The cost of doing business in Ireland is spiralling out of control, argues business lobby group IBEC. It points to a new survey published today showing a 19.1 per cent rise in non-pay business costs in the past two years - more than three times the rise in the consumer price index. Dominic Coyle reports.
"Increases on this scale are both indefensible and unsustainable," said IBEC director of enterprise Mr Brendan Butler. "Unless meaningful action is taken to address this imbalance, the ability of Irish business to compete will be seriously threatened and this will ultimately put jobs at risk."
The results broadly reflect a similar study in 2003, which found non-pay costs in the previous two-year period rising at three and a half times the official inflation rate.
Both studies found that smaller companies were burdened disproportionately with increases in costs outside of pay. The latest survey found that companies with fewer than 50 employees experienced a rise of 23.7 per cent in non-pay costs between 2002 and 2004 while companies employing more than 250 staff encountered a cumulative increase of 15 per cent over the period.
The study broke non-pay costs down into 11 categories. Insurance was the fastest rising expense for business over the most recent two-year period at 32.7 per cent, although this was largely attributable to rises in 2003 (27.8 per cent) rather than last year (3.8 per cent).
IBEC said the figures showed the impact of progress in the reform agenda, which was a priority for the Government. Still, the business group said, insurance remained a top-three non-pay cost concern for two-thirds of respondents.
Waste charges recorded the second most significant rise (31 per cent). At 14.2 per cent, disposing and treating waste was the fastest growing cost in 2004 and, with professional services 10.1 per cent, the only area to hit double digits last year.
Charges for professional services rose by 24.4 per cent over the last two years, making them the third fastest growing non-pay charge on business.
Total non-pay costs rose by 8.3 per cent last year according to the IBEC survey, slowing on the 10 per cent increase in 2003.
Telecoms charges rose slower than any other in each year, rising 10.3 per cent between 2002 and 2004, less than postal services (13.2 per cent), financial services 13.9 per cent), transportation and warehousing (16.9 per cent) and energy (18 per cent).
Local authority rates, which have been a bone of contention for business in recent years, rose 18.4 per cent over the two years although the increase of 11.4 per cent in 2003 nearly halved last year to 6.3 per cent.
The remaining two categories - rents and water charges - were up by 21.7 per cent and 19.9 per cent. In all cases, 2004 saw lower increases than 2003.
"This survey strengthens the position consistently put forward by IBEC that costs in Ireland are rising much more rapidly than in our competitor countries," said Mr Butler. "The problem is exacerbated by wage increases which, at 5 per cent a year over the last two years, have been running at almost twice the rate of other euro-zone countries."
Non-pay costs now account for half of total business costs, he added.
IBEC has proposed a 10-point plan to reduce costs. These include:
• avoiding increases in indirect taxes;
• resisting higher local authority charges;
• keeping wage rises to levels in other European states;
• keep targeting a 2 per cent inflation rate;
• concentrating on value for money in the public sector;
• introducing competition in sheltered areas of the economy;
• developing an appropriate energy policy;
• building infrastructure to tackle the waste crisis;
• prioritising major road construction to reduce congestion;
• assess impact on business of existing and proposed legislation.
