SFA warns over ‘crippling’ increases

THE Government must step in to stop “crippling” increases in the price of gas, electricity and petrol, the Small Firms Association (SFA) said yesterday.

The group called for a new business-friendly energy policy that would help ease the pain currently felt by business and consumers.

SFA director Pat Delaney said recent hikes in energy costs would damage businesses and increase the threat of an economic slowdown.

“Crippling increases in oil, electricity, petrol and gas costs are undermining the business sector at a time when the economy is growing at a markedly slower pace.

“Manufacturing output in the first half of 2005 was 4% below the 2004 figure, the first time since 1982 in which manufacturing output declined,” he said.

Mr Delaney wants government action to ensure “the secure, reliable, efficient and competitively-priced” energy delivery.

“The energy regulator had a case to answer in allowing for direct increases of 41% since 2001. The cumulative increase during the same period is in excess of 50% for high energy users.

“This is totally unacceptable for the exposed sectors of the economy trading in international markets,” he said.

He predicts job losses and higher prices as businesses struggle to survive.

“The inflationary impact of current rises in oil, electricity and gas will be high, because these costs impact directly on the price of raw material prices and finished goods.

“The manufacturing industry will feel the brunt as the cost of energy and oil prices continue to climb,” he said.

The SFA also said wage costs would also be pushed up because pay rises set out in national wage agreements tended to be linked to the general inflation rate. If the oil situation caused an increase in Ireland’s inflation rate, workers would then put pressure on employers for a bigger pay rise to compensate them for a higher cost of living.

“There are no winners in this scenario,” said Mr Delaney. “This current situation is bad news for consumers, bad news for business and bad news for the government.”

Cheaper energy was “a key ingredient” for the success of the economy in the future, he added.

Several economists have predicted the inflation rate will tick up towards 3% next year on the back of higher oil prices, putting Ireland considerably ahead of the 2% target inflation rate set down by the European Central Bank.

Irish inflation is currently slightly below the EU average of 2.2%.