Costs of Doing Business in Ireland 2018 - … of doing...Costs of Doing Business 2018 7 Recent Trends in Cost Competitiveness In terms of business costs, as a small open economy dependent

Costs of Doing Business in Ireland 2018 June 2018

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Introduction to the National Competitiveness Council

The National Competitiveness Council (NCC) reports to the Taoiseach and the Government, through the

Minister for Business, Enterprise and Innovation on key competitiveness issues facing the Irish economy, and

offers recommendations on policy actions required to enhance Ireland’s competitive position. In March 2018,

the Government mandated the NCC as Ireland’s National Productivity Board responsible for analysing

developments and policies in the field of productivity and competitiveness. Each year the NCC publishes two

annual reports:

▪ Ireland’s Competitiveness Scorecard provides a comprehensive statistical assessment of Ireland's

competitiveness performance; and

▪ Ireland’s Competitiveness Challenge uses this information along with the latest research to outline the

main challenges to Ireland’s competitiveness and the policy responses required to meet them.

As part of its work, the NCC also:

▪ Publishes the Costs of Doing Business where key business costs in Ireland are benchmarked against costs

in competitor countries; and

▪ Provides an annual Submission to the Action Plan for Jobs and other papers on specific competitiveness

issues.

Costs of Doing Business 2018

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National Competitiveness Council Members

Professor Peter Clinch Chair, National Competitiveness Council

Pat Beirne Chief Executive Officer, Mergon Group

Kevin Callinan Deputy General Secretary, IMPACT Trade Union

Micheál Collins Assistant Professor of Social Policy, University College Dublin

Isolde Goggin Chair, Competition and Consumer Protection Commission

Cathríona Hallahan CEO/Managing Director (Ireland), Microsoft

David Hegarty Assistant Secretary, Department of Business, Enterprise and Innovation

Jane Magnier Joint Managing Director, Abbey Tours

Fergal O’Brien Director of Policy and Chief Economist, Ibec

Seán O'Driscoll President, Glen Dimplex Group

Margot Slattery Country President, Sodexo Ireland

Martin Shanahan Chief Executive, IDA Ireland

Julie Sinnamon Chief Executive, Enterprise Ireland

Ian Talbot Chief Executive, Chambers Ireland

Patrick Walsh Managing Director, Dogpatch Labs

Jim Woulfe Chief Executive, Dairygold Co-Operative Society Limited

Council Advisers

John Conlon Department of Employment and Social Affairs

Patricia Cronin Department of Communications, Climate Action and Environment

Kathleen Gavin Department of Education and Skills

John McCarthy Department of Finance

Conan McKenna Department of Justice and Equality

David Moloney Department of Public Expenditure and Reform

Ray O’Leary Department of Transport, Tourism, and Sport

John Shaw Department of the Taoiseach

Kevin Smyth Department of Agriculture, Food and the Marine

David Walsh Department of Housing, Planning, Community and Local Government

Research, Analysis and Secretariat

Marie Bourke Department of Business, Enterprise and Innovation

Teodora Corcoran 23 Kildare Street, Dublin 2, D02 TD30

John Maher Tel: +353-1-631-2121

Email: [email protected]

mailto:[email protected]

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Table of Contents

Introduction to the National Competitiveness Council 2

Table of Contents 4

Executive Summary 5

Recent Trends in Cost Competitiveness 7

Chapter 1 – Introduction and Methodology 16

Chapter 2 – How Do Costs Impact on Enterprise? 18

Chapter 3 – Exchange Rates and Harmonised Competitiveness 28

Chapter 4 – Labour Costs, Earnings and Tax 30

Chapter 5 – Property Costs 43

Chapter 6 – Transport Costs 477

Chapter 7 – Utility Costs 52

Chapter 8 – Credit and Financial Costs 57

Chapter 9 – Business Services and Other Input Costs 60

Chapter 10 – Broader Costs Environment 66

Chapter 11 – Focus on Residential Property and Childcare Costs 70

Appendix 1 – NCC Policy Recommendations on Costs 2017 78


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Executive Summary

The Cost of Doing Business is a key element of Ireland’s relative international competitiveness. While Ireland

experiences strong economic growth, the openness of the economy means the enterprise sector is particularly

vulnerable to negative price and cost shocks that are outside the influence of domestic policymakers. These

include unfavourable exchange rate movements, higher international energy prices, imported inflation from

our major trading partners, or an interest rate shock. Ireland is a relatively competitive location in which to do

business. However, several downside risks have already emerged that could undermine national

competitiveness, growth and living standards. Brexit underlines the importance of keeping costs down to

mitigate the effects of continuing uncertainty and unfavourable exchange rate movements. This is a key

element to facilitating firms to stay competitive in international trade. Increasing business costs reduce the

competitiveness of enterprises based in Ireland and our attractiveness as a location for mobile investment. It

is imperative that Government continues to place competitiveness at the heard of our Brexit response and

prioritises policies and actions that are within Ireland’s control to enhance cost competitiveness. As the

pressure on costs increases, it is critical that domestic policies do not contribute to overheating.

While consumer price inflation is subdued, this is largely due to currency effects and is likely to increase in 2018

and beyond. Ireland remains an expensive location in which to do business with a price profile which could be

described as “high cost and rising”. Largely driven by services price rises, Irish consumer prices in 2017 are 23.7

per cent above the EU average. Persistently high rates of consumer prices lead to expectations of further price

increases, and can create a vicious circle of increasing prices, reducing real incomes, increasing wage demands

and reduced international cost competitiveness.

Considering the main cost categories, labour cost growth has remained modest in recent years and below the

growth experienced in both the UK and the EU28. However, this masks considerable divergence at sector

level. As the economy nears full employment, skills shortages and gaps are likely to emerge and it is likely that

wages will rise at a faster pace in 2018 and into 2019. Competitiveness will be negatively affected if growth

outpaces productivity levels and growth rates in competitor countries. As the labour market tightens further,

upward pressures on labour costs can be expected in several sectors as skills shortages have emerged and

these, in turn, have some knock-on implications for wage demands. Retaining employees, particularly in

SMEs, poses difficulties. Certain skills needs are becoming more pronounced as indicated by increased job

vacancy rates in professional, scientific and technical services, financial, insurance and real estate services and

ICT. Skill shortages have the potential to create wage inflation and could impact on enterprise

competitiveness. Measures to encourage labour force participation levels remain important for alleviating

labour cost pressure and increasing the availability of talent.

With the labour market approaching full employment, improving the quality of life and the creation of an

attractive environment to live and work is particularly important in increasing labour market participation

rates, mobility of workers and ensuring Ireland is an attractive location for talent. The delivery of a suite of

competitively priced world-class infrastructure (e.g. energy; telecoms; transport – road, public transport,

airport, seaports; waste and water) and related housing is critical to support competitiveness in the medium

term. In this regard, well planned infrastructure, including sustainable housing, high quality public transport

and adequate water infrastructure provides people with the opportunity to live near their work and enjoy

quality of life, reduces traffic congestion and increases productivity. The return to economic growth and

Ireland’s high dependence on car usage has increased pressure on the transport infrastructure capacity, which

manifests itself in increased journey times, traffic congestion and increased emissions. These are pinch points

for business and workers that not only affect existing firms, but also impact the State’s attractiveness as an

investment location and as a location providing wellbeing of its citizens.

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A well-functioning property market also enhances the competitive performance of our cities and towns,

improves quality of life, and attracts overseas talent. The availability of competitively priced property solutions

is also a key requirement for enterprise. Commercial prices in Ireland compare favourably to comparable cities in

the UK and Europe. However, strong rental growth can be observed, particularly in office accommodation.

Increasingly, the shortfall and affordability of residential housing affects Ireland’s ability to attract and retain

talent, and can indirectly impact on enterprise costs and influence the competitiveness of Irish goods and

services. High rents affect decisions around labour mobility, entering employment and expansion of operations

by enterprises, therefore they are a significant infrastructure impediment, particularly in urban areas. Prices in

Ireland remain relatively high and rents push the cost of living out of line with other developed European

economies. Despite an increase in construction activity, strong demand means property price inflation is likely

to continue. It is well understood that a significant increase in supply is urgently required.

Insufficient access to affordable, full-time childcare in Ireland is a factor in deterring female labour market

participation. The availability of financially accessible, high quality childcare would help to address skills

shortages and would improve Ireland’s overall attractiveness as a location to work and live.

The supply and demand for credit has improved significantly since the crisis. However, the cost of credit

remains relatively high, particularly for SMEs. The determinants of cost are complex, but the concentrated

lending market coupled with higher credit risk premiums in Ireland has led to higher interest rates. The impact

of an interest rate shock on borrowing costs and the wider economy could be significant. It is important that

debt levels continue to be reduced. Increasing competition in the lending market and further diversifying the

funding models remain key medium-term challenges.

The absence of data means it is not possible to ascertain Ireland’s relative performance across aspects of the

enterprise cost base. Items such as local authority commercial rates, water, refuse, banking and legal charges

can significantly affect enterprise competitiveness, particularly for small and micro enterprises. A range of

hidden costs, including costs associated with planning and payment delays, labour law compliance,

transaction costs, cost to export and insurance costs, particularly in relation to cost attributable to employers,

remain a cost pressure point for business. In the case of water rates and the costs of congestion and

inadequate infrastructure, costs can be difficult to measure at a micro level. There are limits to the extent to

which policymakers or regulators can, or indeed should, intervene to influence prices in competitive markets.

However, it is important that price developments in these areas are kept under review by appropriate bodies.

Well targeted State intervention to address deficiencies in infrastructure provision and address market failures

remains important. However, it is vital that policy interventions are not pursued in a piecemeal or short-term

way. Measures that ensure price transparency are essential. Reforms that enable markets to work more

efficiently are the key policy mechanism to realise improvements in cost competitiveness.

The Council emphasises the continued importance of both the public and private sectors proactively

managing their cost base and driving efficiency. Improving firm level productivity must assume a more

prominent role in driving competitiveness. Despite intense global competition, the trajectory of Ireland’s

competitiveness performance has in recent years been positive. Growth is robust and has resulted in

employment growth across a range of sectors and a more favourable fiscal balance. The exporting sectors of

the economy continue to perform strongly and many of Ireland’s traditional strengths (such as our openness

to trade, highly skilled and adaptable workforce, and stable pro-enterprise administrative and regulatory

frameworks) remain.

It is important that the conditions for future competitiveness are put in place. As a small open economy, any

deterioration in our cost competitiveness will have a major negative impact upon economic growth,

employment, and our standard of living. Addressing the treatable causes of erosion in cost competitiveness

must continue to be an urgent economic priority for both enterprise and Government.


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Recent Trends in Cost Competitiveness

In terms of business costs, as a small open economy dependent on exports and foreign investment as major

drivers of growth, our relative cost competitiveness is a significant determinant of our overall competitiveness,

and ultimately of our economic prosperity, employment, and our standard of living. High business costs make

Ireland less attractive for mobile inward investment and reduce the competitiveness of Irish enterprises’ goods

and services trading in both domestic and international markets. More broadly, a more competitive cost base

can help to create a virtuous circle between price inflation, wage expectations and cost competitiveness.

Labour Costs

Based on the summary cost profiles considered in Chapter 2, the cost of labour may be considered as the

most significant driver of business costs for most firms – particularly for services firms. Since labour costs are

generally the most significant cost component for most firms, the relationship between labour costs and

consumer prices is a major determinant of Ireland’s overall cost competitiveness. Overall, despite robust

growth in employment, labour cost growth has remained modest in recent years and below the growth

experienced in both the UK and the EU. However, this masks considerable divergence at sectoral level, and

most likely firm level. Data for 2017 shows labour cost growth in Ireland was 1.9 per cent compared to 1.9 per

cent in the Euro area and 2.6 per cent in the UK. In Q4 2017, the Professional, scientific and technical sector

recorded the largest annual percentage increase in average hourly total labour costs, rising by 4.9 per cent

from €30.17 to €31.65 per hour. The Construction sector recorded the largest annual percentage decrease in

average hourly total labour costs, decreasing by 1.3 per cent from €22.99 to €22.68.

In terms of the size of business, in the year to Q1 2018 the average hourly total labour costs for firms with less

than 50 employees increased by 2.4 per cent (from €21.19 to €21.70), for firms with 50 to 250 employees by 4

per cent (from €24.02 to €24.99) and for firms employing more than 250 employees by 2 per cent (€30.43 to

€31.04). Over the five years to Q1 2018, average hourly total labour costs increased by 4.7 per cent, from 25.70

per hour to €26.92. The percentage changes across the sectors ranged from +12.8% in the Financial, insurance

and real estate activities sector (from €38.53 to €43.45) to -4.1% in the Arts, entertainment, recreation and

other service activities sector (from €20.87 to €20.01).

