A week dominated by reflections on the past did not put a stop to permutations of what the future holds. The progress of the economic recovery and how best to manage it continues to top the political and economic agenda.
In its latest quarterly economic outlook, employers’ lobby group Ibec said it expected economic growth of 4.6 per cent this year and 3.9 per cent for 2017. The group forecast 2.1 per cent employment growth, or an extra 40,000 jobs, with wages set to grow by 2 per cent and short-term unemployment to drop to pre-crisis levels.
Ibec, however, had some harsh words about the housing crisis. It predicted “continued increases” in rental prices in and around the State’s main cities due to the accommodation shortage. It acknowledged the root of the problem was a lack of supply, but also said building costs are still too high.
Ibec chief executive Danny McCoy hit out at the “lazy assumption” that just because house prices were rising, there would be “huge investment” in building.
Figures from the Central Statistics Office showed the recovery in the Dublin housing market appeared to have stalled after a fourth consecutive monthly decline in prices. They fell by 0.3 per cent in February and, while the decline is small, it comes on the back of three successive monthly falls which saw 3 per cent wiped off the value of properties in Dublin since the autumn.
As the debate about the return of commuter belts continues, prices across the rest of the Republic rose modestly, with the annual rate of growth climbing to 11.5 per cent, the strongest rate since May 2007. Residential property prices climbed 8 per cent over the 12 months to the end of February.
As it continued to try to form a government, Fine Gael produced a proposal to cut VAT on new homes and introduce a "help to buy" scheme as part of efforts to tackle the crisis. A housing paper to be tabled by the party proposes a range of measures, such as temporarily reducing VAT on new homes and apartments from 13.5 per cent to 9 per cent. The move has been advocated by the Construction Industry Federation.
The latest set of private sector credit figures from the Central Bank revealed that banks now held €3.6 billion more household deposits than loans. Mortgage lending continues to decline, falling by 2.4 per cent, or ,€327 million, in the year to February, with households repaying €1.9 billion more than was advanced in new loans. The figures also showed Irish consumers withdrew more than €540 million in deposits in February amid plummeting returns.
Ibec's report warned that uncertainty from the growing "economic headwinds" facing Ireland meant actual performance could deviate "substantially". Among the headwinds is the looming prospect of a British exit from the EU.
Ibec said it could spark a devaluation of sterling. That would mean products from Irish companies selling into the UK would effectively be 30 per cent more expensive.
Fine Gael MEP Seán Kelly also said there was “no doubt” a Brexit would “severely damage Irish trade”. Davy stockbrokers also weighed in, warning a sharp reduction in sterling could hurt exports from Ireland, although it said reliance on the British market had declined to 15 per cent of Irish exports from 50 per cent in the past.
The Brexit issue has been compared to the Y2K phenomenon when there was little in the way of concrete data to tell us whether various fears were founded. But many parties are adopting a "better safe than sorry" position, including the European Central Bank (ECB), which is liaising with Irish banks to assess their readiness for such an event.
ECB data shows euro zone banks had a €1.1 trillion exposure to the British market in 2014, comprising 5 per cent of their assets. Its examination of the banks is part of a pan-euro zone exercise looking at the impact it might have on lenders and banking systems with big exposure to the British market.
Davy also suggested that uncertainty over the in/out referendum had started to “hurt” growth in the UK economy, presenting a risk of spillovers into the advancing Irish economy.
Despite the doom and gloom, there were more green shoots in the economy. In a sign of growing international appeal for Irish sovereign debt, the State issued debt with a 100-year maturity for the first time, raising €100 million in a bond which to be repaid in 2116.
Retail sales picked up in the year to February, rising 11 per cent. CSO figures showed sales rose almost 22 per cent. On a monthly basis, the volume of retail sales was up 0.3 per cent, led by increases in books and newspapers, which increased by 7.8 per cent. That was partly offset by a decline in the volume of sales in bars, where there was a 2.8 per cent decline, and a 2.4 per cent fall off in sales of electrical goods.
It is fair to say the recovery is being felt in the boardroom of hotel management group Dalata where its executive team received almost €2 million between them as part of their remuneration packages in 2015 – almost double that of the previous year.
Chief executive Pat McCann took home a bonus of €420,000 on top of his €420,000 salary, bringing his total package to €840,000 before shares were included. Deputy chief executive Dermot Crowley received a package totalling €550,000, with a bonus effectively doubling his €250,000 salary and a pension entitlement of €38,000. His additional benefits had a value of €12,000. Stephen McNally, also deputy chief executive, was awarded the same salary, bonus and pension as Crowley, but with €3,000 in other benefits.
There were also pay rises at Kerry Group where chief executive Stan McCarthy received a total remuneration package of $4.6 million (€4 million) in 2015, up from $4.4 million (€3.9 million) a year earlier. Gerry Behan, group president and head of Kerry Ingredients and Flavours, received $2.9 million, as against $2.6 million in 2014, while chief financial officer Brian Mehigan took home $1.8 million, compared with $1.6 million a year earlier. A pittance really compared with Google chief executive Sundar Pichai who it emerged received a $100.5 million pay package in 2015, according to a filing from parent company Alphabet Inc.
In terms of the ordinary Joe, however, many people are still struggling to make ends meet, and Ulster Bank came under fire for its treatment of some of its business customers in financial distress. The bank’s affected customers were given until the end of March to say if they would be in a position to repay or refinance their borrowings or else face having their loans sold to third parties.
A ruling in the European Court of Justice could mean consumers here are facing another increase in premiums for home and motor insurance. The court ruled in a Polish case that work which insurers outsource to claims handlers is not exempt from VAT.
That leaves insurance companies – themselves exempt – facing up to 23 per cent higher costs for the work they outsource on managing and settling claims and on other back-office functions. The full financial cost of the ruling is unclear but it will run into millions.
Industry sources confirmed most of the 40 insurers in the Irish market outsourced their claims handling business. “This is a major judgment,” said one tax specialist. “It is pretty clear-cut, succinct and to the point. And it could and probably will have an impact here.”
