Billy Kelleher (Cork North Central, Fianna Fail)

I thank the Deputy for raising this matter on the Adjournment. The Tánaiste sends her apologies. I am sure the Deputy is aware of the circumstances.

I am acutely aware of the consequences of the proposal to close the Irish Flavours and Fragrances facility in Drogheda, County Louth. If implemented, the proposal would result in 103 job losses. IDA Ireland is directly engaged with IFF on the matter and has put a proposal to the company which it hopes it will consider. FÁS has also been in contact with IFF to offer assistance. The aim of both agencies is to explore options with IFF which would avoid or alleviate the threatened redundancies. I have asked the IDA to bring local concerns and the concerns of local representatives to the attention of IFF Corporate and use its best endeavours to minimise the impact of a final decision. The IDA believes the Drogheda plant was highly regarded within the overall group. The proposal to close the plant is based on a corporate desire to centralise all manufacturing of fine fragrance products — the segment in which Drogheda is involved — in one location in Europe.

Aside from the IFF situation, IDA Ireland is actively marketing County Louth as a location for industrial development. This year there was a robust programme of site visits to assess the county for investment, from which it is hoped some significant wins will result. The IDA has two very significant site portfolios in County Louth, with business parks in Dundalk and Droghed. It has secured planning permission for two biopharma facilities in the Dundalk science and technology park. These will be used to aggressively market the county in what is now one of the most significant sectors globally.

On a broader policy level, the Government has been responding to the economic downturn and taken numerous initiatives which will benefit regions affected by or threatened with job losses. In particular, the Tánaiste and her Ministers of State have been closely involved in promoting measures to improve competitiveness, stabilise industrial employment and output, and strengthen labour market activation policies. Cost competitiveness is a key factor in determining a location for business. It is important, therefore, that we achieve greater cost competitiveness in Ireland. For most exporting firms, labour costs account for more than half their input costs. We have recently seen a 7% competitiveness gain in unit labour costs. Although it is a painful adjustment, a reduction in unit labour costs, delivered through pay reform, will strengthen our longer term competitiveness. The European Union estimates that Irish unit labour costs will fall by 4% this year, compared with a 3% increase in the Union on average, translating into a significant improvement in competitiveness.

There has also been downward movement in energy prices. In May this year there was an average 10% drop in electricity prices for residents and small and medium enterprises, while gas prices were reduced by an average of 12%. The CER recently announced that it would hold down prices for large energy users. In early September it announced a 0.4% decrease for small businesses and a more significant 5.5% decrease for medium-sized enterprises from October.

Both the NCB manufacturing and services purchasing managers' indices are showing a sustained period of decline in input costs for businesses in Ireland. The decline in Irish inflation reached -5.9% in the year to July, the sharpest fall since the early 1930s. Property and land prices are also falling, which is an advantage in terms of lower rents or property costs in the attraction of new FDI projects and also for indigenous businesses seeking to set up or expand. The OECD has predicted mild deflation in Ireland for the next two years. This will maintain the current downward pressure on wages and prices.

The National Competitiveness Council published its annual competitiveness report in August. The report states we retain a wide range of competitive strengths. These include a young and well educated workforce, growing levels of research and development activity, a modern internationally trading enterprise base and a long track record as a successful location for overseas investors. However, we must redouble our efforts to ensure the economy becomes more competitive in order that Ireland will be in a position to benefit from a global recovery when it emerges. In fact, there are some indications that the global downturn has reversed. The price of oil has gone up in the past few days and there is now an acknowledgment that the world may have come out of the current downward spiral, particularly those nations in the G20. For example, Australia raised its interest rates today, which is an indication that some economies are reaching a plateau and coming out of the recession. As an open trading economy we are vulnerable to downward trends, but equally there are opportunities in upward trends. Hopefully, we will see these opportunities over the next period. This hope is being lived up to in the increase in exports. I understand the concerns the Deputy raised in the context of the IFF workers. We will urge the IDA to engage with the company to address the issues and see what supports can be brought forward to address the concerns of the Deputy and the workers.

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