can  Potential for a number of spin-out companies through impact on established and potential agri-business and rural research initiatives from CIT. tourism industries within the county. Transport and ICT Infrastructure  Poor provision of rail infrastructure and services.  Strong road-based transport corridors leading to high levels of accessibility. Education Levels  Potential for the formation of a South East University with campuses in Waterford, Carlow, Wexford and Tipperary. Tourism and Services  Potential for increased activity in the agri-tourism sector.

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As discussed, the subject lands are located in a key strategic position at the convergence of the M9 Motorway and N80 National Primary Route. Effectively, these critical transport corridors of national and regional infrastructure provide the connectivity from the national economic driver of the Greater Dublin Area to the South East Region. This network provides the arterial routes connecting key national freight gateways in the form of Dublin Airport, Dublin Port, Rosslare Europort and the Port of Waterford.

From analysis of the latest CSO Road Freight Transport Survey (2014), there is a significant amount of activity within the South East Region. Table 1 presents the results pertaining to the South East Region in relation to transport activity presented as tonnes of freight carried by area of origin.

Origin Tonne-km (million) Percentage Share Table 1: Transport Activity in the South South East Region 1,218 13.3% East Region Classified by Origin (Source: CSO. 2014) State, Northern Ireland 9,138 100% and Other Countries

The South East Region is only surpassed by the Dublin Region and marginally by the South West Region in terms of origin of transport freight activity within the State. This equates to a 13.3% share of transport activity by origin for the State, Northern Ireland and any road freight originating from other countries. This trend is replicated in transport activity based on region of destination, with the South East Region again the third most active region in the State in this category. As shown in Table 2, this registers a 13.8% share of transport activity by destination for the State, Northern Ireland and any road freight destined to other countries.

Table 2: Transport Origin Tonne-km (million) Percentage Share Activity in the South South East Region 1,263 13.8% East Region Classified by State, Northern Ireland Destination (Source: 9,138 100% and Other Countries CSO. 2014)

Further analysis of road freight activity classified by the volume of tonnes carried reveals the South East Region ranking highly again in the State. Similarly, the South East is the third most active region in the State based on origin (Table 3) and destination (Table 4) for amount of freight tonnes carried.

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Tonnes carried Origin Percentage Share (thousand) Table 3: Amount of Freight Tonnes South East Region 14,622 13.4% carried from the South East Region State, Northern Ireland (Source: CSO, 2014) 108,831 100% and Other Countries

Tonnes carried Origin Percentage Share (thousand) Table 4: Amount of Freight Tonnes South East Region 14,784 13.6% carried to the South East Region (Source: State, Northern Ireland CSO, 2014) 108,831 100% and Other Countries

This trend of high freight activity in the South East is further substantiated when analysing the latest statistics of port traffic produced by the CSO. Table 5 presents the total tonnage of goods handled by those ports located in the South East Region as well as a composite total tonnage for the year 2013 pertaining to the South East Region in relation to transport activity presented as tonnes of freight carried by origin.

Tonnage of Goods Port Location Handled (thousand) Table 5: Total Tonnage of Goods Handled by Waterford 1,348 Ports in South East Region and all State Ports based on Port Traffic Survey for 2013, New Ross 343 (Source: CSO, 2014) Rosslare 1,940

All State Ports 46,722

Taken together, the total tonnage of goods handle by those ports in the South East Region totalled 3,631 tonnes. Whilst this equates to a modest 7.8% share of the total tonnage of goods handled by all the State’s ports, the Port of Waterford alone ranks fourth highest in terms of total tonnage of goods handled by ports in the State behind Dublin, Shannon Foynes and Cork. This analysis highlights the vital regional role ports such as Waterford and Rosslare play and can have in the future in furthering the economic development of the South East.

Overall, the analysis of freight activity in the South East Region further reinforces the requirement for an effective and efficient regional logistics park which offers critical support to existing industries within the South East and strengthens future freight activity within the region.

Specifically in terms of the proposed regional logistic park within the context of the freight sector, the development has a potential Gross Floor Area (GFA) of approximately 58,420 sqm, the estimated

11 | P a g e total construction cost would be in range of appropriately €53.45m4 resulting in a significant project development value for the area particularly in terms of construction employment. In addition, the logistics employment activity generated for the development could delivery approximately 780 new direct jobs5 and applying the most recent CSO figures relating to the level of average earnings6 this represents a significant salary income stimulus to the local and regional economy to the scale of approximately €28.7m per annum. There will also be the opportunity to support additional indirect and induced employment through the 'multiplier effect'.

4 Conclusion

Economic development is about creating the appropriate conditions necessary to improve the economic health, standard of living and social well-being of the resident population. Internal and external connectivity is not only important for quality of life factors and the social well-being of a population, but is essential to economic development. Effective transport infrastructure is particularly important in an Irish context given the State’s dependence on a significant export global trade model, its relatively low population density and its geographic location on the far western periphery of Europe. The justification for the future development of a regional logistics park on the subject lands is therefore driven by a compelling economic rationale.

The vast improvements made to the primary road network within the State and in the South East in particular has been one of the most positive and lasting legacies of the buoyant economic period of the late 1990s to the late 2000s. However, while the economic retraction of recent years has reduced near-term demand for transport infrastructure, it is conceivable that under investment in the development of key transport and logistics systems could hinder further economic growth in the future. This point is particular salient in the case of Carlow and the South East Region as a whole, given the presence of a significant export-import based economy in the region and indeed, the strategic shift in central government policy in identifying an export-led recovery for the State.

The future economic development of Carlow and the South East must be grounded in a clear appreciation of the national context and the contribution the county can make in continuing the path towards more balanced economic growth. Given its key strategic location with excellent connectivity links to the Greater Dublin Area and the key national freight gateways of the Port of Waterford and Rosslare Europort, the provision of a regional logistics park in Carlow will provide a considerable asset in reinforcing and enhancing future economic development.

4 Using an average construction cost of approximately €915 per sq.m. based on current market costs. 5 Applying an average employment density of one employee per 75 sq.m of GFA as the set out in the Employment Densities Guide (2nd Edition, 2010) prepared by the UK Office of Project and Programme Advice and Training and the Home and Communities Agency. 6 Based on the CSO Earnings and Labour Costs Quarterly (26th February 2015) the current average weekly earnings are €704.34.

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