Wednesday, 18 April 2018
Ceisteanna - Questions - Priority Questions
22. To ask the Minister for Jobs, Enterprise and Innovation the actions being taken to reverse Irish competitiveness deficiencies to make Ireland an attractive location for enterprises to locate in and scale up; and if she will make a statement on the matter. [16975/18]
I ask the Minister the actions being taken to reverse Irish competitiveness deficiencies to make Ireland an attractive location for enterprises to locate and scale up. I ask her to make a statement on the matter. I raise this because our competitiveness is under continual threat for a number of reasons, including the increased activity in the economy, with rising employment putting pressure on services across the State. Equally, deficiencies in the State's capacity to respond and sometimes reluctance to respond are damaging our competitiveness which will have an impact on our ability to continue to trade internationally. I ask the Minister to outline the efforts she is making to address the issue.
I thank the Deputy for raising the matter. Despite intense competition, Ireland’s competitiveness performance remains positive. Ireland moved from 16th in 2015 to sixth in 2017 in the Institute for Management Development World Competitiveness Yearbook. In addition, the World Bank’s most recent Doing Business 2018 report shows Ireland is now ranked 17th out of 190 countries, an improvement of one place on last year.
Our improved performance is reflected in strong employment growth across sectors and regions. We have over 2.2 million people at work and our unemployment rate is down to 6.1%. Agency-supported companies now employ over 400,000 people throughout Ireland. The strong performance of clients supported by the enterprise agencies in winning exports and investment, market share and job creation in the face of intense global competition is impressive and reflects the competitiveness of the environment in which to do business.
However, there is no room for complacency. We need to continue to improve our competitiveness and remain vigilant to the very significant challenges in the external environment, particularly Brexit. In addition, the productivity performance of many Irish-owned enterprises is weak and not enough enterprises are engaging in innovation. We have a number of supports available to them in that respect.
Competition for FDI remains intense. Ireland has many strengths when it comes to attracting FDI. We score highly on criteria such as investment incentives, labour productivity, and the adaptability and ability of talent. While we have a proven track record in attracting and sustaining FDI, continued success cannot be taken for granted. Our capacity to continue winning such new investment despite geopolitical changes and intense competition will be aided by the underlying strengths of our FDI offering.
As Minister for Business, Enterprise and Innovation, my objective is to create the best possible environment for enterprise, entrepreneurship, innovation and investment across all regions. The immediate challenge for Ireland is to ensure growth is sustainable, that enterprises are resilient and that we continue to grow Irish enterprises and attract foreign direct investment. We are taking steps to ensure the economy is resilient at sectoral and firm level to deal with imminent competitiveness challenges and to build further on the progress we have made. That is why we are continually examining how we can improve on factors that are crucial to fostering further investment here, including our cost base, infrastructure, availability of talent and innovation.
Additional information not given on the floor of the House
Enterprise 2025 Renewed, which I launched last month, placed an increased emphasis on developing Irish-owned enterprises. There is a strong focus on taking action that will embed resilience in our enterprise base. We are placing a spotlight on innovation and on skills. Enterprise Ireland places a strong emphasis on competitiveness. It supports exporting enterprises with initiatives in Lean, RD&I and management development. The agency helps enterprises to take a strategic approach to understanding and responding to potential implications arising from Brexit and assists them to enter into new markets and diversify their export base. The local enterprise offices offer a suite of supports to enhance the competitiveness of small and micro-enterprises. Initiatives include mentoring, innovation vouchers, Lean Start and access to a Brexit diagnostic and guidance.
My officials and I, as well as the National Competitiveness Council, remain focused on competitiveness, an agenda that requires cross-Government commitment to continue to develop and implement actions to enhance national competitiveness.
We have been here before in terms of competitiveness and the loss thereof as the economy expands and grows quite rapidly. Based on GDP, GNP or any other metrics, there is huge activity in the economy. Key areas in the economy have already reached full employment and we will soon have to address that issue by attracting people into the country. One of the greatest barriers to that will be the costs of housing, childcare, insurance and transport. These and many other areas diminish our ability to attract key labour into the market in order to ensure we remain competitive in key areas of the economy.
While I welcome the Minister's statement that there is no complacency on this issue, proactive policies are needed to address areas where significant competitiveness problems will arise. I refer, for example, to the lack of housing and the inability to address this fundamental issue, not only in the broader context of how society is structured but also in terms of competitiveness. We must remain attractive to foreign direct investment and foreign employees to ensure exports are competitive internationally.
The reason for the shortage of housing supply is that when the country experienced its worst ever recession only a few short years ago, the bottom fell out of the construction sector. The current problems in housing are part of that legacy. We have a plan to address these problems, namely, Rebuilding Ireland, and we are only 18 months into this five-year programme. After 18 months, people claimed the five-year Action Plan for Jobs would not work, yet it was successful. We have to give Rebuilding Ireland time.
The number of commencement notices for houses has increased by more than 40% to 18,000. In 2017, the number of social houses built was three times higher than the number completed in 2016. Since 1 February, a new Rebuilding Ireland home loan has been available from local authorities. We have also introduced measures to fast-track the planning process for large developments and apartments. In 2018 alone, more than 2,300 homes and 3,400 student bed spaces have been approved through this process. We introduced rent pressure zones to cap rent increases at 4% in pressure areas. Today, the Government announced that breaches of the cap would be a criminal offence. In 2018, we will spend €1.9 billion on housing, which is an increase of 46% on 2017. I accept we need to do more but building houses takes time.
I thank the Minister for her reply. We must also address interest rates and the cost of credit to small and medium-sized businesses and mortgage holders because it is much higher than the rates available in other countries in the eurozone. The European Central Bank sets the interest rate for the eurozone. The Irish economy must compete with other economies in the eurozone but our interest rates are roughly double those of most of the other eurozone member states with which we compete. As regards the cost of credit to mortgage holders, the variable rates in Ireland are approximately twice as high as the European average. Similarly, credit to small and medium-sized businesses costs approximately twice as much as the European average. As a member of the eurozone operating in the Single Market, we should at least address the fundamental problem of expensive credit costs for small and medium-sized businesses. This has not been done to date. Banks, the State and the European Union have an obligation to create a single market for access to credit across the eurozone.
Supply and demand for credit have improved significantly since the height of the economic crisis. While the cost of credit is falling, it continues to be relatively high and it is vital that is reduced to align our rates with those in competitor countries. The divergence between interest rates for enterprise in Ireland and the rest of the euro area is particularly noticeable for loans of up to €250,000. The interest rate on new business loans was double the euro area average throughout 2017. On 28 March, I opened a Brexit loans scheme for applications to allow for the roll-out of €300 million in funding to eligible Irish businesses. Such businesses can apply to the scheme through the participating finance providers. The scheme, which will be delivered by the Strategic Banking Corporation of Ireland, SBCI, through commercial lenders, will make €300 million available to eligible businesses with up to 499 employees at an interest rate of 4% or less. My Department is working with the SBCI and the European Investment Bank to provide a longer-term facility to assist businesses to deal with the threats posed by Brexit.