Manufacturing Sector 2025 Outlook

Bank of Ireland head of Manufacturing Sector Conor Magee says the outlook for 2025 is largely positive but warns of risks from global trade shocks.

2024 – A year of persistent contraction, lower inflation, strong employment, growing conflicts, complex geopolitics, global growth, consequential national elections, the threat of US tariffs escalates, a growing realisation that ESG carbon targets are under serious threat, and Artificial Intelligence gains ground.

On a personal note, 2024 marked 40 years for me in Manufacturing. Four decades of disruptive change exponential growth in Ireland, and now a sector that is the cornerstone of our economy.

Summary

These headline trends above for 2024 played out as follows:

Persistent Contraction: Irish Manufacturing started 2024 on an asymmetric mix of optimism and caution. Optimism on the back of solid performance in 2023, but caution as global demand slowed. EU manufacturing has been a full year in contraction, with sluggish demand and new orders. While Irish Manufacturing has fared better with only moderate contraction, activity has been overall sluggish and a sustainable upturn remains elusive.

Lower Inflation: Interest rate hikes have had the desired effect with inflation falling back to 0.5% (HICP) in Nov but rising to 1.0% in Dec.3 The reality is though that input prices remain elevated and Manufacturing must have a laser focus on cost and margin improvement.

Strong Employment: Employment has remained strong in 2024 in Ireland and US. However this is a lagging indicator and signs are that without a material upturn in demand, Manufacturing including Ireland will cut capacity. December 2024 EU PMI report4 noted that “Manufacturers are still cutting jobs. Although the pace of job trimming slowed slightly in December, it is still relatively high, and this trend is likely to continue well into the new year given all the news about companies restructuring”. Anecdotal evidence suggests leavers are not being replaced and business will align their cost basis to business activity.

World Conflicts: Ongoing conflicts in Ukraine and The Middle East with no clear pathway to resolution create huge uncertainty and trigger a slowdown in consumption and demand for goods. The Middle East crisis has opened a whole new supply chain uncertainty for manufacturing with container ships rerouting away from the Red Sea adding significant time and cost to manufacturing inputs.

Fingers crossed that latest ceasefire deal will endure.

Complex Geopolitics: 2024 saw an increase in the risks and uncertainties for manufacturing associated with geopolitics. A growing move away from globalisation to protectionism because “business trust” is broken, creates tension between trading partners. VUCA – Volatility, Uncertainty, Complexity, Ambiguity, isthe new norm.

Global Growth: Despite regional differences, with Europe in recessionary territory, global GDP growth will land around +3.2% in 2024 with US at +2.8% and Euro area at +0.8%.5 Global growth is forecast stable and resilient at +3.3% in 2025 and 2026 despite uncertain times. Ireland GDP 2024 is forecasted at -1.1% but Modified Domestic Demand is positive at 3.2% reflecting the domestic economy. GDP 2025 is forecasted to be at 4.5%.

US tariffs: 2025 braces itself for tariffs which may have significant material impact on businesses and economies across the globe.

Consequential Elections: 2024 tested democracy as an estimated 4 billion people in more than 50 nations – 50% of the world’s population voted in national elections.7 The outcomes are likely to shape global politics for years to come not least the new US administration which is promising major upheavals in world trade.

ESG and Climate Change: The urgency of the crisis is not matched by the pace of change. Carbon Targets are not on track and Intent to address is not matched by action. As noted by the UN Emissions Gap report8: “No more hot air please – there is a massive gap between rhetoric and reality”.

Artificial Intelligence: ChatGPT, Generative AI and Large Language Models gathered momentum in 2024. AI enabled PC sales grew by 99.8% in 2024.9

Despite all of these headwinds, Irish Manufacturing has delivered a solid performance in 2024:

• 2024 Value of Irish exports are up YOY by 15%.10 This spike may be attributed to stock building in fear of tariffs.
• Corporation tax receipts projected at €24.5BN overall, up 2.5% YOY with ca. €10BN from Manufacturing.11
• Multinational corporation (MNC) Employment stayed above 300K with 234 new investments delivering 13500 future jobs.12 SME/Enterprise Ireland Employment grew 7% to 235K.13
• Manufacturing are embracing the Green Agenda driven by MNC demands, and strategic imperative.
• SMEs proven to be the engine of MNCs and Manufacturing growth.

In terms of individual sectors, 2024 was a mixed picture but mostly of solid growth:

• Global PC sales have grown 1.8% YOY.14
• EU Automotive registrations were flat at +0.4% YTD Nov. EVs volumes fell by 5.4%.15 In Ireland FY registrations down 1% and EVs down by 23.6%.16
• Record sales of Semiconductor manufacturing equipment at $113BN up 6.5% YOY driven by AI.17
• Industrial construction equipment expected to fall in 2024 by 8% to 1.08m. units.18
• Agri equipment are forecasting falls of 10 to 15% (Region and product dependent) for year end 2024.19
• Data centres, & Modular construction and sustainability retrofitting all continue strong.
• Continued growth in medical devices sales with CAGR forecasts of 9.8% to $1.3Tn by 2029.20
• Pharma sales also expected to grow by 5.1% in 2024.21 Irish Manufacturing is deeply anchored in all the above supply chains and so individual businesses will feel the pain differently.

The optimistic view, sentiment and ambition is that Manufacturing contraction has hit a turning point and that 2025 will see a return to at best moderate growth. However the turning point remains fragile and vulnerable to ever more risky geopolitics. A prolonged contraction, may trigger deeper capacity reductions and further adjustments in employment levels cannot be ruled out.

To learn more and read about the 2025 trends to watch, download the FULL Insight & Outlook 2025 report for the Manufacturing sector below:

• Bank of Ireland is welcoming new customers every day – funding investments, working capital and expansions across multiple sectors. To learn more, click here

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