THE GOVERNMENT’S RECENT report on data centres was based on “flawed methodology” and “exaggerated” claims about the benefits to the Irish economy, according to a new academic paper.

The researchers say that the arguments offered by the industry and successive governments in favour of data centres “do not stand up to empirical scrutiny” and are “designed to inflate the economic value of data centres”.

The study also suggests that nearly 50,000 homes could have been built, or tens of thousands of jobs created across education, health or social sectors, if the resources used expanding data centres were directed elsewhere.

The government’s report, which cost the Department of Enterprise over €100,000 to produce, claimed that data centres “underpin” 876,000 jobs – which is close to a third of total employment in Ireland – despite also admitting that just 3,300 people are directly employed.

The figure was calculated by surveying 30 private firms across six sectors for the percentage of jobs that are “digitally dependent”.

But the academic research claims that this figure is “based on a spurious methodology” that “exaggerates economic benefits of data centres”.

This is because the government report assumes firms surveyed are a representative sample of the Irish economy, according to the academic research, even though the vast majority of businesses (up to 99%) employ fewer than 50 people, while the firms surveyed for the government report employed an average of 2,100-5,200 people.

It also assumes that domestic economic activity from the six sectors surveyed is dependent on nearby data centres if a business is located within 50km of one and is connected to cloud services.

The study, which was published today, was written by Seán Fearon, a research fellow at Autonomous University of Barcelona, Patrick Bresnihan, associate professor at Maynooth University and Patrick Brodie, assistant professor at University College Dublin.

An example given in the study is that “the activities of surgeons and paediatricians” at a hospital “are assumed to be dependent” on a data centre if it is located within 50km of one.

Bresnihan told The Journal that “this is a huge claim to make” and that it is “almost impossible to establish”. He added:

It’s a bit like [saying] all of the jobs are dependent on roads because of people having to drive on the roads.

The study adds that the government sought “to create a myth of ‘domestic dependency’ of huge sections of preexisting economic activity” and link it to data centres.

This is not the first time that issues with the government-funded data centre report have been identified.

The Journal first reported that concerns over supporting data centres ahead of transport or housing were scrubbed from a draft version of the report before it was published.

The report also did not include a section on the potential for higher electricity prices due to rising data centre demand, despite the terms of reference suggesting it should.

A spokesperson for the Department of Enterprise told The Journal that it would not be “appropriate or consistent with good research and analytical practice, to comment on the specific findings” without “reviewing the publication in full.”

“The study was undertaken by KPMG and was subject to review and challenge throughout the research process,” a spokesperson added.

KPMG declined to comment on the study’s findings.

Opportunity cost of data centres

The researchers also examined the opportunity cost of data centre development by analysing the number of jobs that could have been created if resources in data centres were directed elsewhere.

They found that over a seven-year period between 2019 and 2025, the labour demand committed to the build out of data centre infrastructure in Ireland could have, on average, “created and sustained 20,490 jobs in the education sector, 12,657 jobs in the health service, or 25,484 jobs in social work related activities”.

The study also suggests that “nearly 50,000 homes could have been built between 2019-2024” if the demand for data centres was instead directed towards building homes.

Comparisons of the data centre sector in Ireland to other national industries, such as the German automotive industry, were also criticised by the study, calling them “spurious at best”.

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This is because of the differences in value each industry adds to the economy and their disproportionate resource use.

Minister for the Environment Darragh O’Brien made the comparison during a Dáil debate in June.

The German automotive industry, the researchers said, employs an estimated 400,000 direct jobs and in 2024 used just 3% of the electricity generated.

Data centres in Ireland, by contrast, provide direct employment for roughly 3,300 people and used 22% of national electricity grid demand in 2024.

They added that data centres in Ireland that provide cloud services for European enterprise have “minimal direct impact on domestic activities”.

Bresnihan said that the purpose of the study was to establish whether continued data centre expansion was a rational allocation of resources.

“Based on the findings”, looking at the benefits that accrue in Ireland and the costs that are socialised, “it would seem pretty clear that continued expansion is an irrational allocation of resources”.

A Department of Enterprise spokesperson added that it will “consider the research from Maynooth University and the evidence underpinning its findings”.

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Conor O’Carroll is an investigative reporter with The Journal Investigates.