Figure 19 shows considerable divergence in sectoral labour costs across the EU. Within the business economy

(exl agriculture, public admin), labour costs per hour in Ireland were highest in industry €32.9 compared to

€33.4 in the euro area. Labour costs in Irish services were €28.9 compared to €29.3 and €25.2 in the Euro area

and UK. Costs per hour were €27.3 construction (Euro area €26.7 and UK €25.4).

Between 2016 and 2017, hourly labour costs in the total Irish economy expressed in € currency rose by 1.9%

both in Ireland and the Euro area. When comparing labour cost estimates over time, levels expressed in

national currency should be used to eliminate the influence of exchange rate movements. Within the Euro

area, the largest increases were recorded in the Baltic Member States. The only decrease was observed in

Finland (-1.5%). Expressed in national currency, hourly labour costs increased in the UK (+2.6%) (-4.1% in

Euro). Expressing labour cost growth in an index form, Figure 16 shows that Irish labour costs have been

increasing since 2014 but at a rate less than UK and Euro area labour costs.

Taxes

From an enterprise perspective, it is important that the taxation system is internationally competitive, stable,

supports and rewards employment, entrepreneurship and investment, and stimulates labour market

participation. The Irish income tax system is the most progressive in the EU. Figures 34 and 36 show that for a

married couple with 2 children earning the average wage and above in 2016, both the average income tax and

the marginal rate of income tax remain competitive, below the OECD average and the UK rate. Married

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couples in Ireland also fare better than single people in terms of marginal rate of income tax. OECD data

shows that for a single person earning 100 per cent of the average wage in 2016, total average income tax in

Ireland was 9 per cent lower than the OECD average and 3 per cent below the UK average (Figure 31).

However, this cohort faced a 12 per cent higher marginal income tax in Ireland (54.4%) than in the UK and

almost 10 per cent higher rate than the OECD average (Figure 32). Marginal rates were competitive at lower

wage levels but high for employees earning the average wage and above.

Ireland is currently very reliant on taxes on income as a source of revenue and significantly less revenue is

generated through social security contributions in Ireland as compared with other OECD members. Figure 13

indicates that when expressed as a percentage of total labour costs, Irish employers' social contributions and

other labour costs paid by the employer represented 13.8 per cent, significantly lower than the 25.8 per cent in

the Euro area and below the UK figure of 16.5 per cent in 2016.

As the country is moving towards full employment, it is also important that Ireland’s income tax regime

contributes to attracting and retaining talent, including those coming from abroad. CSO data indicates that

entry to the higher rate of income tax in Ireland occurs at a relatively low level - the standard rate band

threshold for a single individual without qualifying children of €33,800 (€34,550 for 2018) was below the

national average wage of €36,916 in 2016.

As the economy continues to grow, it can be expected that upward pressure on labour costs will intensify as

the labour market tightens. To maintain cost competitiveness, it is important that our labour cost base is in

line with productivity developments at sectoral level and not significantly out of line with our competitors

across the OECD and the UK.

In this challenging environment, long term certainty, transparency and stability regarding our 12.5 per cent

corporate tax regime also remains critical in informing enterprise investment plans.

Earnings

Average hourly earnings increased by 3.5 per cent between Q1 2013 and Q1 2018 while irregular earnings

increased by 14 per cent (Figure 26). From a sectoral perspective, the highest increases occurred in the Real

Estate (25.8%), Construction (9.7%) and Administrative sectors (8.9%). The highest earnings (€35.22 per hour)

were recorded in Education; the lowest earnings were in the accommodation &food sector (€12.76 per hour).

In absolute terms Ireland has the second highest national minimum wage in the EU at €1,563.25 per month,

Luxembourg records the highest rate (€1,998.59) while the UK has the seventh highest (€1,396.90). The

strength of the Irish minimum wage is reduced somewhat when expressed in purchasing power standards

(Ireland ranks 6th), though it remains relatively high (Figure 29). As a percentage of the average wage the

minimum wage in Ireland is 42 per cent compared to 44 per cent in the UK and 46 per cent in Luxembourg.

The gap in the national minimum wage between the UK and Ireland is an important consideration in the

context of Brexit. The wholesale and retail, hotels and restaurants, other services, and traditional

manufacturing sectors are likely to be the sectors most impacted by increases in the national minimum wage.

Increases in the past number of years do not appear to have had an adverse effect on competitiveness or

employment.

As the labour market is approaching full capacity job vacancy levels are increasing and certain skills needs are

becoming more pronounced. CSO data shows that job vacancy rates have increased with vacancy rates in Q1

2018 highest in professional, scientific and technical services, financial, insurance and real estate and ICT.

Skills shortages have the potential to create wage inflation and could impact on business competitiveness.

Productivity performance will assume an even more prominent role in driving Irish international

competitiveness. Indeed, in the longer term, productivity growth is the preferred mechanism to improve

competitiveness as it can support cost competitiveness in tandem with high and increasing income levels.


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Relative to most OECD countries, Ireland’s productivity performance is strong in terms of growth and levels of

GDP per hour worked. However, Ireland’s overall productivity performance measured relative to GDP is

positively skewed by certain sectors and high performing firms. A narrow base of sectors (ICT and

Manufacturing account for most productivity growth) is leaving Ireland vulnerable to shocks. Increasing

productivity particularly in the indigenous economy remains a significant issue.

Property Costs

After labour costs, facility or property costs represent the next significant cost factor in the profile of business

costs. For services sub-sectors, office lease costs represent 4 to 15 per cent of total location-sensitive costs.

For manufacturing, sub-sectors, industrial lease costs range from 2 to 5 per cent of location-sensitive costs.

The availability and affordability of commercial property solutions is a key requirement for the operation and

expansion of enterprises based in Ireland and winning and maintaining mobile investment. During the

downturn in the commercial property market, there was limited office construction activity in the Dublin

market between 2011 and 2013. The last number of years has witnessed a sustained recovery in the Irish

commercial property market. Commercial rents growth has been driven by an increase in demand,

particularly in major cities, reflecting the improving economy. Recent quarterly increases in capital values for a

range of commercial property classes suggest continued growth and stabilisation in the Irish commercial

property market. In Figure 38 the Jones Lang LaSalle Property Index shows sustained growth in commercial

capital and rental values. In terms of capital values, overall capital value growth was recorded at 5.2 per cent

in Q4 2017, this comprised of annual increases of 8.4 per cent, 1.3 per cent and 3.2 per cent in Office, Retail and

Industrial values respectively. Jones Lang LaSalle report that while the capital value index has increased it

remains 38 per cent below 2007 peak value. The CBRE Irish Market Outlook 2018 reports continued growth in

Dublin Office Take-Up and falling vacancy rates. In the industrial sector CBRE reports rental values increased

by more than 6 per cent year-on-year in 2017 and this has led to an increase in planning applications for new

industrial and logistics buildings.

The take-up of office space remained strong in 2017, reflecting the growth of existing businesses. Office rental

prices in Ireland in 2017 compare favourably to cities in the UK. Figure 41 shows that in 2017, Cushman and

Wakefield report the cost per square meter per year in Dublin City (€619) and Suburbs (€324), Limerick and

Cork (€325) and Galway at €295. UK costs range from €1333 in the West End, €406 in Manchester, and €303 in

Cardiff. Year-on-year increases in Irish locations ranged from 67 per cent in Limerick to 9 per cent in Dublin

Suburbs. Any Brexit-related firm relocations would add to demand in the Dublin market. A large supply of new

office space in Dublin is due to be in place by 2020. The Central Bank/CBRE report the equivalent of a further

five years of average Dublin office take-up is due to be completed by 2020. The addition of this new stock

should help reduce rapid upward pressure on rents. In Q4 2017 prime high street retail rents had increased on

an annual basis across Ireland. The most expensive location was Dublin (€3,794, +4% year on year). Costs in

Galway (1,349, +9%), Cork (€1,265, 0%) and Limerick (€562, +5%) compare relatively favourably to the UK.

The World Bank estimates it takes 149.5 days to build a warehouse in Dublin compared with 86 days in

London. Cost is recorded as a percentage of warehouse value (the value is €2 million in Dublin and £1.4 million

in London) and is reported as 4.6 per cent in Ireland compared to 1 per cent in the UK (Figure 44).

The availability of information and data is a powerful tool in encouraging efficient markets. In this regard, the

Council welcomes the announcement that NAMA and the Central Bank are to co-fund the development of a

commercial property statistical system to provide a comprehensive database of commercial sales and lease

transactions. It will incorporate the existing commercial lease register, currently produced by the Property

Services Regulatory Authority. Improving the accessibility of the Valuation Office’s comprehensive data on

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commercial properties would also assist in establishing market size, vacancy rates and to compare costs across

locations.

Transport Costs

Brexit also underscores the importance of Ireland’s logistics and transport sectors’ cost competitiveness. The

international price of oil increased by 25 per cent between 2016 and 2017. The decision of the world’s major oil

producers to extend production curbs until the end of 2018 along with the geopolitical uncertainty, were major

factors in the three-year high rise of the oil prices recorded at the end of 2017 (almost $70 a barrel). Improving

global growth, particularly in emerging economies and the Eurozone, is also expected to continue pushing up

oil prices by increasing demand for energy, but the increase is expected to be limited as non-OPEC producers

have started increasing output. Prices for Brent oil are projected to increase by an average of 24.6 per cent to

68.3 USD per barrel in 2018 compared to 2017.

Figure 47 shows that Irish petrol and diesel prices increased by 6.3 per cent and 7.8 per cent respectively in

2017 compared to 2016. In January 2018, the cost of 1 litre of diesel in Ireland (€1.29) was 4 per cent above the

EU average (€1.24) in the corresponding month. The CSO’s experimental Services Producer Price Index (Figure

49) indicates that transport service prices have been relatively flat in recent years, excluding prices in Air

transport1, which have been more volatile, and prices in Sea and coastal transport, which have been on a

downward trajectory since 2016.

The UK is the destination for 55 per cent of all maritime goods exports and 86.1 per cent of roll on/roll-off

freight traffic. The liquid bulk received from the UK accounts for 39.5 per cent of the total tonnage of goods

received in 2016. Of the total amount of goods received at Irish ports in 2016, a third arrived from the UK. The

implications of extra administrative costs and tariffs, standards and regulations and customs on the transport

of goods between Ireland and the UK may negatively impact on indigenous exporters’ supply chains, and their

capacity to competitively price products, not only in the UK but domestically and in other international

markets.

Transport usage is strongly related to economic activity. Economic growth increases employment, disposable

income and consumer spend, all of which lead to more travel. Economic decline produces the opposite effect.

This was clearly demonstrated over the past decade. Ireland’s high dependence on car usage has clear impacts

on infrastructure capacity and competitiveness in terms of the negative effects of increased journey times and

congestion which affect productivity and costs and diminishes the attractiveness of a location to set up

business, live and work.

In the State, overall, 61.4 per cent of working commuters drove to work in 2016. Just under half of Dublin city

and suburbs workers commute by car, which is the lowest across the State. The highest car use was in rural

areas, where 76 per cent of commuters used the car to get to work. The average commute for those at work

rose in 2016 to 28.2 minutes, having fallen between 2006 (27.5mins) and 2011 (26.6mins). Commuting times

rose in every county, but there was still significant variation in times travelled depending on where people

lived. Nearly 200,000 commuters (199,922), representing almost 11 per cent of all commuters, spent an hour

or more commuting to work in 2016, with an average travel time of 74 minutes. This has increased by almost

50,000 persons (31%) on the 2011 figure of 152,000. Men account for 61 per cent of those commuting for over

an hour. Figure 53 indicates that nearly 53,000 workers commuted 90 minutes or more. Census data shows

Dublin city and suburbs recorded a 10.9 per cent increase in the number of workers commuting from outside

the urban area, rising to 130,447 from 117,764 in 2011. Twenty-five per cent of Dublin workers commute from

outside the city and suburbs. The number of workers commuting in to Cork city and suburbs increased by 13.5

per cent between 2011 and 2016 and Limerick city and suburbs saw a rise of 13.1 per cent. Over 40 per cent of

1 The Air Transport index is constructed using data collected by the Consumer Price Section.


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workers in Cork commuted from outside the urban area. In Limerick and Galway city and suburbs half the

workforce commute from outside the urban area. The most recent data shows that the greatest year- on-year

traffic growth was recorded on motorways in 2016, when traffic increased by 5.7 per cent for all vehicles and

7.3 per cent for HGVs.

International congestion statistics based on TomTom's database (Figure 54) show on average, journey times

in busy periods take 43 per cent, 34 per cent and 27 per cent more time in Dublin, Cork and Limerick

respectively. Dublin is one of the most traffic congested cities in Europe with morning and evening congestion

times 80% and 86% higher compared to a free flow. Analysis of congestion in the Greater Dublin area

undertaken by the Department of Transport2 estimates the cost of time lost due to aggravated congestion is

€358 million in the base year (2012). Most of the costs of aggravated congestion are incurred between the M50

and the canals, on key arterial routes. The cost of congestion is forecasted to rise to €2.08 billion per year in

2033. The annual cost is forecasted to grow moderately up until at least 2025, but will begin to increase sharply

after that.

