Irish businesses paying 80pc more for loans than euro zone average – National Competitiveness Council’s damning report
IRISH businesses are paying 80pc more for loans than the euro zone average, a damning report from the National Competitiveness Council has warned.
In its annual Cost of Doing Business in Ireland report, it added that there are a number of other concerns in the economy including risks of a return to boom-time in the property market.
The report was also critical of the costs of insurance, the legal system, childcare, consumer prices and energy, among others.
The council’s annual Cost of Doing Business in Ireland report also took issue with increasing levels of industrial unrest and high costs for childcare, insurance, legal, transport and energy services.
But it highlighted the cost of borrowing for businesses.
“In November 2015, the interest rate in Ireland on loans of up to €0.25m was more than 80m above the euro area average rate for new business; the rate on loans of up to €1m was more than 60pc more expensive in Ireland.”
Rising levels of industrial unrest, skills shortages and infrastructural bottlenecks risks putting the economic recovery and living standards at risk, the state’s competitive watchdog has warned.
Ireland remains an expensive location for businesses with a price profile described as “high cost, rising slowly”, the National Competitiveness Council said.
High legal costs, credit costs, and business services costs are a worry, while the body said it was particularly concerned about the dramatic rise in rents. The latter, it said, has potentially significant adverse consequences for the entire economy.
It comes as the IBEC boss Danny McCoy will tell a conference of top 300 business leaders this morning that the Irish economy is moving into a period of greater industrial discord with pay claims that in many cases go far beyond what is reasonable.
Mr McCoy argues the Luas dispute was an example of a “series of ongoing, exaggerated pay claims that risk undermining the economic gains or recent years.” And he described the pay debate as “ominous”.
IBEC’s CEO conference takes place this morning with Aongus Hegarty, President of Dell Europe, Enterprise Ireland chief executive Julie Sinnamon and Alastair Campbell among the speakers.
“Of course pay must rise over time; and public sector pay and conditions must be comparable with private sector roles, but this must happen at a sustainable rate, and it must balance the legitimate expectations of workers with the pressing need to invest more in the quality and capacity of our public services and in much-needed capital infrastructure projects,” Mr McCoy said.
Mr McCoy warned that there is an opportunity this year to attract back home Irish people who left during the crisis, but that jobs will be put at risk if costs spiral and competitiveness is eroded.
“Now is not the time for a one-size fits all national pay agreement and enterprise level pay bargaining is set to remain a feature of the Irish economy over the coming period,” Mr McCoy said.
“At the same time we all have a responsibility to ensure that when disputes arise, they are resolved in a timely and responsible way.”
The head of the state’s biggest business body argued that pay rises and budget tax cuts mean workers will get the equivalent of about two weeks additional pay this year.
Compared to 2014, he said, the average worker will be better off by almost one month’s pay by the end of the year.
“This is at a time of historically low inflation. The cost of goods and services across the economy is similar to what it was in 2008. This reality needs to be reflected in wage expectations,” he added.
And he hit out at any attempts to increase wages to meet property costs.
Mr McCoy reiterated IBEC’s call for more investment in infrastructure, arguing that Ireland is falling behind because of the tightening of spending that occurred during the recession.
“We need to take full advantage of this once in a generation opportunity and ramp up public infrastructure investment to 4pc of GDP by 2020. And we need to find new financial ways of connecting the stock of private capital with productive investment to achieve this target,” he said.
The National Competitiveness Council, in its latest Cost of Doing Business report, said domestic competitiveness pressures on the economy include infrastructural bottlenecks, skills shortages and increasing levels of industrial unrest.
And the watchdog warned exporting SMEs that they need to have strategies in place to mitigate the risks of currency fluctuations, as sterling has weakened by 14pc in recent months.
“The recent appreciation of the euro vis-à-vis sterling provides a timely warning about just how vulnerable Irish firms are to external shocks: the appreciation of the euro has placed Irish exporters under increased cost competitiveness pressure,” said Professor Peter Clinch, National Competitiveness Council chair.
The Council said the cost base for enterprise has improved across a range of metrics since 2009, but it added that Ireland remains a relatively high cost location and already the return to growth has resulted in a series of upward cost pressures.
It noted it was particularly concerned about the rise in both commercial and residential property costs.
“In particular the dramatic increase in residential rents is a major cause for concern with potentially significant adverse consequences for the entire economy.”
It said rising rents and increasing house prices will inevitably impact upon wage demands, increase the cost of living and will damage competitiveness.
The cost of credit continues to act as a “drag on the enterprise sector”, inhibiting investment and growth, particularly amongst startups and SMEs, the report said.
“In November 2015, the interest rate in Ireland on loans of up to €250,000 was more than 80pc above the euro area average rate for new business; the rate on loans of up to €1 million was more than 60pc more expensive in Ireland,” it added.
Article Source: http://tinyurl.com/kbwqb42