Isme wants spotlight on price increases to help prevent scarring of the economy

Neil McDonnell said the profit margins generated by large retailers in the Republic are larger than those in Britain

Isme chief executive, Neil McDonnell, said that interest rate increases will also soon increase costs on businesses and households. 

The Government will need to mount a fight to seek out transparency from large international retail and wholesale operators in the Republic, to help keep inflation from scarring the economy, the head of business group Isme has said.          

Neil McDonnell, the chief executive of the business group, said the profit margins generated by large retailers and other suppliers operating in the Republic, as far as it is possible to ascertain, are larger than those in Britain, and more light has to be thrown on the issue as costs pressures for businesses and households mount.        

The onus is on the Government to maintain a competitive environment for consumers, given that price levels in the Republic are already among the most elevated in the eurozone, Mr McDonnell said.     

"We keep banging the costs drum" because the fight against inflation would help to keep the lid on any potential damaging wages spiral, he told the Irish Examiner.

The relatively small size of the population means that costs will likely be higher than those in major economies, but that means monitoring price levels is all the more urgent, he said.                                        

The temptation in a small market like Ireland's for large retail and wholesale international groups is to avoid competition, which makes transparency more important during this time of stress, he said.                                                           

The comments come as Isme prepares its submission ahead of October's budget by Finance Minister Paschal Donohoe that will say the Government will require to be stringent on the public finances. 

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Mr McDonnell said that although it was important not to talk down confidence that the warnings of a slowdown in the US and a possible recession in Britain will require increased surveillance on spending by the Government here.                      

Citing other global indicators such as surveys that show a sharp contraction in China — which is the manufacturer to the world — he said that interest rate increases will also soon increase costs on businesses and households. 

The UK and US have hiked interest rates and the ECB "will not be far behind", probably as early as July, when it is tipped to start increasing interest rates for the first time in many years. Mr McDonnell said that politicians will have to be honest that the Government "cannot buy ourselves out of an inflation crisis". 

That means that any new package in October to help with the cost-of-living crisis will have to target specific households, rather than offering wide-ranging subsidies to utility bills of all households, as was unveiled earlier this year, he said.  

On the public finances, he said "even extreme caution might not be enough" amid the inflation crisis.  "We have backed ourselves into a corner in that every euro in spending is already spoken for," Mr McDonnell said.       

He said that "there was an air of unreality" among public service unions about the realities of the economic challenge. On building costs inflation, Mr McDonnell said that Ireland's public procurement contracts are less "sophisticated" than the rest of Europe.