Utility Costs

A reliable and competitively priced supply of energy is vital for business and its ability to compete successfully

in international markets. Utility and energy costs are an essential input to the entire enterprise base across

the State, both the internationally trading and domestic sectors of the economy. Utility costs can represent 1

to 7 per cent of location-sensitive costs3. Despite increasing investment in renewable energy, Ireland remains

heavily dependent on imported energy products, which represent 82 per cent of the gross inland consumption

in Ireland. The share of crude oil and petroleum products represent 75 per cent of the total import of energy

products. The high dependence on imported fossil fuels makes Ireland’s energy prices vulnerable to

substantial oil price fluctuations, therefore it is essential that efforts continue to focus on cost determinants

within our control such as regulatory costs.

The UK accounts for 76 per cent of our oil import and 40 per cent of the gas import. Given Ireland’s

dependence on energy imports from the UK, Brexit could potentially have a significant impact on Ireland’s

energy market. Figure 56 indicates that the average electricity prices (in purchasing power standard) for non-

household consumers in Ireland have declined over 2015-2017; in the first half of 2017 they were marginally

lower than the Euro area but higher than the UK prices. The proportion of non-recoverable taxes and levies in

the overall electricity price for the same period is lower in Ireland (10.2%) compared to the Euro area (28.2%)

and the UK (22.2 %). The average prices of natural gas expressed in purchasing power standard for business

consumers are slightly lower than the Euro area average but higher than the UK prices (Figure 59). The

proportion of non-recoverable taxes and levies in the overall gas price is also lower than the Euro area average

but higher than the UK.

Generally, water and waste water costs for enterprise in Ireland compare favourably to those in competitor

markets despite there being a significant variation between water and waste water tariffs across Local

Authorities.

Lack of comprehensive data on waste management costs makes it difficult to benchmark Ireland's

performance versus competitor countries. The Confederation of European Waste-to-Energy Plants (CEWEP)4

Country Reports indicate that in 2014 the average net fee for landfilling in Ireland was €94 per tonne,

marginally higher that Sweden's fee of €93.4 per tonne. To divert waste from landfills, most EU States apply a

form of landfill tax and/or a landfill ban. According to CEWEP in 2017 the tax varied from €3 per tonne

2 Department of Transport, Tourism and Sport/IGESS, The Costs of Congestion, An Analysis of the Greater Dublin Area, 2017 3 The CSO’s Census of Industrial Production shows that energy costs for Irish enterprise, including SME’s, represents 1.57% of total costs. 4 http://www.cewep.eu/2016/07/23/country-reports-2016/

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(Lithuania) to more than €100 per tonne (Belgium). Ireland's landfill tax was €75 per tonne, below the UK

standard landfill tax of £86.1 per tonne (€97.8 per tonne).

Ireland is relatively cost competitive for telecoms, especially for business mobile broadband. However, it is

more expensive in cost for fixed and mobile broadband than the UK. Concerns persist around the issues of

quality (speed) and the regional availability of high speed services (Figures 63-66).

Affordability of Credit

Access to competitively priced sources of finance is essential to facilitate enterprises establish, survive,

improve productivity, and ultimately scale. Limited or costly credit damages the environment for

entrepreneurship, scaling and investment, and amounts to a competitive disadvantage for Irish enterprises.

Irish SMEs are still heavily reliant on bank loans with limited uptake of non-bank finance sources.

The concentrated lending market and higher credit risk premiums are important factors when determining the

cost of credit in Ireland. The Central Bank reports5 that the market share of the three main lenders in new

lending flows in the first half of 2017 was 82 per cent. In the second half of 2017, the SME lending market

became more concentrated both in terms of outstanding credit and new lending flows, with fewer banks

holding an ever-larger market share. Increasing competition and choice in the lending market would

contribute towards reducing the cost of credit, therefore further diversifying the lending market in Ireland and

in turn increasing levels of private equity, crowdfunding and venture capital funding remains important.

The ECB Survey on Access to Finance of Enterprises (SAFE) indicates that credit demand was low with the

share of SMEs applying for bank loans at 21 per cent in September 2017. Working capital was the primary

purpose of internal and external financing. The annual European Investment Bank survey6 conducted in 2017

suggests that while bank loans remain the main source of external finance for investment activities (41%),

their share fell compared to 2016 (57%); the share of bank loans is also below the EU average of 56 per cent.

Leasing has become more prominent as a form of external finance and in 2017 it accounted for 36 percent of

the overall external finance. All other types of finance, including equity, bonds and grants represent less than

10 per cent of the external finance used.

The cost of credit remains high compared to the Euro area average. Figure 67 shows that Interest rates on

new business loans in Ireland have been consistently higher and more volatile than equivalent Euro area rates

which puts Irish businesses at a competitive disadvantage. The divergence is particularly noticeable for loans

of up to €0.25 million, where the interest rate on new business loans in Ireland was more than double the Euro

area average rate throughout 2017. As per Figure 70, the interest rates on gross new lending for SMEs declined

between Q1 2015 and Q3 2017 in most economic sectors with the exception of ICT. The interest rates to SMEs

engaging in Construction and Transport & Storage were consistently higher than the rates for the remaining

sectors in the same period.

Figure 68 indicates that as of late 2016, interest rates on outstanding amounts were significantly higher in

Ireland compared to the Euro area, and the interest rate gap between the two jurisdictions is widening. The

interest rates on outstanding amounts to SMEs were consistently lower than the interest rates on gross new

lending in the period Q1 2015-Q3 2017, and the difference is particularly prominent in the Construction Sector.

The interest rates on outstanding amounts to SMEs engaging in Transport & Storage were higher than the

rates for the remaining sectors in the same period (Figure 69).

Figure 66 shows that Irish businesses also face the second highest interest rate charges on revolving loans and

overdrafts (4.9%) in the Euro area in 2017; the Euro area average interest rate is 2.5 per cent. The SAFE survey

5 Central Bank of Ireland, SME Market Report, H2 2017 6 EIB Investment Survey, Ireland Overview, 2017


13

indicates that although interest rates on credit lines for SMEs in Ireland have declined over the four-year

period to H1 2017, at 4.7 per cent, they remain above the Euro area weighted average of 3.2 per cent.

Services Costs

In Q4 2017, the CSO’s Experimental Services Producer Price Index stood at 113.6. Following a period of decline

during the recession, an upward trend has been evident since 2011. Services prices in Quarter 4 2017, as

measured by the SPPI, were on average 4.2% higher in the year when compared with the same period last

year. The most notable changes in the year were: Postal and Courier (+9.1%), Air Transport (+7.2%), Computer

Programming and Consultancy (+6%) and Sea and Coastal Transport (-8.5%).

Over the five years to 2017 Ireland has maintained its competitive position in terms of the cost to register a

business as a percentage of gross national income (Figure 76). In 2017, Ireland ranked first in the Euro area and

joint-second in the EU. Regarding legal costs, World Bank analysis suggests that enforcing a commercial

contract in Ireland is estimated to cost more and take relatively more time than the OECD average. In the

World Bank's Ease of Doing Business Report 2018, Ireland is ranked 98 out of 190 countries and rates poorly

relative to the UK (31st). The World Bank estimates that the total cost of contract enforcement in Ireland was

26.9 per cent of a claim, compared with 21.5 per cent in OECD high income countries. It also takes longer to

enforce a contract in Ireland (650 days) than in the OECD (551 days). This category is based on the ease or

difficulty of enforcing a case study commercial contract. This is determined by following the evolution of a

payment dispute and tracking the time, cost, and number of procedures involved from the moment a plaintiff

files the lawsuit until actual payment. The World Bank reports the time taken for filing, service, trial,

judgement and enforcement (including time for appeal) is 650 days in Ireland compared to 437 in the UK.

Pricing in the motor insurance sector for private and commercial vehicles has been subject to a lot of volatility

in recent years, from a point where some premiums appeared to be priced at an unsustainably low level.

Insurance is a significant element within the Consumer Price Index basket, with a weighting in 2017 of 6 per

cent. While the rate of headline consumer price inflation has been relatively stable in recent years, there has

been a notable increase in insurance price inflation, in the period from mid-2015 to mid-2017. Motor insurance

has moderated in recent months; in the period 2014-2016, prices as measured by the CPI increased by

approximately 40 per cent (Figure 77). It has not been possible to provide statistics on commercial insurance

prices in the Irish and broader European markets due to the lack of publicly available information in this area.

Commercial insurance prices tend to be agreed on a company-by-company basis with insurers, reflect

differences in the types of companies insured and the coverage purchased (i.e. the range of commercial

insurance products is wide, and the nature and type of coverage provided in commercial insurance policies is

non-homogeneous), and the final price charged is generally not publicised. International comparisons can also

prove problematic because of differences in law, in fiscal regime, in policyholder behaviour, and in the

expectations of policyholders from their insurance provider.

Consumer prices for insurance as measured by the Consumer Price Index are now between 20-30 per cent

higher than levels in 2014. CSO data for December 2017 indicates that private motor insurance premiums have

reduced by 16 per cent from the peak in July 2016. On a monthly basis, the price of motor insurance has been

falling since April 2017. While the CSO statistics indicate more stability on an overall basis, these figures

represent a broad average and therefore there are many people who may still be seeing increases. However, it

is anticipated that this greater stability in pricing will be maintained and that premiums should continue to fall

from the very high level of last year.

Revenue collected by the local authorities through commercial rates in 2017 stood at €1,475m. In most

counties, the commercial rates levied as a proportion of the total receipts increased in the five-year period to

2017.

14

Service and Broader Environment Price Competitiveness

The UK’s decision to leave the EU has imminent and far reaching consequences for Ireland’s economy and

brings into sharp focus the need for Ireland to maintain and improve our cost competitiveness. The openness

of the Irish economy means the competitiveness of the enterprise sector is particularly vulnerable to negative

price and cost shocks which are outside the influence of domestic policymakers.

The sustained appreciation of the euro-sterling exchange rate in 2016/2017 poses significant challenges for

Irish export competitiveness to the UK. The appreciation of the euro vis-à-vis Sterling provides a timely

warning about just how vulnerable Irish firms are to external shocks and further volatility, and depreciation of

Sterling represents a major threat to Irish export competitiveness. Figure 8 shows that the €/£ exchange rate

average was 0.88 in 2017 compared with 0.82 in 2016 and 0.73 in 2015. Sterling was 0.91 in August 2017. The

€/$ spot rate averaged 1.13 in 2017, up from 1.11 in 2015 and 2016. Further volatility in exchange rates could

affect the Irish economy through several channels. It may generate expenditure switching effects between

foreign and domestic goods and services both at home and in trade partners, thus affecting net exports, to the

degree that nominal exchange rate changes are absorbed by importers/exporters rather than passed on

through increased prices. Exchange rate movements may also affect firms’ profit margins, with possible

second-round effects on investment.

Harmonised Competitiveness Index data for December 2017 show that the nominal HCI increased by 5 per

cent on an annual basis. In real terms, the HCI increased by 3.5 per cent when deflated with consumer prices

(Figure 10). The movement indicates a decline in this measure of competitiveness linked to the exchange rate

movements. Features of the Irish economy can be affected by movements in HCIs and care should be taken in

interpreting movements in the indices as a measure of relative international competitiveness. The nominal

HCI is affected by exchange rate developments and relative to other Euro area countries a high share of Irish

exports is destined for non-Euro area countries (UK and US). Real HCIs consider price movements relative to

trading partners. Using consumer prices as a deflator means the impact of intermediate goods and capital

goods are not directly considered and the influence of indirect taxes and non-traded goods and services on the

CPI limits its usefulness as a good indicator of international competitiveness.

Consumer price inflation, Ireland remains an expensive location in which to live and do business with a price

profile which can be described as “high cost, and rising”. As per Figure 85, Irish consumer prices in 2017 were

over 23 per cent above the European Union average and increasing at an annual rate of 0.2 per cent. The

Consumer Price Index annual average rate of inflation in 2017 was 0.4 per cent. Figure 84 indicates that the

price of Goods decreased on average by 2.1 per cent compared to a fall of 3 per cent in 2016. The price of

Services (which includes mortgage interest) rose by 2.1 per cent. Prices on average, as measured by the HICP,

rose by 0.2 per cent in 2017 compared to a fall of 0.2 per cent in 2016. Over the period 2013 to 2017, the largest

increases were recorded for Education (+15%), Miscellaneous Goods & Services (+9.6%) and Restaurants &

Hotels (+8.4%). The largest decreases were for Clothing & Footwear (-13.1%), Furnishings, Household

Equipment & Routine Household Maintenance (-12.1%) and Food & Non-Alcoholic Beverages (-7.6%). During

2017, mortgage interest repayments fell on average by 1.6 per cent and by 6.4 per cent in 2016. In terms of

prices directly affected by the State, mainly administered prices cover the prices of goods and services on

which the government including any national regulator has a significant influence. There has been a

downward trend in HICP and administered price inflation over the period 2011-2016. In 2016, mainly

administered prices in Ireland decreased by 1.9 per cent, a rate lower than the UK and Euro area rates.

