Bernard Durkan (Kildare North, Fine Gael)
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Question 120: To ask the Minister for Enterprise, Trade and Employment the extent to which his Department has identified the cost factors most likely affecting industries proposing to relocate to lower wage economies; and if he will make a statement on the matter. [19355/07]

Micheál Martin (Cork South Central, Fianna Fail)
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Factors affecting the competitiveness of dynamic market economies are constantly changing. Ireland has prospered by being closely connected with global markets and using the opportunities of globalisation and the EU Single Market to create employment and build a broad based enterprise economy. Markets and companies adjust to aspects of competitiveness that are specific to their sector. Some companies move overseas for strategic business reasons and of course for cost reasons, just as others relocate to Ireland because they can improve their competitiveness by investing here.

The impact of costs is highly dependent on the cost structure of different business sectors. For example the Nation Competitiveness Council (NCC) reported last year that labour costs make up 20% of a typical food company's cost base but are almost 80% of the costs facing a funds management business. Broadly speaking, this NCC analysis suggests that labour costs make up nearly 60% of the business costs in its survey. Because these dominate business costs, it is fair to presume that labour costs would be an important consideration in a business deciding to move its activities from Ireland. But we know from the same NCC report that labour costs, taxes, and transport costs are competitive in Ireland when compared with benchmarked locations in the EU-15/US. Ireland's cost competitiveness is also supported by relatively low taxes on labour.

The factors that make it more attractive to relocate from Ireland are diverse and are only part of a complex decision making process for the firms involved. However, what is important for competitiveness is that the costs of doing business in Ireland do not get out of line with those in other, high cost economies with whom we compete.

Recent data from the CSO pointing to increased exports and industrial output (where costs pressures are most likely to have a swift impact ) show that net exports were nearly €280 million higher in the first quarter of 2007 than in 2006, while the volume of industrial output was 14% higher. This underlines the fact that the economy remains a cost competitive location for business.

Nevertheless the NCC has also drawn attention to cost pressures in the economy and the importance of maintaining international price competitiveness. To address inflation and with a view to keeping costs for enterprises under control, the Government and the Social Partners have agreed to intensify co-operation in responding to inflationary pressures within the framework of the pay agreement, and especially through the work of the Anti-Inflation Group and the High Level Group on Manufacturing.