Low inflation concealing high cost of doing business.
Competitiveness a key priority.
Danger of wage inflation must be addressed.
ISME, the Irish Small and Medium Enterprises Association, at the release of the CSO March inflation figures today (10th March), warned that the next Government must make competitiveness a key focus of the programme for Government. The Association expressed concern at the relatively high costs of doing business in Ireland compared to our European counterparts and the wage demands from trade unions, and called on the new administration to make this a priority issue.
In February the change in the Consumer Price Index was -0.1%% in the year and +0.4% in the month.
ISME Chief Executive, Mark Fielding commented on the situation, "Since labour costs are generally the most significant cost component for most SMEs, the relationship between consumer prices and labour costs is a major determinant of Ireland's overall cost competitiveness. The recent increase in the National Minimum Wage has led to relativity claims throughout all pay scales, increasing the wage pressures on SMEs. As wages are often the largest bill for SMEs, they are now experiencing unsustainable pressure to make ends meet".
"The low rate of inflation indicates that, in general, prices have not gone up but, many of the costs associated with business have increased substantially, including motor insurance, which has risen by a massive 29%. This has resulted in a double whammy whereby SMEs are paying more to produce their products but cannot increase the prices accordingly".
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.
"Wage inflation is a crucial element of competitiveness and can create a vicious circle of increasing prices, increasing wage demands and reduced international cost competitiveness. The next Government must call for wage restraint and the Low Pay Commission must ensure that their recommendations reflect the reality of the economy and not be influenced by madcap utopian calls for wage increases", concluded Fielding.