The UK’s new relationship with the EU post-Brexit will have a significant bearing on consumer price inflation

over the next few years through several channels. UK inflation recently soared to its highest level in two and a

half years and in 2017 stood at 2.7 per cent. Much of the rise to date reflects the elimination of past drags from

food, energy and import prices, together with renewed rises in oil prices. The current overshoot of inflation


15

above the 2% target is almost entirely due to the effects of higher import prices following sterling’s

depreciation, the contribution from which is expected to dissipate in coming years. The UK inflation rate is

forecast at 2.3% cent in Q1 2019. Irish inflation rates are forecast to gradually pick-up to 0.7% in 2018 and

0.9% in 2019. The services sector is likely to remain the main source of upward price pressure in Ireland.

The services sector is likely to remain the main source of upward price pressure in Ireland, with the price pass

through impact of exchange rates and an expected increase in energy prices in 2018.

Focus on residential property

In addition to the considerable social policy implications associated with the availability and affordability of

housing, the shortage and cost of residential property is damaging competitiveness. It impacts upon our

attractiveness for mobile investment and talent. High rents affect decisions around labour mobility and

entering employment. In addition to being an important element of Ireland’s cost base, housing impacts on

productivity. Despite an increase in construction activity and planning permissions residential property supply

remains constrained. Continued strong demand means property price inflation is likely to continue in the short

term without additional supply becoming available. The link between residential prices, rents, and wage

expectations means that developments in the residential property sector also have a direct impact on Ireland’s

international competitiveness. Continued strong demand means property price inflation is likely to continue in

the short to medium term. Residential Tenancies Board data for 2017 indicates that private sector rents

continued to trend upwards and are above pre-crisis levels. Rental growth has been strong since 2012 and

accelerated between 2014 and 2017. On a year-on-year basis, rents for houses increased by 6.5% in 2017 Q4.

Apartment rents increased by 5.3% on a similar basis.

House price growth in Ireland remains high. Year-on-year house price growth reached 12.8 per cent in

September 2017, up from 8 per cent a year earlier. In terms of residential sales, overall, the national index is

23.7 per cent lower than its highest level in 2007. Dublin residential property prices are 24.7 per cent lower than

their February 2007 peak, while residential property prices in the Rest of Ireland are 29.6 per cent lower than

their May 2007 peak. ‘Rebuilding Ireland’ Plan presents a wide-ranging set of commitments to address

housing supply. While many of these will take time, the Government is implementing and driving change. The

CSO reports that in 2017, planning permissions were granted for 20,776 dwelling units, compared with 16,375

units in the year 2016, an increase of 27 per cent. The problems in the Irish housing market, while not unique to

Ireland are severe and will take time to resolve. A continued acceleration of supply by the private and social

sectors is required.

Focus on childcare

The Council has previously noted childcare-related costs and benefits (as a percentage of average wage - this

data takes account of childcare fees, child benefit and relevant tax reductions). For couples, earning 167 per

cent of the average wage, Ireland is the second most expensive in the OECD. For lone parents (67% of the

average wage) Ireland is the most expensive OECD location. New CSO QHNS Childcare statistics which relate

to Q3 2016 show a fall in the number of children using parental childcare between the years 2007 and 2016.

The decrease is larger among primary school children (from 81% to 74%) than among pre-school children

(from 64% to 62%). The average household weekly expenditure on paid non-parental childcare is €155.60. This

is an increase from 2007, when the corresponding figure was €123.20. The average weekly cost per child is

highest in Dublin, at €150.00 per child per week. It is lowest in the South-East at €83.00 per child per week

(Figure 103).

16

Chapter 1 – Introduction and Methodology

Introduction

Competitiveness is a multidimensional concept, encompassing many different drivers. Competitiveness is not

an end, but a means of achieving sustainable improvements in living standards and quality of life. The Cost of

Doing Business is just one of the elements which determine a country’s ability to compete in international

markets.

The NCC’s Competitiveness Framework

The Council uses a ‘competitiveness pyramid’ to illustrate the various factors (essential conditions, policy

inputs and outputs), which combine to determine overall competitiveness and sustainable growth.

▪ At the top of the pyramid is sustainable growth in living standards – the fruits of competitiveness

success.

▪ Below this are the key policy outputs for achieving competitiveness, including business performance

(such as trade and investment), costs, productivity, and employment. These can be seen as the metrics

of current competitiveness.

▪ Below this in the third tier are the policy inputs covering three pillars of future competitiveness, namely

the business environment (taxation, regulation, and finance), physical infrastructure, clusters and firm

sophistication, and knowledge and talent.

▪ Finally, at the base of the pyramid are the essential conditions for competitiveness, these foundations are

based on institutions, macroeconomic sustainability, and endowments.

This report attempts to focus on the costs that are largely domestically determined such as labour, property,

transport, utility, credit and financial, and business services and which can be benchmarked internationally. It


17

considers both price levels, and changes in those levels (i.e. price inflation) on an annual basis and over a

longer time, for example, 5-10 years. It is structured as follows:

▪ Chapter 2 provided an overview of why costs matter for enterprise, sets out cost profiles for a range of

firm types which identify the most important cost categories, and explains the high level economic factors

that determine costs;

▪ Chapter 3 summarises the key cost trends for enterprise in Ireland;

▪ Chapters 4 to 8 examine the main cost categories in greater detail. The primary costs analysed in these

chapters relate to labour, property, transport, utilities, and credit and financial costs;

▪ Chapter 9 examines data on business services and other input costs – a cost category not captured in the

profiles referred to above but still an important input for the vast majority of enterprises; and

▪ Chapter 10 considers the broader consumer cost environment.

▪ Finally, acknowledging the interlinked nature of all sectors and participants of the economy, chapter 10

focuses on childcare and residential property

Methodology

In each chapter, a range of internationally comparable, enterprise-focussed cost indicators are examined for

Ireland and key trading partners, particularly the UK. We have endeavoured to collect data from high-quality,

internationally respected sources, and where necessary, caveats on data are set out. Costs are typically

compared over a five year or annual basis. In some instances, a longer time frame is used, particularly

considering changes in the economic cycle pre- and post-recession. Nonetheless, there are limitations to

comparative analysis:

▪ While every effort is made to ensure the timeliness of the data, there is a natural lag in collating

comparable official statistics across countries. As much of this data is collected on an annual basis, there

may be a time lag in capturing recent changes in cost levels.

▪ The Council is also constrained in terms of the availability of metrics and their impact on enterprises of

different sizes and sectors, and across several important areas such as water, transport and international

freight, waste, commercial insurance and Local Authority rates.

▪ Given the different historical contexts and economic, political and social goals of various countries, and

their differing physical geographies and resource endowments, it is not realistic or even desirable for any

country to seek to outperform other countries on all cost measures.

▪ There are no generic strategies to achieve an optimum level of cost competitiveness; as countries face

trade-offs and may be at different points in the economic cycle.

▪ Where possible, Irish cost levels are compared to a relevant peer group average (e.g. the OECD and Euro

area average) Given the importance of the UK as a trading partner and the potential implications of Brexit

on the economy, the UK’s performance is also benchmarked. It is also worth noting that individual cost

metrics have strengths and weaknesses (i.e. in terms of definitions used, in how the data is collected etc.).

When analysing the individual metrics, it is important, therefore, to consider all the data as the analysis of

the individual metrics combine to tell a coherent story about Ireland’s current cost competitiveness

performance.

18

Chapter 2 – How Do Costs Impact on Enterprise?

Why Costs Matter

Generating sustainable, broad-based, export-led growth is essential to sustaining economic growth in these

challenging times. To achieve such growth, Ireland’s international competitiveness must be maintained and

enhanced relative to our key competitors.

Competitiveness is a complex concept, encompassing many different drivers. Notwithstanding the evolution

of the Irish economy and the growing complexity of the goods and services produced in the country over the

past decade, cost competitiveness remains a critical determinant of success. Indeed, in the absence of a

currency devaluation policy lever to manage short term competitiveness pressures, a combination of cost

competitiveness in key business inputs and enhancements in productivity must provide the foundations for

sustaining growth. In the longer term, productivity growth is the preferred mechanism to improve

competitiveness as it can support cost competitiveness in tandem with high and increasing income levels.

A high cost environment weakens competitiveness in several ways.

▪ High costs make Ireland less attractive in terms of mobile investment and business expansion and in the

context of Brexit, if unchecked could see companies relocating to other jurisdictions;

▪ High costs make firms that rely on domestically sourced inputs less competitive when they are selling into

foreign markets – this is a concern for large indigenous exporting sectors such as the food and drink

sector, construction products and services, timber and engineering; and

▪ A high cost environment can impact on firms which may not export, but which rely on the domestic

market – their customers (consumers and other firms) may source cheaper inputs from abroad due to

currency fluctuations, rather than from within Ireland, leading to a loss of market share for Irish-based

enterprises.

More broadly, all sectors of the economy are interlinked and interdependent - high and increasing business

costs have implications for the costs of living. These in turn have knock on implications for wage demands, and

so the cycle continues. It remains vital, therefore, that Ireland protects the gains made to date, and that we

continue to act to address unnecessarily high costs (i.e. cost levels not justified by productivity) wherever they

arise. In this regard, there is a role for both the public and private sectors alike to proactively manage their cost

base and drive efficiency, thus creating a virtuous circle between the costs of living, wage expectations and

cost competitiveness

While cost competitiveness matters to all firms Figure 1 shows that in 2017 the most pressing problem

reported by Irish SMEs was finding customers (29%). The next most pressing problem was the availability of

skills and competition (both 15%). The proportion of SMEs identifying costs as the most pressing problem was

11 per cent.

Figure 2 shows the proportion of SMEs who consider costs the most important problem ranges from 6 per

cent in Slovakia to 18 per cent in Italy. The proportion of firms in Ireland in 2017 was 11 per cent compared to

10 per cent in 2016. This is marginally below the EU 28 and UK rate (12%). Irish SMEs identify finding

customers (29%) and the availability of skills (15%) as the most pressing problem. The survey shows that

across Europe enterprises report rising costs amid improvements in their debt situation and higher

investment. The net percentage of EU SMEs indicating an increase in labour costs remained relatively

constant (56%). The comparable figure for Ireland and the UK was 55 per cent and 62 per cent respectively.


19

Figure 1: Most Pressing Problem faced by Irish SMEs, SAFE Survey, 2009-2017

In 2017 the most

pressing problem for

Irish SMEs was finding

customers (29%). The

next most pressing was

the availability of skills

and competition (both

15%). The proportion of

SMEs identifying costs

as the most pressing

problem was 11%. Over

the period 2009-2017

the median value of

firms identifying costs as

the most pressing

problem was 10%.

Source: ECB

Figure 2: Costs as the Most Pressing Problem faced by European SMEs, SAFE Survey, 2017

The proportion of SMEs

who consider costs the

most important problem

ranges from 6% in

Slovakia to 18% in Italy.

The proportion of firms

in Ireland in 2017 was

11% compared to 10% in

2016. This is marginally

below the EU 28 and UK

rate (12%).

Source: ECB

0

20

40

60

80

100

20

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10 H

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20

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availability of skilled staff or experienced managers costs of production or labour

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20

Which Costs Matter Most?

From a competitiveness perspective, it is essential that policymakers focus on maintaining cost

competitiveness, particularly in relation to those goods and services that comprise a significant percentage of

business costs and that are out of line with those in competitor countries. Figure 3 and Table 1 provide an

enterprise cost profile based on KPMG data for a range of sectors and locations7.

The data illustrate the relative importance of location sensitive and location insensitive costs (i.e. goods and

services produced on international markets where the price is determined by global supply and demand

conditions: e.g. commodity raw materials, industrial equipment, etc.).

Figure 3: Summary of Enterprise Cost Profiles, 2016 (to be updated March 2017)

The column on the right

strips out cost elements

determined

internationally and

focuses instead on costs

which are primarily

determined

domestically. The

significance of the

location-sensitive cost

factors differs by sector,

with considerable

variations occurring

between services and

manufacturing firms.

Source: KPMG Competitive Alternatives 2016,

These differences are elaborated upon in Table 1, which provides a range of magnitude for each cost category.

7 KPMG’s 2016 Competitive Alternatives report explores the most significant business cost factors in more than 100 cities and 10 countries around the world.

