Ireland is still a high cost location for a
number of key business inputs and the economy is at turning point in terms of
cost competitiveness, with overall relative cost competitiveness disimproving
and a series of upward cost pressures emerging: the harmonised competitiveness
indicators show that Ireland’s relative cost competitiveness is now
deteriorating vis-à-vis our main competitors; labour costs are rising again
following a number of years decline, industrial electricity prices have
increased in recent years; and an upward trend is evident across a range of
business service costs.
This depressing news comes from the National
Competitiveness Council (NCC), an Irish Government agency.
reported in January this year, that Ireland was the
only country in the EU to experience a decrease in inflation between 2008 and
2012 but prices remain high by EU standards, according to the report
Measuring Ireland’s Progress 2012 , published by the CSO. Ireland was the fifth
most expensive EU state in 2012, after Denmark, Sweden, Finland and Luxembourg
with prices 15% above the EU average. However, this represents a considerable
improvement on 2008 when Irish prices were the second highest in the EU, at 30%
above the EU average.
Dr Don Thornhill,
NCC chairman, said yesterday on the publication
of the agency's
latest report [pdf] on business costs: "Recent price falls are largely a
cyclical response to the Irish and international recessions rather than a
response to structural changes in the Irish economy. In this light we need to
see the Government’s continuing focus on those aspects of the economy which
drive costs for business. Reforms that reduce business costs and improve
productivity need to become the new story of the Irish economy.”
- Following a number of years of marginal decline, labour costs in Ireland are
increase. In 2012 and 2013 Irish labour costs grew by 2.4% and 0.5%
respectively, against a backdrop of still elevated unemployment.
- Gross earnings are the 8th highest in the euro area while net wages are the
- Following several years of cost reductions the commercial property market has
to stabilise. There is a risk of shortages in prime office space which could
- Diesel prices are 7% more expensive in Ireland than in the euro area.
While it is expensive to export from Ireland, Irish administrative processes
efficient and compare favourably with processes in key competitor countries.
- Electricity costs in Ireland are relatively high with Ireland the 5th and 6th
expensive location in the euro area for SMEs and large users respectively.
- Landfill gate fees are the 5th most expensive out of 10 countries while
thermal treatment fees are 3rd highest out of 9 countries.
- Ireland is the 5th most expensive location out of 16 for industrial water
services are currently undergoing a major reform and the cost impacts from these
reforms are not yet clear.
- Telecom costs are relatively competitive though concerns persist in relation
quality (speed) of services available.
- New business interest rates for non-financial corporations are higher in
in the euro area with Irish rates 31% higher for loans up to €1 million
and 27% higher for loans above 1 million.
Business services and other input costs
- Throughout 2012 and 2013 prices for a range of business services have been
increasing in Ireland. This follows a period of significant price declines over
course of the recession. In Q3, prices were 3.4% above 2010 levels.
Broader Cost Environment
- Ireland’s current price level and inflation profile can be described as high
rising slowly. In 2012 Ireland was the 3rd most expensive location in the euro
consumer goods and services. Irish prices were 14.6% above the euro area
average. Irish price levels remain above the euro area average in 10 of the 12
- Since the recession, the principle contributors to Irish inflation have been
Miscellaneous Good and Services (driven by health insurance), Transport, Alcohol
Tobacco, Education and Health.
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