Cost of doing business here increases

The cost of doing business in Ireland — already high by international standards — is beginning to increase even further and needs to be addressed if it is not to impact on our economic recovery, the National Competitiveness Council has warned.

The council’s Costs of Doing Business in Ireland 2014 report found Ireland’s cost base had been improving during the recession, making it more competitive internationally and a more attractive location for firms to base their operations. “However, despite these improvements, Ireland remains a high-cost location for a range of key business inputs. Addressing Ireland’s international cost competitiveness must, therefore, remain a key economic priority for Government,” it read.

It said the evidence suggested the economy has reached a “turning point” in terms of cost competitiveness and that overall relative cost competitiveness is now disimproving with a series of “upward cost pressures” emerging.

It found gross wages here are the eighth highest in Europe while net wages are sixth highest. After a number of years of “marginal” decline, labour costs had begun to increase — 2.4% in 2012, and 0.5% in 2013.

“Further small increases, which will weaken cost competitiveness, are projected in 2014. The cumulative impact of increases in income taxes; changes to bands; the introduction of the Universal Social Charge etc; have weakened competitiveness since the onset of recession,” it said.

The council also found:

-Transport costs: Diesel prices are 7% higher here than in the euro average.

-Utility costs: Electricity costs are the fifth and sixth most expensive in the euro area-17 for SMEs and large companies respectively.

-Water costs: Presently, Ireland is the fifth most expensive location out of 16 for industrial water costs.

-Credit costs — new business interest rates are 31% higher in Ireland than in the eurozone for loans up to €1m, and 27% higher for loans above €1m.

-In 2012, Ireland was the third most expensive location in the eurozone for consumer goods and services. Prices were 14.6% above the eurozone average.

Enterprise Minister Richard Bruton, said the report should serve as a major wake-up-call for anyone who thought our competitiveness issues were resolved. “Now is not the time for businesses to hike their prices; now is not the time for unions to make wage demands; and now is not the time for Government to take its foot off the pedal in making the structural reforms we need.”

Employers’ body Ibec said the fact labour costs remain among the highest in the EU meant that, while some companies will be able to award modest pay rises this year, “many simply cannot afford to”.

Ibec’s Mary Rose Burke said the tax burden is too high. “In the next budget, the Government should increase the income entry point to the higher marginal tax rate and reduce the marginal income tax rate below 50%.”