This study measures 26 key cost components, across 7 business to business service segments and 12 significant manufacturing sectors. The 10 countries

included in the KPMG report are Australia, Canada, France, Germany, Italy, Japan, Mexico, Netherlands, UK and US. While Ireland is not included in the

project, Figure 1 provides data based on the average contribution of each cost factor for the 10 countries included in the study. This provides an indication of

the importance of each cost factor to the average firm. All figures in this report are expressed in US dollars and so results are sensitive to exchange rate

movements – while exchange rate changes do not affect local business costs expressed in local currency, they do impact international comparisons when local

costs are converted to US dollars.

32.9%

60.6%

7.9%

7.3%

13.4%

5.5%

10.1%

45.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Including location insenstive costs Excluding location insensitive costs

Per

cen

tag

e o

f co

sts

Labour Property Transportation

Utilities Interest & depreciation Income taxes

Other taxes Location insensitive costs


21

Table 1: Relative Significance of Location Sensitive Costs (% of total location sensitive costs), 2016

Services Manufacturing

Labour & Benefits 72-86% 40-57%

Of which: Salaries & Wages 52-61% 28-40%

Statutory Plans 8-10% 5-7%

Other Benefits 12-14% 7-10%

Facility Costs 4-15% 2-5%

Transportation Costs - 6-21%

Utility Costs 0-1% 2-7%

Capital Costs 0-8% 11-25%

Taxes 3-16% 10-18%

Of which: Income Taxes8 1-15% 9-15%

Property Taxes 1-2% 1-2%

Other Taxes 0-1% 0-1%

Source: KPMG Competitive Alternatives 2016

Taking these in turn:

▪ Labour costs include wages and salaries, employer-paid statutory plans, and other employee benefits.

KMPG research indicates that labour costs represent the largest category of location-sensitive cost factors

for all industries examined. For the services sub-sectors examined, labour costs typically range from 72 to

86 per cent of location-sensitive costs, while for manufacturing operations the typical range is from 40 to

57 per cent of total location-sensitive costs.

▪ Facility or property costs represent the next significant cost factor. For services sub-sectors, office lease

costs represent 4 to 15 per cent of total location-sensitive costs. For manufacturing sub-sectors, industrial

lease costs range from 2 to 5 per cent of location-sensitive costs.

▪ Transportation costs are only assessed for manufacturing operations – reflecting the cost of moving

finished goods to markets. For the manufacturing sub-sectors examined, transportation costs represent 6

to 21 per cent of total location-sensitive costs.

▪ Utility costs represent 1 to 7 per cent of location-sensitive costs9. Electricity and natural gas costs are more

significant for manufacturers than for non-manufacturers.

▪ Costs of capital include both depreciation and interest. These are major cost items for manufacturers,

ranging from 11 to 25 per cent of location-sensitive costs across sub-sectors. Capital-related costs are

much less significant for services sub-sectors, at 0 to 8 per cent of location-sensitive costs.

▪ Taxes typically represent 3 to 16 per cent of total location-sensitive costs for the services sub-sectors

examined, and 10 to 18 per cent for manufacturing sub-sectors.

8 Effective income tax rates are calculated to reflect combined corporate tax rates (national, regional and local), net of generally applicable tax credits, grants

and other common government incentives. 9 As noted above, the CSO’s Census of Industrial Production shoes that energy costs for Irish enterprises, including SMEs, represent 1.57% of total costs.

22

HICP – Administered prices (HICP-AP)

Persistently high rates of consumer price inflation lead to expectations of further price increases, and can

create a vicious circle of increasing prices, reducing real incomes, increasing wage demands and reduced

international cost competitiveness. Rapid consumer price inflation can also adversely impact on Ireland’s

attractiveness as a location for talent. Although Irish consumer price inflation is currently low, it is prudent to

consider administrative factors affecting consumer price inflation and contributing to the Irish consumer price

level. The HICP-AP is a Eurostat measure of state-influenced prices. It is important to stress the HICP-AP

basket differs from country to country depending on the scope government has to influence prices. Several

conventions guide the definition of administered prices. The CSO consider that HICP-AP indices do not

provide an exact measure of the development of administered and non-administered prices. In effect, the

basic information from which these aggregate measures are derived does not fully distinguish administered

and non-administered prices. HICP items which cover more than 50% administered prices are classified as

administered.

Administered prices refers to prices of goods and services which are fully (“directly”) set or mainly (“to a

significant extent”) influenced by the government (central, regional and local government including national

regulators). From a policy perspective, the portion of any increase in administered prices that can be

attributed to the government directly is unclear for at least two reasons. Firstly, in the case of Ireland, the

categories are ‘mainly-administered’, meaning the government does not completely determine prices in these

categories. Secondly, some categories, such as electricity and gas, may be more influenced by international

prices that are outside of the control of governments. In addition, certain pricing aspects of administered

prices are determined by independent regulators (in accordance with their prescribed mandates). The

classification of administered prices is updated on an annual basis. There are no prices which are directly set by

government in Ireland but some prices are influenced by government generally through the regulator for that

market. The goods and services classified as “administered” by the CSO and Eurostat represent a small subset

of the overall Irish CPI basket. Table 2 outlines the range of goods and services categories defined as mainly

administered prices in Ireland, and the year in which they were classified and included in the ‘mainly

administered’ basket.

Table 2: Mainly-administered prices in Ireland

COICOP10 Sub indices Mainly administered prices, in Ireland and date of inclusion

04.41 Water Supply (from 2015)

04.43 Sewage (from 2015)

04.51 Electricity (up to 2011)

04.52 Gas (up to 2015)

06.3 Hospital services

07.31 Passenger transport by railway (from 2011)

07.32 Passenger transport by road

07.35 Combined passenger transport (from 2011)

08.1 Postal services (up to 2008)

12.53 Insurance connected with health (up to 2008)

Source Eurostat

10 COICOP is an acronym for the Classification of Individual Consumption by Purpose.


23

Figure 4: HICP and Mainly-administered prices in Ireland, 2012-201711

Figure 4 shows a

downward trend in HICP

and administered price

inflation over the period

2012-2017. Inflation in

administered prices was

particularly high in 2012

(7.3%) and 2015 (10.5%).

Since November 2016,

mainly administered

price inflation has been

negative and was -1.9%

in November 2017.

Source: Eurostat

Table 3: HICP and Mainly administered prices, annual average rate of change (%), 2012-2017

GEO/TIME 2012 2013 2014 2015 2016 2017 Median (12-17)

Average (12-17)

All items (HICP) 1.9 0.5 0.3 0.0 -0.2 0.3 0.3 0.5

Mainly administered prices

7.3 3.2 1.2 10.5 -1.9 -1.4 2.2 3.2

Water Supply 0.0 0.0 0.0 174.7 -50.0 : 0.0 24.9

Sewerage Collection 0.0 0.0 0.0 174.7 -50.0 : 0.0 24.9

Gas 15.2 6.7 2.1 -2.4 -3.0 -1.6 0.3 2.8

Hospital Services 1.5 -0.5 0.0 0.0 0.1 0.5 0.1 0.3

Passenger transport by railway

2.7 5.1 4.7 4.4 2.1 1.7 3.6 3.5

Passenger transport by road

6.0 5.8 2.2 2.7 0.9 0.1 2.5 3.0

Combined passenger transport

6.8 7.3 7.1 1.9 0.2 2.2 4.5 4.3

Postal Services 1.0 6.1 7.2 8.9 2.9 16.5 6.7 7.1

Source: Eurostat

Table 3 sets out the annual changes in the Classification of Individual Consumption by Purpose (COICOP) sub-

categories that Eurostat has at one point determined qualify as fully- or mainly-administered in Ireland. Some

categories, such as Gas were identified as administered up to points in time, after which the category has

dropped out of the HICP-AP basket. Others, such as Water supply and Sewerage collection was introduced in

201512. All other sub-headings are included in the HICP-AP index for the entirety of the time series. The table

11 Inflation in administered prices has been higher than headline HICP inflation in Ireland throughout the period 2011-2016 and the differential between the

two has narrowed (with the exception of 2015).

12 Water supply and sewage collection are components of Group 04.4 of the COICOP classification, codes 04.4.1 and 04.4.3 respectively. This group also

includes refuse collection (04.4.2) and other services relating to the dwelling (04.4.4). Water supply and sewage collection charges were introduced in Ireland

on 1 January 2015 and subsequently suspended from 1st July 2016. See CSO, CPI Technical Paper Introduction of Water Supply and Sewage Collection

-6

-4

-2

0

2

4

6

8

10

12

2012M01

2012M04

2012M07

2012M10

2013M01

2013M04

2013M07

2013M10

2014M01

2014M04

2014M07

2014M10

2015M01

2015M04

2015M07

2015M10

2016M

01

2016M

04

2016M

07

2016M

10

2017M01

2017M04

2017M07

2017M10

Mov

ing

12 m

onth

s av

erag

e ra

te o

f cha

nge

(%)

HICP Administered Prices HICP (excluding Administered Prices)

24

shows that transport related costs have increased at a rate consistently higher than HICP over the period 2012-

2017. Of all mainly administered price categories, the annual rate of change in prices of postal services is

notable for the relatively large increases in price since 2012. The rate of increase in postal services was highest

in 2017 (16.5%). This is likely to be attributable to increases of between 12 per cent and 39 per cent across the

full range of mail services for An Post to continue to meet its Universal Service Obligation. Categories no

longer classified as administered prices, such as insurance connected with health, postal services, gas and

electricity, also increased on average over the five years at a more rapid rate than HICP prices.

Figure 5: Inflation in mainly administered prices, Ireland, UK and the Euro area, 2012-201713

Figure 5 shows that

between 2012-2015,

inflation in Irish mainly

administered prices

tended to outpace

inflation in the Euro area

(changing composition).

Since 2015, inflation has

been decreasing at a

faster rate. Regarding

the UK14, mainly

administered prices

have been higher than

the Irish rates in every

year except for 2015- a

result of the

introduction of water

charges in 2015.

Source: Eurostat/ECB

13 Comparison with the Euro area is a comparison between other countries’ HICP-AP inflation but there are differences in the composition and categories that

make up the Irish HICP-AP basket and the Euro area basket which is calculated by the European Central Bank.

14 Mainly administered prices in the UK refer to Water Supply, Sewage, Electricity, Gas, Passenger transport by railway and Postal Services

-4

-2

0

2

4

6

8

10

12

2012 2013 2014 2015 2016 2017

An

nu

al C

han

ge

(%)

Ireland UK Euro area (changing composition)


25

Interest Rates

Improvements in Irish competitiveness in recent years have been driven by a range of important external

factors including a weak euro exchange rate, low international fuel prices and low interest rates which have

helped reduce the costs of borrowing for the State, enterprise and consumers. As has been evident in the

recent exchange rate developments, changes in any of these factors could have ramifications for national

competitiveness.

While the risk of an immediate and rapid pick up in interest rates appears unlikely based on current

information, at some time we should anticipate the possibility that interest rates will rise in the medium-term.

The global financial and economic crisis which commenced in 2008 resulted in significant monetary policy

actions by Central Banks with reductions in key interest rates and the launch of large scale asset purchase

programmes. In the Euro area, the accompanying sovereign debt crisis and sustained low inflation below the

ECB’s mandated price stability threshold resulted in the ECB undertaking a major asset purchase programme,

and lowering interest rates to around the lower zero bound. This accommodative monetary policy approach

which has seen interest rates at historic low values, has helped stabilise financial markets, reduced borrowing

costs and supported an increase in Euro area output.

The Governing Council of the ECB sets the key interest rates for the euro area:

▪ The interest rate on the main refinancing operations (MRO), which provide the bulk of liquidity to the

banking system;

▪ The rate on the deposit facility, which banks may use to make overnight deposits with the

Eurosystem; and,

▪ The rate on the marginal lending facility, which offers overnight credit to banks from the Eurosystem.

Figure 6: Main ECB Policy Rates 1999-2017

Figure 6 shows the

evolution of the ECB’s

policy rates over the last

two decades. It shows

how in the pre-crisis

period the MRO rate

ranged from 2% to

4.5%. All rates were

rapidly reduced in

2008/2009 with the

MRO falling from 4.25

per cent to 1 per cent

and have been at

historically low levels

since 2015.

Source: ECB

In January 2017, the Governing Council of the ECB decided that the interest rate on the main refinancing

operations and the interest rates on the marginal lending facility and the deposit facility would remain

unchanged at 0.00 per cent, 0.25 per cent and -0.40 per cent respectively. In its forward guidance, the

Governing Council stated that it expects the key ECB interest rates to remain at their present levels for an

-1.0-0.50.00.51.01.52.02.53.03.54.04.55.05.56.06.5

01/

01/

199

9

01/

10/1

99

9

01/0

7/20

00

01/0

4/20

01

01/

01/

20

02

01/

10/2

00

2

01/0

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03

01/0

4/20

04

01/

01/

20

05

01/

10/2

00

5

01/0

7/20

06

01/

04

/20

07

01/0

1/20

08

01/1

0/20

08

01/0

7/20

09

01/0

4/20

10

01/0

1/20

11

01/1

0/20

11

01/0

7/20

12

01/0

4/20

13

01/

01/

20

14

01/

10/2

014

01/0

7/20

15

01/

04

/20

16

01/0

1/20

17

01/1

0/20

17

Po

licy

Rat

e (%

)

Marginal lending facility Deposit facility Main refinancing operations

26

extended period. Regarding non-standard monetary policy measures and net asset purchases, in October

2017, the ECB announced that its programme of asset purchases of approximately €60 billion per month

would be reduced to €30 billion from January 2018 until the end of September 2018 or beyond, if necessary,

and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with

its inflation aim. If the outlook becomes less favourable, the ECB is ready to increase the APP in terms of size

and/or duration.

