Wage demands must be resisted at all costs, to assist economic revival.
ISME, the Irish Small & Medium Enterprises Association, reacting to the latest inflation figures today (10th October), cautioned the Government against ignoring high state-influenced business costs in Budget 2014. The Association warned that, though overall inflation remains relatively low, the cost of doing business is continuing to rise, to the detriment of employment growth and competitiveness. The Budget must make cost curtailment across the economy a priority and ensure that all business costs are benchmarked internationally.
Inflation currently stands at 0.2%, a composite rate for all price changes, which conceals the burden of increasing state-influenced business costs being borne by SMEs, with electricity and gas increased by 5.8% and 7.6% respectively.
According to ISME Chief Executive, Mark Fielding, “If the Government wants to see increased employment and economic growth in the coming year it must use the Budget as an opportunity to assist SMEs and drive down the cost of doing business. State imposed costs such as utilities and local authority rates, in particular, continue to negatively impact business as SMEs have already cut controllable costs as much as possible. Issues such as the two-tier electricity system and excessive legal fees must be addressed and a tax initiative introduced for those lumbered with upward only rents on legacy leases”.
Fielding warned that any easing of austerity in the budget will be crucial for medium-term expectations. This could lead to higher wage demands, which in turn would create additional price pressures, leading to higher inflation. Any wage increases must be resisted.
The Association called for a review of all state controlled costs, benchmarked to our international competitors and a concerted effort to reduce them, to allow our exporting sector compete, both at home and abroad. SMEs, who are price-takers, cannot afford to increase their prices in response to domestic cost rises. Internationally, our competitiveness is suffering, at a time when it is most needed to retain and create employment.
The Association called on the Government to:
Use Budget 2014 to address the issue of high business costs.
Ensure that all state imposed business costs are benchmarked internationally.
Address the issue of upwards only rent reviews on legacy leases.
Reduce Public Sector costs by addressing the increments, perks and inefficiencies.
Address the energy, transport and exorbitant fees of the monopolistic legal profession.
“The economy may be showing signs of recovery but businesses continue to struggle. The Government must act on its promise to make Ireland the best small country in which to do business by reducing the high cost base to improve competitiveness,” concluded Fielding.