Written answers

Thursday, 12 February 2015

Department of Jobs, Enterprise and Innovation

Action Plan for Jobs

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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110. To ask the Minister for Jobs, Enterprise and Innovation the extent to which the industrial cost base here compares favourably with other European Union and non-European Union countries; and if he will make a statement on the matter. [6557/15]

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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The Government’s Action Plan for Jobs, which is co-ordinated and developed by my Department since 2012, has set out a comprehensive set of measures to improve our competitiveness performance. Substantial progress has been made in terms of improving Ireland's competitiveness in recent years and we have climbed to 15thin the IMD competitiveness rankings. Cost competitiveness is an important aspect of Ireland's overall competitiveness.

The real Harmonised Competitiveness Indicator (HCI) is a measure of the trade-weighted exchange rate for Ireland, adjusted for relative price developments. In December 2014, Ireland's real HCI fell by 4.4 per cent year on year. A fall indicates an improvement in price competitiveness and leaves Irish-based firms better equipped to compete on the international market. Relatively low consumer price inflation over the last five years has meant that Irish price levels have fallen considerably relative to our euro area peers. A weaker euro has improved our cost competitiveness in non-euro area markets.

There has been a significant improvement in economy-wide cost competitiveness. The European Commission in its winter forecasts estimate that real unit labour costs in Ireland will fall by 2.0 per cent annually in 2015 compared with an increase of 0.3 per cent in the UK, and a fall 0.9 per cent in the euro over the same time period. Competitiveness has been achieved through wage moderation vis-à-vistrading partners as well as productivity improvements.

We continue to monitor Ireland's cost competitiveness on a regular basis. This is specifically required under the Action Plan for Jobs 2015. Action 247 requires the National Competitiveness Council to “Benchmark key business costs and publish a report highlighting areas where Irish enterprise costs are out of line with key competitors”.

The report concentrates on the costs that are largely domestically determined such as labour, property, energy, water, waste, communications and business services. The NCC note that Ireland’s cost base has improved across a range of metrics over the last four or five years. This has made Irish firms more competitive internationally and made Ireland a more attractive location for firms to base their operations in. However, despite these improvements, the NCC note that it is essential that we continue to focus on reducing costs that comprise a significant percentage of business costs and that are out of line with those in competitor countries.

Addressing Ireland’s international cost competitiveness, therefore, remains a key economic priority for Government.

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