Euro area monetary policy is determined by the ECB and implemented through the European System of

Central Banks, which comprises the ECB and the Central Banks of member states. The ECB Governing Council

price stability target is a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the Euro

area of below, but close to, 2 per cent15.While ECB policy is formulated for the Euro area, reflecting the size of

its respective economies, the performance of Germany, France and Italy are an important determinant of

monetary policy.

Figure 7: HICP Inflation trends, Ireland and selected Euro area economies, 2015-2017

Figure 7 shows recent

trends in HICP inflation

in major Euro area

economies and Ireland.

Euro area inflation

remains appreciably

below the ECB target

(red line). It highlights

the pickup in inflation in

the Euro area in recent

months rising from 0.6%

to 1.9% year on year

November 2017 and

Ireland’s low relative

level (0.5%).

Source: ECB

While the Euro area economy taken as a whole is expanding robustly, with stronger growth rates in output and

employment than previously forecast current projections for growth and inflation in the Euro area suggest

that an increase in interest rates is not expected in the short term. However, if growth continues in the Euro

area, it would appear unlikely that the prevailing level of low rates will continue in the medium to long term. In

Budget 2018, the Department of Finance16 modelled the impact of a shock to the economy of a 1 percentage

point increase in the main ECB policy interest rate over 5 years. Relative to the baseline projections the effect

would reduce Irish GDP and employment by approximately 1 per cent and 0.7 per cent after 5 years. The

impact on the public finances would result in the deficit to GDP ratio and the debt to GDP ratio rising by 0.3

and 2.3 percentage points. The Department’s analysis suggests that this is principally driven by output in the

15 The Harmonised Index of Consumer Prices (HICP) provides the headline inflation Figure

for the Euro Area. It is calculated as a weighted average of national consumer price indices. The weights are based on national accounts data for household

consumption expenditure.

16 Department of Finance, Medium Term Economic Outlook, 2017

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

20

15M

11

20

15M

12

20

16M

01

20

16M

02

20

16M

03

20

16M

04

20

16M

05

20

16M

06

20

16M

07

20

16M

08

20

16M

09

20

16M

10

20

16M

11

20

16M

12

20

17M

01

20

17M

02

20

17M

03

20

17M

04

20

17M

05

20

17M

06

20

17M

07

20

17M

08

20

17M

09

20

17M

10

20

17M

11

An

nu

al P

erce

nta

ge

chan

ge

Euro area 19 Germany France Italy Ireland


27

Euro area being reduced below the baseline level, and a strengthening of the euro relative to the baseline

which has a negative competitiveness effect.

Ireland has benefitted from the ECB’s policy approach with an associated reduction in debt interest costs for

Government, Households and enterprise. As set out in the National Risk Assessment 201717, while

Government debt in Ireland remains high, the risk to government debt arising from an increase in interest

rates on new borrowing is moderated by the structure of debt (mostly fixed rates and the long maturity profile

of our existing stock of debt). The continued high level of private debt means households and the high

proportion of mortgages on variable tacker rates would be affected by increases in interest rates in the

medium term. While public, household and corporate debt levels in Ireland have been reduced in recent years,

they remain relatively high. A continued focus on reducing public and private indebtedness and further

reductions in the level of non-performing loans is warranted. Further reductions in debt levels could help

reduce some of Ireland’s exposure to an interest rate shock.

The impacts of increases in interest rates on domestic borrowing, loan repayment and economic activity will

depend on the level of pass-through of rate increases by the banks. The determinants of the cost of credit in

Ireland are complex and varied, but the concentrated lending market, coupled with higher credit risk

premiums, have been cited as the reasons for higher interest rates in Ireland compared to the Euro area

average. As noted by the ESRI18, while historically Irish banks would pass on policy rate changes since the

beginning of 2009, rates have remained relatively high despite ECB rate reductions. Research by the ESRI19

suggests that a primary reason for a disconnect in pass-through between the policy rate and the standard

variable rate is attributable to weak competition in the market. While there are no quick and easy ways to

increase competition in the market, the policy focus should be on developing well considered measures which

support competition in the sector over the medium term.

17 Department of An Taoiseach, National Risk Assessment, 2017

18 ESRI, Quarterly Economic Commentary, Winter 2017

19 McQuinn, K. and C. Morley (2015). ‘Standard Variable Rate (SVR) Pass-Through in the Irish Mortgage Market: An Updated Assessment’, ESRI Research

Note.

28

Chapter 3 – Exchange Rates and Harmonised Competitiveness

Figure 8: Euro/pound sterling and euro/dollar exchange rate Index, January 2014-2018

The €/£ exchange rate

average was 0.88 in 2017

compared with 0.82 in

2016 and 0.73 in 2015.

Sterling was 0.91 in

August 2017. The €/$

spot rate averaged 1.13

in 2017, up from 1.11 in

2015 -2016. The

sustained appreciation

of the euro-sterling

exchange rate poses

significant challenges

for export

competitiveness.

Source: Eurostat

Figure 9: Euro/pound sterling and euro/dollar exchange rate, year-on year change, 2015-2017

Variations in exchange

rates can significantly

and rapidly impact upon

competitiveness. In

2016, and the first half

of 2017 the Euro

strengthened and

appreciated against

Sterling in the run up to

and post the UK

referendum on EU

membership. In 2017,

the Euro strengthened

and appreciated by 12

per cent against

Sterling.

Source: Eurostat

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1.50

201

4M

01

201

4M

03

201

4M

05

201

4M

07

201

4M

09

201

4M

11

201

5M01

201

5M03

201

5M05

201

5M07

201

5M09

201

5M11

201

6M

01

201

6M

03

201

6M

05

201

6M

07

201

6M

09

201

6M

11

201

7M01

201

7M03

201

7M05

201

7M07

201

7M09

201

7M11

Eu

ro E

xch

ang

e R

ate

Pound sterling US dollar

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

20

15M

01

20

15M

02

20

15M

03

20

15M

04

20

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05

20

15M

06

20

15M

07

20

15M

08

20

15M

09

20

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10

20

15M

11

20

15M

12

20

16M

01

20

16M

02

20

16M

03

20

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04

20

16M

05

20

16M

06

20

16M

07

20

16M

08

20

16M

09

20

16M

10

20

16M

11

20

16M

12

20

17M

01

20

17M

02

20

17M

03

20

17M

04

20

17M

05

20

17M

06

20

17M

07

20

17M

08

20

17M

09

20

17M

10

20

17M

11

20

17M

12

Year

on

Yea

r P

erce

nta

ge

Ch

ang

e

Pound sterling US dollar


29

Figure 10: Harmonised Competitiveness Indicators20, Ireland, January 2011 - December 2017 (1999 = 100)

HCI data for December

2017 show that the

nominal HCI increased

by 5% on an annual

basis. In real terms, the

HCI increased by 3.5 per

cent when deflated with

consumer prices. The

movement indicates a

decline in this measure

of competitiveness

linked to the exchange

rate movements, with

subdued inflation likely

to be mitigating the

impact on the real HCI.

Source: Central Bank of Ireland

Figure 11: Real effective exchange rate (REER), Ireland, deflated by Consumer Prices, 2011-2017

The REER is a country’s

exchange rate relative to

a basket of exchange

rates of other countries

weighted by their

respective trade shares.

A negative value

indicates improving

competitiveness relative

to its principal trading

partners. Recent

developments in

exchange rates and

inflation have served to

improve Ireland’s

performance.

Source: Eurostat

20 Features of the Irish economy can HCI can affect movements in HCIs and care should be taken in interpreting movements in the indices as a measure of

relative international competitiveness. The nominal HCI is affected by exchange rate developments and relative to other Euro area countries a high share of

Ireland’s exports are destined for non-Euro area countries (UK and US). Real HCIs consider, relative price movements relative to trading partners. Using

consumer prices as a deflator means the impact of intermediate goods and capital goods are not directly considered and the influence of indirect taxes and

non-traded goods and services on the CPI limited its usefulness as an indicator of good indication of international competitiveness. See Barry, F, (2017) The

Central Bank’s harmonised, competitiveness indicators, users beware, Administration, vol. 65, no. 4, O’Brien, D. (2010) Measuring Ireland’s price and labour

cost competitiveness. Central Bank Quarterly Bulletin, 1

85

90

95

100

105

110

115

Jan

-11

May

-11

Sep

-11

Jan

-12

May

-12

Sep

-12

Jan

-13

May

-13

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

May

-16

Sep

-16

Jan

-17

May

-17

Sep

-17

Ind

ex (

199

9 =

100

)

Nominal HCI Real HCI

82

84

86

88

90

92

94

96

98

100

2011 2012 2013 2014 2015 2016 2017

Ind

ex 2

010

=10

0

EA 19 EU 28 37 Countries 42 Countries

30

Chapter 4 – Labour Costs, Earnings and Tax

Figure 12: Total economy hourly labour costs 21,2017

Total Hourly Labour

Costs denominated in

Euro are shown in Figure

12. Hourly labour costs

in the EU ranged from

€4.1 in Bulgaria to €42.5

in Denmark. At €31 per

hour, Ireland's hourly

rate was the 8th highest

in the Euro area, 2% and

20% higher than the

Euro area (€30.3) and

the UK (€25.7).

Source: Eurostat

Figure 13: Employers' social contributions and other labour costs paid by the employer as a percentage of

total labour costs, 2017

Over the period 2013-

2017, as a percentage of

total labour costs, Irish

labour costs, other than

wages and salaries have

been flat. In 2017, these

costs represented 13.7%

of the total labour costs,

a significantly lower

figure compared to the

Euro area (25.9%). The

equivalent figure for the

UK was 17.1%.

Source: Eurostat

21 Eurostat total economy data refers to enterprises with 10 or more employees and excludes agriculture and public administration

0

5

10

15

20

25

30

35

40

45

De

nm

ark

Sw

eden

Lu

xem

bo

urg

Fra

nce

Ne

ther

lan

ds

Ge

rma

ny

Fin

lan

d

Irel

an

d

Eu

ro a

rea

Ital

y

EU

UK

Sp

ain

Po

lan

d

Lat

via

To

tal H

ou

rly

Lab

ou

r C

ost

s (€

)

Wages & Salaries Labour costs other than wages and salaries

0

5

10

15

20

25

30

35

40

Fra

nce

Swed

en

Ital

y

Euro

are

a

Spai

n

Ne

the

rla

nd

s

Ge

rma

ny

Fin

lan

d

Latv

ia

Po

lan

d

UK

Den

mar

k

Irel

and

Sh

are

of

no

n-w

age

cost

s (%

)

2017 2013


31

Figure 14: Employer and employee social security contributions, 2016

Ireland has the 9th

lowest rate of social

security contributions

in the OECD. Unlike

other countries,

where either a cap on

employer social

security costs or a

reduced rate above a

threshold exists, in

Ireland, a flat rate is

charged on the full

salary; as salaries

increase, Ireland's

competitiveness

position is eroded.

Source: OECD, Taxing Wages 2017

Figure 15: Eurostat Growth in Hourly Labour Costs 201722

Between 2016 and

2017, hourly labour

costs in the whole

economy expressed

in € rose by 1.9%

both in Ireland and

the Euro area. The

largest increases

were recorded in the

Baltic Member

States. The only

decrease was

observed in Finland (-

1.5%). Expressed in

national currency,

hourly labour costs

increased in the UK

(+2.6%) (-4.1% in €).

Source: Eurostat

22 When comparing labour cost estimates over time, levels expressed in national currency should be used to eliminate the influence of exchange rate

movements.

0

10

20

30

40

50

60

Fran

ce

Ital

y

Ger

man

y

Sw

eden

Sp

ain

Pol

and

Latv

ia

Finl

and

Japa

n

OE

CD

- A

vera

ge

Net

her

lan

ds

UK

Kor

ea US

Irel

and

Sw

itze

rlan

d

Den

mar

k

New

Zea

land

Rat

e o

f tax

atio

n (%

)

Average rate of employees' social security contributions Average rate of employer's social security contributions

-6

-4

-2

0

2

4

6

8

10

Lat

via

Po

lan

d

Ge

rma

ny

UK

Lu

xem

bo

urg

Ne

ther

lan

ds

EU

28

Sw

eden

Irel

an

d

Eu

ro a

rea

19

De

nm

ark

Fra

nce

Ital

y

Sp

ain

Fin

lan

d

Ch

ang

e in

ho

url

y la

bo

ur

cost

s (%

)

In national currency In euro

32

Figure 16: Growth in nominal labour costs, Labour Cost Index, 2017

Expressing growth in an

index form, where 2012

labour costs=100, the

graph shows that Irish

nominal labour costs

have been increasing

since 2014 but

cumulatively have

increased by less than

the EU, Euro area and

UK labour costs. The

index does not reflect

the different starting

levels of labour costs in

each country.

