High Services inflation, driven by exorbitant insurance, banking and legal fees.
Goods inflation expected to stay negative, due to sterling devaluation.
Lack of government action a threat to Competitiveness.
ISME, Thursday 14th July 2016.
ISME, the Irish Small and Medium Enterprises Association, called on the new Government for a concentrated effort to reduce all business costs which are affected by government. At the release of the CSO inflation figures for June today (14th July), the Association warned that continuing increases in basic business costs are undermining the efforts of SMEs to recover from the recession.
There was a slight increase in the annual CPI inflation figure to 0.4%, while the inflation for the month of June is 0.7%. The sub-index for Services rose by 3.2%, while Goods decreased by a similar amount.
Commenting on today’s figures ISME CEO, Mark Fielding said, “Irish consumer price levels are some of the highest within the euro area, defined as high cost rising slowly. Some of the recent competitiveness improvements have been as a result of a depreciation of the euro against sterling. The Brexit vote has quickly eroded that advantage and the challenge is now to avoid any inflationary cost increases. In this respect it is important that pay increases are linked to productivity improvements to ensure their sustainability”.
“Goods inflation has been consistently negative and should continue as imports from the sterling area will be cheaper. However, there has been a consistent rise in services inflation of more than 2.5%. The three main areas affecting business are those where there is a total lack of competition; insurance, bank interest and charges and legal fees. In these important areas government intervention has been non-existent, long on excuses; short on action.”
The Association called on the Government to:
Ensure that all state imposed business costs are benchmarked internationally.
Address insurance, bank interest, and exorbitant fees of the monopolistic legal profession.
Post Brexit ensure that SMEs are not hampered by labour, tax or regulatory increases, at least while exchange rate difficulties persist.
Ensure no National Minimum Wage increase.
Stand firm on public sector wage demands.Reduce public sector costs by addressing the increments, perks and inefficiencies.Outsource more state sector services to SMEs.
“The Government must focus on competitiveness. The drive must be to reduce state-influenced costs while the private sector increases productivity”, concluded Fielding.