Competitiveness under threat as euro value increases
ISME, the Irish Small and Medium Enterprises Association, at the release of the CSO inflation figures today (14th January) warned that our competitiveness is decreasing steadily due to rising business costs. The Association expressed concern at the increases in labour, insurance, local charges and utilities, disguised in the overall inflation figure of 0.1%.
In December the change in the Consumer Price Index was +0.1% in the year and -0.1% in the month.
ISME Chief Executive, Mark Fielding commented, "Since labour is the most significant cost for SMEs, the relationship between consumer prices and labour costs is a major determinant of competitiveness. The current actual wage increases and left-wing demands for further increases will create a vicious circle of price increases and wage demands, leading to reduced international cost competitiveness".
"The issue of insurance costs is a critical concern for SMEs. Our recent ISME Quarterly Trends Survey for Q4 2015 found that 75% of businesses had experienced insurance cost increases. Cost increases such as this are preventing them from expanding or from taking on new staff. Competitiveness will become even more of an issue if sterling values against the euro continue to decrease, as the low value of the euro has been hugely beneficial to Irish exporters. We had warned Government that these externalities could not be relied upon to preserve competitiveness but they have failed to act."
The Association called on the Government to:
Ensure that all state influenced business costs are benchmarked internationally.
Address the costs over which they have influence; energy, telecom, transport, insurance and exorbitant legal fees.
Use the tax system to facilitate and promote job creation.
Reduce public sector costs through targeted private sector outsourcing.
"Increasing costs are one of the most pressing issues facing SMEs at present. It is difficult for small businesses to grow and hire new staff when their cost base is continuously rising and their margins reduce. The Government hides behind the overall inflation rate as evidence that competitiveness is satisfactory but they are not looking beyond the headline figures and analysing how costs are affecting businesses".
"A commitment to benchmark state imposed costs internationally, if included in all parties manifestos, would show that they are serious about improving Irish competitiveness and give a boost to SME confidence", concluded