Source: Eurostat

Figure 17: Mean nominal hourly labour cost per employee, (Constant 2011 PPP $ Currency), 2016

Figure 17 shows

hourly labour costs

expressed in

purchasing power

standards (PPS), a

measure which

accounts for price

differentials across

countries. A large

group of countries

have similar hourly

labour costs in PPS

terms. Ireland’s cost

in 2016 was $37.6

compared to $31.6 in

the UK.

Source: ILOstat

95.0

97.0

99.0

101.0

103.0

105.0

107.0

109.0

111.0

2011 2012 2013 2014 2015 2016 2017

Lab

ou

r co

st in

dex

(2

012

-10

0)

EU28 Euro area Ireland UK

0

5

10

15

20

25

30

35

40

45

50

Fra

nce

Ne

ther

lan

ds

Ge

rma

ny

Lu

xem

bo

urg

Sw

eden

Ital

y

Irel

an

d

Fin

lan

d

Sp

ain

UK

Isra

el

Po

lan

d

Lat

via

Co

nst

ant

20

11 P

PP

$ (C

urr

ency

)

2016 2012


33

Figure 18: ILO Mean nominal hourly labour cost per employee (Constant 2011 PPP $ Currency) Growth rate

Figure 18 shows the

trend in growth in

nominal hourly

labour cost per

employee in Ireland

and the UK over the

period. While Irish

levels are above the

UK, the gap between

the two is narrowing.

UK costs have risen

faster in every year

and increased by

1.1% in 2016 to $31.6

per hour compared to

an increase of 0.9%

to $37.6 per hour in

Ireland.

Source: ILOstat

Figure 19: Hourly labour costs, Business Economy, 2017

Within the business

economy (exl

agriculture, public

admin), labour costs

per hour in Ireland

were highest in

industry €32.9

compared to €33.4 in

the euro area. Labour

costs in Irish services

were €28.9 compared

to €29.3 and €25.2 in

the Euro area and

UK. Costs per hour

were €27.3

construction (Euro

area €26.7 and

UK €25.4).

Source: Eurostat

25

27

29

31

33

35

37

39

2012 2013 2014 2015 2016

Co

nst

ant

20

11 P

PP

$ (C

urr

ency

)

Ireland UK

0

5

10

15

20

25

30

35

40

45

50

De

nm

ark

Sw

ed

en

Lux

em

bo

urg

Fra

nce

Ge

rma

ny

Ne

the

rla

nd

s

Fin

lan

d

Eu

ro a

rea

19

Ire

lan

d

Ita

ly

EU

28

UK

Sp

ain

Po

lan

d

Latv

ia

Ho

url

y L

ab

ou

r C

os

ts (

€)

Business economy Industry Construction Services

34

Figure 20: Hourly Labour Costs, Business Economy, Detailed NACE sectors, 2017

Figure 20 compares

hourly labour cost

levels in € across

economic sectors.

Hourly labour costs

are highest in Utilities

(€55) and lowest in

Accommodation and

Food (€16). Ireland

(€46) is behind the

UK (€46.2) in

financial services. In

manufacturing (IE €

31.6 and UK €24.6)

and ICT (€43.8 and

€34.3) Ireland is

above UK levels.

Source: Eurostat

Figure 21: Change in sectoral hourly labour costs (own currency) Ireland and UK, 2017

There is considerable

divergence within the

Irish economy and

between Ireland and

the UK in labour cost

growth in 2016. In

Ireland, the sectors

with the highest rates

of growth were

Utilities (5%) and

professional services

(3.8%). Growth was

negative in mining,

arts and other

services. In the UK

growth was highest

in administrative

(4.8%) and transport

(4.7%).

Source: Eurostat

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Bu

sin

ess

Eco

no

my

Min

ing

an

d q

ua

rryi

ng

Man

ufac

turi

ng

Ele

ctri

city

, ga

s, s

tea

m a

nd

air

con

dit

ion

ing

Wat

er

sup

ply

; se

we

rag

e,

wa

ste

ma

nag

eme

nt

Co

nst

ruct

ion

Wh

ole

sale

, re

tail

trad

e,

mo

tor

rep

air

Tra

nsp

ort

ati

on

an

d s

tora

ge

Acc

om

mo

dat

ion

an

d f

oo

d

ICT

Fin

anci

al a

nd

insu

ran

ce

Pro

fess

ion

al,

scie

nti

fic

an

d

tech

nic

al

Ad

min

istr

ati

ve a

nd

su

pp

ort

Art

s, e

nte

rta

inm

ent

and

recr

ea

tio

n

To

tal l

abo

ur

cost

s (€

per

ho

url

y)

Ireland UK Euro area

-4-3-2-10123456

To

tal E

con

om

y

Bu

sin

ess

Eco

no

my

Min

ing

an

d Q

ua

rryi

ng

Man

ufac

turi

ng

Ele

ctri

city

, ga

s, s

tea

m a

nd

air

co

nd

itio

nin

g s

up

ply

Wat

er

sup

ply

; se

we

rag

e,

wa

ste

ma

nag

eme

nt

an

d…

Co

nst

ruct

ion

Wh

ole

sale

an

d r

eta

il tr

ade

;

rep

air

of

mo

tor

veh

icle

s…

Tra

nsp

ort

ati

on

an

d

Sto

rag

e

Acc

om

mo

dat

ion

an

d f

oo

d

serv

ice

acti

viti

es

ICT

Pro

fess

ion

al,

scie

nti

fic

an

d

tech

nic

al a

ctiv

itie

s

Ad

min

istr

ati

ve a

nd

su

pp

ort

serv

ice

acti

viti

es

Art

s, e

nte

rta

inm

ent

and

recr

ea

tio

n

Oth

er

serv

ice

act

ivit

ies

% C

han

ge

(Ow

n C

urr

ency

lev

els)

Ireland UK


35

Figure 22: Growth in nominal labour costs, whole economy, percentage change, quarterly, 2013-2017

Ireland had the 11th

highest percentage

increase (2%) in nominal

labour costs in the Euro

area (the corresponding

figure for the Euro area

was 1.6%) in 2017. This

is the highest

percentage increase

over the period 2012-

2017. The increase in the

wage and salaries

component is the 10th

highest in the Euro area

and the highest increase

in Ireland since 2008.

Source: Eurostat

Figure 23: Growth in labour costs23, by economic sector, annual percentage change, 2017

The rate of labour cost

varies by sector. In 2017

the highest annual

increase was recorded in

Financial & Insurance

(4.9%) and Professional

& Technical (3.8%).

Growth was lowest in

Construction (0.6%). In

the Euro area the

strongest growth was in

Professional &Technical,

and in the UK – in

Financial & Insurance.

Source: Eurostat

23 Labour cost for LCI (compensation of employees plus taxes minus subsidies)

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Latv

ia

Po

lan

d

UK

Sw

ed

en

Ger

man

y

Ire

lan

d

Ne

the

rla

nd

s

Den

mar

k

Euro

are

a

Fran

ce

Ital

y

Spai

n

Fin

land

An

nu

al p

erce

nta

ge

chan

ge

com

par

ed

2017 2013 2015

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Fin

an

cia

l&In

su

ran

ce

Pro

fessio

na

l&T

ech

nic

al

Wh

ole

sale

, re

tail,

mo

tor

Bu

sin

ess

Eco

no

my

Acco

mo

dati

on

&Fo

od

Ad

min

istr

ati

ve

&su

pp

ort

Pu

blic a

dm

inis

tra

tio

n

ICT

Ma

nu

factu

rin

g

Tra

nsp

orta

tio

n&

sto

rag

e

Co

nstr

ucti

on

Pe

rce

nta

ge

ch

an

ge

on

pre

vio

us

pe

rio

d

Ireland UK EU28 Euro area

36

Figure 24: Growth in labour costs, by economic sector, average annual percentage change, 2013-2017

In the five years to the

end of 2017, labour costs

growth in the Irish

business economy was

1.2% compared to

1.42% in the Euro area

and 2.28% in the UK.

Growth in Ireland was

highest in ICT (2.42%),

Administrative (2%) and

Wholesale (1.54%).

Growth was lowest in

Transportation (0.26%)

and negative in Public

administration (-0.28%).

Source: Eurostat

Figure 25: Average hourly other labour costs24 2012-2017

In Q3 2017 the average

other labour costs

represent 13.4% of the

average hourly total

labour costs (compared

to 13.2% in Q3 2012).

The average other

labour costs have

increased in 13 out of

the 16 sectors examined

between Q3 2012 and

Q3 2017. The highest

increases were in the

Real Estate (6.1%),

Mining and Quarrying

(3.8%) and ICT (2.9%).

Source: CSO

24 Other labour costs are comprised of statutory social contributions (e.g. employer PRSI), non-statutory contributions (employer pension contributions),

benefits in kind (BIK), other expenses (e.g. employer training expenses), redundancy payments and subsidies.

-1

0

1

2

3

4

5

ICT

Ad

min

istr

ativ

e&su

pp

ort

serv

ice

s

Wh

ole

sale

, ret

ail,

mo

tor

Bu

sin

ess

Eco

no

my

Fin

anci

al&

Insu

ran

ce

Pro

fess

ion

al, s

cien

tific

&te

chni

cal

Acc

omod

atio

n&

Food

Man

ufa

ctur

ing

Cons

truc

tion

Tran

spor

tati

on a

nd

sto

rag

e

Publ

ic a

dmin

istr

atio

n

Ireland 5 year average Euro area 5 year average UK 5 year average

0

5

10

15

20

25

30

35

40

Fra

nce

Sw

ed

en

Ital

y

Eu

ro a

rea

19

Sp

ain

Net

he

rlan

ds

Ge

rman

y

Fin

lan

d

La

tvia

Po

lan

d

UK

Ire

lan

d

De

nm

arkE

mp

loye

rs'

soci

al c

on

trib

uti

on

as

a p

erce

nta

ge

of

tota

l la

bo

ur

cost

s (%

)

2016 2012


37

Figure 27: Growth rate in average total annual earnings by sector, Ireland 2014-2016

Figure 26: Average hourly earnings in Ireland by Q1 2013-201825

The average hourly

earnings increased by

3.5 per cent between Q1

2013 and Q1 2018;

irregular earnings

increased by 14 per cent.

The highest increases

occurred in the Real

Estate (25.8%),

Construction (9.7%) and

Administrative sectors

(8.9%). The highest

hourly earnings (€35.22

per hour) were recorded

in Education; the lowest

earnings were in the

accommodation &food

sector (€12.76 per hour).

Source: CSO

Average annual earnings

across all sectors in Ireland

grew by 2.1% over the

period 2012-2016. 8 out of

12 sectors recorded

increases between 2015

and 2016. The largest

increases were recorded in

Professional, scientific and

technical activities (6.4%),

Construction (3.3%) and

Accommodation and food

services (3.3%). The

largest decline was

recorded in Public

Administration.

Source: CSO

25 Data for Q1 2018 is preliminary and subject to revision.

-4

-3

-2

-1

0

1

2

3

4

5

6

7

All

sect

ors

Co

nst

ruct

ion

Wh

ole

sale

& r

eta

il

Tra

nsp

ort

atio

n &

sto

rag

e

Acc

om

m &

fo

od

ICT

Pro

fess

ion

al

Pub

lic a

dm

inis

trat

ion

Ed

uca

tio

n

Ind

ust

ry

Fin

ance

& in

sura

nce

Art

s &

en

tert

ain

men

t

Gro

wth

in A

vera

ge

To

tal E

arn

ing

s (%

)

2015/2016 14/15 13/14

0

5

10

15

20

25

30

35

40

Ed

uca

tio

n

Fin

anci

al&

insu

ran

ce ICT

Pro

fess

ion

al

Pu

bli

c a

dm

inis

tra

tio

n

Min

ing

an

d q

ua

rry

ing

Rea

l est

ate

Hu

man

hea

lth

All

NA

CE

eco

no

mic

sec

tors

Man

ufa

ctu

rin

g

Tra

nsp

ort

atio

n&

sto

rag

e

Co

nst

ruct

ion

Wh

ole

sale

&re

tail

Art

s

Ad

min

istr

ati

ve

Acc

om

mo

dat

ion

&fo

od

Eu

ro p

er h

ou

r

Average Hourly Earnings excluding Irregular Earnings Q1 2018 Average Hourly Irregular Earnings Q1 2018

Average Hourly Earnings excluding Irregular Earnings Q1 2013 Average Hourly Irregular Earnings Q1 2013

38

Figure 29: Monthly minimum wage PPS (2017) and minimum wage as a percentage of average wage (2011-

2017)27

In 2017, Ireland had the

second highest monthly

minimum wage of

€1563. The chart shows

that, when expressed in

Purchasing Power

Standards, the

minimum wage was

€1,403. The minimum

wage as a percent of

average wage ranged

from 34% in Spain to

50% in Slovenia. In

Ireland, it was 42.3% and

44.1% in the UK.

