Dáil Éireann Debate, Wednesday - 22 May 2013
51. Deputy Peadar Tóibín asked the Minister for Jobs, Enterprise and Innovation the costs that undermine business growth and employment creation; and his views on whether property rental costs are not an issue for business. [24441/13]
View answerThe recently published Forfás report "Costs of Doing Business in Ireland 2012" 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 dramatic reductions in property related costs (in terms of purchase and rent levels) and falling prices across a range of professional and business services. We have also seen relative improvements in labour costs in Ireland which fell 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 the Forfás report highlights that Ireland is still out of line with our key competitors for a range of business inputs. Labour costs, despite the reductions achieved to date, 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. Also the report 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 report indicates that certain property costs in Ireland have reduced significantly in recent years. Construction costs and rental costs for both office and industrial space have fallen dramatically for new businesses since the collapse of the property market. Rental costs for new leases of office space in Dublin, for example, have decreased by 45 per cent between 2007 and 2011. Of course, I recognise that many existing businesses are tied into higher property costs, having purchased property or entered leases with upward only rent review clauses prior to February 2010.
The Government has taken steps to address the issue of upward only rent reviews where possible. In the Action Plan for Jobs 2012, the Government undertook to place downward pressure on commercial rents where the National Asset Management Agency (NAMA) had acquired the loan on the underlying property.
Other property related costs, such as stamp duty on transactions, have recently been reduced. Local Authority rates have fallen marginally in the past three years and the Government will continue to encourage Local Authorities to exercise restraint in setting commercial rates and, where possible, to reduce rates.
The 2013 Action Plan for Jobs also includes a number of specific actions to support a sustainable commercial property market. These include:
- Ensuring that the commercial leases database is established and fully operational in 2013.
- The completion of a review of the Rent Review Arbitration Code to consider the effectiveness of the Code in resolving disputes over rent reviews, and the degree to which stakeholders are making use of the Code
- Enacting and implementing the Valuations Bill in order to accelerate the revaluation of properties for commercial rates purposes.
