Peadar Tóibín
Question:41. Deputy Peadar Tóibín asked the Minister for Jobs, Enterprise and Innovation his views on the Forfás report on competitiveness. [24440/13]
View answerWednesday, 22 May 2013
Questions (41, 48)
Willie O'Dea
Question:48. Deputy Willie O'Dea asked the Minister for Jobs, Enterprise and Innovation his views on whether Ireland's competitiveness is improving; the way it can be further enhanced; and if he will make a statement on the matter. [24421/13]
View answerWritten answers
I propose to take Questions Nos. 41 and 48 together.
The recently published Forfás report “Costs of Doing Business in Ireland 2012” is an important report in the context of our need to continue to build an export led recovery. It looks at the relative importance of different areas of cost for different sectors.
The report indicates that business costs have reduced significantly in recent years with overall price levels in the economy falling back to levels last experienced in 2002. The improvement in business cost competitiveness has been driven by significant reductions in property related costs (in terms of purchase and rent levels) and falling prices across a range of professional and business services. There have also been relative improvements in labour costs in Ireland which fell on average by 0.9% per annum in the period 2008-2011, while labour costs increased in the euro area by 4.6% per annum on average in the same period.
However, while these improvements are very welcome and indicate that the economy is moving in the right direction, we must continue to focus on actions to promote further cost reductions across the economy. The Forfás report advises that over half of recent cost competitiveness gains are attributable to favourable exchange rate movements. The report also indicates that upward price pressure is beginning to emerge in some areas, while rigidities continue to persist within the economy.
Despite the reductions achieved to date, labour costs, remain relatively high (over 6% above euro area averages). Energy costs remain a cause for concern, particularly for the SME sector, while legal service prices are 11% above 2006 levels despite the recession. The report also shows that Irish consumer prices are 12% above the euro area average. This is a significant indirect cost for business as it puts upward pressure on wage expectations.
The Forfás report makes a number of recommendations aimed at further improving our cost competitiveness position in relation to labour, property, transport, utility and professional services costs. Part of the objective of the Action Plan for Jobs has been the development of proposals each year that can improve our competitiveness. The 2013 Action Plan includes a number of specific actions in this regard which address some of the areas highlighted in the Forfás report. The implementation of these actions, combined with the Government’s broader agenda to enhance productivity, will play a key role in improving our competitiveness and realising our ambition of making Ireland the best small country in the world to do business.