Exports grow but skills shortages and credit squeeze hamper expansion

Despite increasing exports the private sector has experienced a dramatic decline in investment from over 23% of GDP in 2005 to 7% in 2011.

There is a serious skills shortage in certain sectors and the credit squeeze by banks is hampering expansion by indigenous enterprises, according to the National Competitiveness Council’s annual benchmarking report.

Ireland has the 14th highest total labour costs level in the OECD, 2% higher than the OECD average and 6% higher than the eurozone average. Ireland’s wage level is over 20% above the OECD average.

On the plus side, the report shows that, despite global economic difficulties, Irish export performance has been resilient — reflecting recent improvements in our international competitiveness. Significant consolidation has also been achieved in public finances.

While exports have supported growth to date, Ireland’s market share remains at pre-recession levels and, according to the NCC, this issue must be addressed urgently.

“As a key driver of growth, Ireland must diversify our export base in order to protect and grow market share,” says the council, which points out that skills mismatches persist despite high unemployment. “The bursting of the construction bubble has left Ireland with a major skills imbalance — an excess of individuals qualified to work in sectors no longer demanding labour, and shortages of individuals equipped with the necessary skills to work in growth sectors.”

The report shows that businesses continue to be challenged by a shortage of credit.

“Unless access to credit improves, firms will be unable to make the productivity-enhancing investments that are necessary if they are to compete successfully in international markets.”

The report also shows that foreign direct investment remains critically important to the Irish economy, with inward investment levels amongst the highest in the OECD.

Overall Irish firms have performed well in international markets with significant increases recorded in merchandise exports from the pharmaceutical sector. Computer services, business services, and financial and insurance services all saw significant growth.