The Irish engineering sector is gaining momentum, with business sentiment steadily improving, as revealed by the Engineering Sector Manufacturing Report 2025 from Ibec’s Engineering Industries Ireland (EII). The findings reflect a cautiously optimistic outlook, with rising confidence driven by innovation and sustainability initiatives.

Reasons for Optimism

Despite global challenges, the industry is showing resilience:

• Innovation at the forefront: 63% of businesses plan to boost sustainability investments, while 58% aim to enhance digitalisation, signalling a shift towards smarter, greener operations.

• Focus on efficiency: Half of respondents are prioritising profitability, and 46% are addressing labour costs and increasing production.

• Sustainability leads the way: A remarkable 83% of businesses are engaged in meeting regulatory or parent company sustainability requirements.

Challenges to Overcome

However, the road ahead is not without hurdles:

• Talent shortage: Attracting skilled workers remains a persistent issue.

• Rising costs: 79% of businesses cite wage growth as a key pressure, highlighting concerns over labour expenses.

• Global headwinds: Declining export sales, expected to drop by 22%, alongside reduced capital investment and R&D activity (both forecast to fall by 12%), underline the impact of weaker global growth.

The Role of Technology and AI

Digital transformation is gaining traction, with 50% of businesses adopting or enhancing AI initiatives to boost efficiency and productivity. Yet, only 25% of companies currently rank AI among their top priorities, suggesting untapped potential in leveraging advanced technologies.

Voices from the Sector

Pauline O’Flanagan, EII Director, underscored the sector’s vital contributions, noting its €8.8 billion export value and the employment of over 50,000 people. She applauded recent government plans to support the sector, including the launch of a National Digital Skills Strategy and a forthcoming Action Plan for Competitiveness and Productivity.

“The focus on digital and AI technologies, particularly in decarbonisation, will be key to unlocking Ireland’s global competitiveness,” O’Flanagan stated.

Looking Ahead

While challenges persist, the Irish engineering sector’s commitment to innovation, sustainability, and digital transformation highlights a determination to thrive. With government support and a clear focus on strategic growth, the sector is well-positioned to navigate the complexities of today’s global landscape and build a brighter future.