Isme says costs up 30 per cent in three years

Small businesses in Ireland have experienced a 30 per cent increase in production costs in the last three years, according to…

Small businesses in Ireland have experienced a 30 per cent increase in production costs in the last three years, according to the Irish Small and Medium Enterprises Association (Isme).

Isme's end-of-year statement shows that fuel and waste charges form the largest increases. Gas costs, for example, have risen 25 per cent, petrol by 12 per cent, and waste charges have increased by 20 per cent.

On top of these costs businesses have been hit with increases of more than 5 per cent for rents and, a newly announced, significant increases in business post, Isme said.

"As in previous years the Budget failed to address the specific requirements of the SME sector. The high cost environment for business, particularly the Government-controlled element, has been central to undermining our competitiveness and needed to be addressed in a systematic way," the statement said.

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Isme research confirms that labour costs in SMEs increased by 5.6 per cent over the last 12 months.

While this is slightly down from the 6 per cent on the previous 12 months, they are still running at over twice the rate of inflation and double the rate of increase in the rest of the EU, where wage rates increased by 2.6 per cent for the same period.

The Isme statement added: "Consequently it is absolutely essential, if we are to achieve future growth within the sector that wage rates are not allowed to get out of control, undermining our competitiveness as has been the case to date. It is imperative that, at the very least, labour cost increases are brought into line with the EU average to ensure our continued competitiveness."

Despite the hike in production costs the Isme's most recent trends survey has recorded that a net 28 per cent of companies were more confident about business prospects than in the previous 12 months.

Manufacturing has fared better than in previous years with companies reporting increased business confidence and evidence that the sector is beginning to recruit more jobs than it is shedding. Although Isme calls this a "positive sign" it also warns that "this sector continues to come under increasing pressure internationally, particularly from cheap imports and will require significant investment in innovation, R&D and training in order to compete effectively while operating within a high cost environment."

The most dramatic improvement has been in the manufacturing sector, where a net 19 per cent of companies were employing more in 2005.

According to Isme, employment prospects in 2006 will be just as positive with a net 28 per cent of companies expecting to increase employment in the next 12 months.