Source: Eurostat

26 Q1 2018 preliminary estimates

27 Data relating to the minimum wage as a percentage of average wages is based on the latest year available. All data measuring monthly minimum wage

levels relates to the first half of 2017.

Belgium

Bulgaria

Czech Republic

Estonia

Ireland

Greece

Spain

France

Croatia

Latvia

LithuaniaLuxembourg

HungaryMalta

Netherlands

PolandPortugal

Romania

Slovenia

UK

Germany

20

25

30

35

40

45

50

55

100 300 500 700 900 1,100 1,300 1,500 1,700

Mo

nth

ly m

inim

um

wag

e as

% o

f av

erag

e w

age

Monthly minimum wage (Purchasing Power Standard)

Figure 28: Average hourly earnings (excluding irregular earnings) by size of enterprise, Ireland, Q1 201826

The average hourly

earnings in enterprises

employing less than 50

and between 50 and 250

people have been more

volatile over the period

examined. Earnings in

enterprises with more

than 250 people were

above the earnings in the

other two categories and

in Q1 2018 they were

€24.54, compared to

€18.13 for businesses with

less than 50 and €19.69 for

businesses employing

between 50 and 250.

Source: CSO

-4

-3

-2

-1

0

1

2

3

4

5

20

13Q

2

2013

Q3

20

13Q

4

2014

Q1

2014

Q2

20

14

Q3

20

14Q

4

20

15Q

1

2015

Q2

20

15Q

3

2015

Q4

20

16

Q1

2016

Q2

20

16

Q3

2016

Q4

2017

Q1

2017

Q2

20

17Q

3

20

17Q

4

2018

Q1

Ave

rag

e h

ou

rly

earn

ing

s (%

ch

ang

e)

< 50 employees 50 - 250 employees > 250 employees


39

Figure 31: Average income tax plus employee and employer contributions less cash benefits – single individual

earning 100% of average earnings29, 2016

For a single person

earning 100% of the

average wage in 2016,

total average income tax

in Ireland was the

seventh lowest in OECD

(27.1% compared to the

OECD average of 36%).

Irish taxes rates rose

marginally in the five

years to 2016 whereas

OECD figures were

comparable in 2012 and

2016.


28 Gross wages include wages, taxes on income and employer and employee social security contributions. EU27 and Euro area 17 excludes Cyprus.

29 Where relevant, the Universal Social Charge is included in the Irish data.

0

10

20

30

40

50

60

Ger

man

y

Fran

ce

Ital

y

Fin

lan

d

Sw

eden

Latv

ia

Spa

in

Net

herl

and

s

Den

mar

k

OE

CD

-Av

era

ge

Po

lan

d

Japa

n

US

UK

Ire

lan

d

Kor

ea

Sw

itze

rlan

d

New

Zea

lan

d

Rat

e o

f tax

atio

n (%

)

2016 2012

Figure 30: Average annual gross & net earnings, single individual, no children, 100% of average earnings28, 2015

Ireland had the 8th

highest gross and 6th

highest net wage level in

the Euro area-19 in 2015.

Net earnings were

almost 13% above the

Euro area average,

partly a result of the

relatively small gap

between before and

after-tax wages in

Ireland (primarily a

result of low social

security contributions).

Source: Eurostat

€0

€10,000

€20,000

€30,000

€40,000

€50,000

€60,000

€70,000

€80,000

€90,000

Sw

itze

rlan

d

Lux

emb

our

g

Den

mar

k

UK

Net

her

lan

ds

Ge

rma

ny US

Sw

eden

Fin

lan

d

Fran

ce

Jap

an

Eu

ro a

rea

19

Irel

and

EU

28

Ital

y

Lat

via

An

nu

al E

arn

ing

s (€

)

Gross annual earnings (€) Net annual earnings (€)

40

30 Marginal rate of income tax plus employee and employer contributions less cash benefits 31 The average tax wedge is used by the OECD to measure the extent to which taxes on labour income discourage employment. The tax wedge is defined as the ratio between the amount of taxes paid by an average single worker without children (i.e. a worker on 100% of average earnings) and the corresponding total labour costs for the employer including employer social insurance costs.

Figure 32: Marginal income tax, single individual, no children, 201630

The Irish marginal tax

rate for employees

earning 100% or 167% of

average earnings in 2016

was 54.4%, above the

OECD average (47%)

and UK (49%). However,

at 36.3%, the rate for a

single individual earning

67% of average earnings

in Ireland was below the

OECD average of 41.8%.


Figure 33: Average tax wedge, single individual at 100% of tax earnings, no children, 201631

Ireland historically has

one of the lowest tax

wedge levels both

within the EU and the

OECD at average wages.

In 2016, Ireland’s

average tax wedge was

27.1% of labour costs.

This compares very

favourably to the OECD

average of 36.0%. At

167% of average wages,

the wedge is 54%

compared to 47% in the

OECD and 49% in the

UK.


0

10

20

30

40

50

60

70

80

New

Ze

alan

d

Sw

itze

rlan

d

Ko

rea

Jap

an US

Irel

and

Po

lan

d

Den

mar

k

UK

OE

CD

-Ave

rag

e

Lat

via

Sp

ain

Sw

eden

Net

her

lan

ds

Fin

lan

d

Ital

y

Ge

rma

ny

Fran

ce

Rat

e o

f tax

atio

n (%

)

Single person at 67% of Average wage, no child Single person at 100% of Average wage, no child

Single person at 167% of Average wage, no child

0

10

20

30

40

50

60

New

Zea

land

Sw

itze

rlan

d

Isra

el

Ko

rea

Irel

and

UK

Can

ad

a

US

Jap

an

Pol

and

OE

CD

- A

vera

ge

Den

mar

k

Net

her

land

s

Luxe

mb

our

g

Spa

in

La

tvia

Sw

eden

Fin

lan

d

Ital

y

Fra

nc

e

Ger

man

y

2016 2011


41

Figure 34: Average income tax plus employee and employer contributions less cash benefits, married couple

with two children, earning 100% of average earnings, 2016

For a married couple

earning 100% of the

average wage with two

children in 2016, the

combined total of

income tax and

employee and employer

contributions in Ireland

(8.3%) was the third

lowest in the OECD

(26.6%). At higher

income levels (167% of

average earnings), the

average rate in Ireland

remained competitive

and below the OECD

average.


Figure 35: Average income tax rate, single individual earning 100% of average earnings, Ireland, selected

economies 2016

In Ireland, the average

income tax for a single

worker earning 100% of

the average wage over

the last 16 years has

been consistently lower

than the OECD average

rate and rates in the UK

& US. The Irish rate in

2016 was 27%, below

comparable UK (30.8%)

& US (31.7%) rates. In

2016, the Irish rate fell

by 1.8% to 27.1% while

the average income tax

across the OECD

decreased by 1 % to

36%.


0

10

20

30

40

50

60

New

Zea

lan

d

Irel

and

Swit

zerl

and

Ko

rea

US

UK

De

nm

ark

OEC

D-A

vera

ge

Jap

an

Pol

and

Latv

ia

Net

herl

and

s

Spai

n

Ger

man

y

Swed

en

Ital

y

Fin

lan

d

Fran

ce

Rat

e o

f Ta

xati

on

(%

)

2016 2012

20

22

24

26

28

30

32

34

36

38

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Rat

e o

f ta

xati

on

(%)

Ireland UK US OECD - Average

42

Figure 36: Marginal income tax, married couples with children, earning 100%, 133% or 167% of average

earnings, 2 children, 2016

Married couples with

children, earning 100%,

133% or 167% of the

average earnings pay

marginal rate of 36.3%

in Ireland. The

corresponding average

rates across the OECD

are 44.4%, 44.4% and

43.8% respectively.

Married couples in

Ireland also fare better

than single people in

terms of marginal rate

of income tax.


Figure 37: Corporation Tax Rates, 2008-2017

Ireland’s corporation tax

rate remains

internationally

competitive and is the

third lowest in the OECD

at 12.5%. While Ireland’s

rate has remained

consistent over recent

years, many of our key

competitors have

reduced their rates (e.g.

the UK and in 2018, the

US32).

Source: OECD

32 The Tax Cuts and Jobs Act of 2017 reduced US corporate tax rates to one flat rate of 21% tax rate on corporate income from January 1 2018.

0

10

20

30

40

50

60

70

Sw

itze

rlan

d

Ko

rea

US

Irel

and

Japa

n

Po

lan

d

UK

Den

mar

k

Fran

ce

Latv

ia

OE

CD

-…

Sp

ain

Sw

ed

en

Ne

w Z

ea

lan

d

Ne

the

rla

nd

s

Ger

man

y

Ita

ly

Fin

lan

d

Rat

e o

f Tax

atio

n (%

)

Married 2 children, 100-33% avg earnings

Married, 2 children, 100-67 % avg earnings

Married, 2 children, one earner 100% avg earnings

0

5

10

15

20

25

30

35

40

Sw

itze

rlan

d

Irel

and

Can

ada

Lat

via

Ger

man

y

Po

lan

d

UK

Fin

lan

d

Lu

xem

bo

urg

US

*

De

nm

ark

Ko

rea

Sw

ede

n

Jap

an

Ital

y

Isra

el

Ne

ther

lan

ds

Sp

ain

Ne

w Z

eala

nd

Fra

nce

Co

rpo

rate

Inco

me

Tax

Rat

e (%

)

2017 2013 2008


43

Chapter 5 – Property Costs

Figure 38: Quarterly change in capital values in Ireland, Q1 2015-Q4 2017

Figure 38 shows the

change in capital values

(in index form) in Ireland

for a range of

commercial property

classes. Since Q1 2015,

values across all

categories have

consistently increased.

Overall capital value

growth was recorded at

5.2% in Q4 2017 – this

comprised of annual

increases of 8.4%, 1.3%

and 3.2% in Office,

Retail and Industrial

values respectively.

Source: Jones Lang LaSalle, Irish Property Index

Figure 39: Cost of constructing a prime office unit, $ per square metre33, 2016

In Dublin, 2016 cost is

estimated at $2,553

compared with $3,519 in

London. In advanced

economies, 20 of the 25

markets saw

construction costs rise

by more than general

inflation – the average

price increase for these

economies was 2.7%

with markets such as

Dublin seeing cost

inflation as high as 7 %.

Source: Turner and Townsend Construction Cost Survey

33 Prices quoted are the upper boundary of the cost of the constructing a prime office unit. A prime office unit refers to a city centre, self-contained building of

a size and height typical of major cities in a country; building costs include for accommodation to a good finish with raised floors, carpet, suspended ceilings,

air conditioning, lighting and power, but excluding partitioning.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0

200

400

600

800

1,000

1,200

1,400

1,600

Q1

20

15

Q2

20

15

Q3

2015

Q4

20

15

Q1

2016

Q2

2016

Q3

20

16

Q4

2016

Q1

20

17

Q2

20

17

Q3

2017

Q4

20

17

Ove

rall

Cap

ital

Val

ue In

dex

Cap

ital

Val

ue

Ind

ex

Office Capital Retail Capital Industrial Capital Overall (Right Axis)

0

1,000

2,000

3,000

4,000

5,000

UK

(L

on

do

n)

Ire

lan

d (D

ub

lin)

Ne

ther

lan

ds

(Am

ster

dam

)

Ger

man

y (M

un

ich

)

Can

ada

(To

ron

to)

Sin

gap

ore

So

uth

Ko

rea

(So

eul)

Po

lan

d (W

arsa

w)

Ch

ina

(Bei

jing

)

US

$ p

er m

etre

sq

uar

ed

2016 2013

44

Figure 41: Cost of renting a prime office unit, € per square metre per year, Q4 201734

Office rental prices in

Ireland in 2017 compare

favourably to cities in

the UK. In 2017,

Cushman and Wakefield

report the cost per SqM

per year in Dublin City

(€619) and Suburbs

(€324), Limerick and

Cork (€325) and Galway

(€295). UK costs range

from €1333 in the West

End, €406 in

Manchester, and €303 in

Cardiff.

Source: Cushman and Wakefield, Office Snapshot Reports

34 Figures for both Dublin (D2/D$) and Cork are from Q2 2016.

0

200

400

600

800

1000

1200

1400

1600

Gal

way

Car

diff

Dub

lin S

ubu

rbs

Co

rk

Lim

eri

ck

Gla

sgo

w

Bri

sto

l

Bir

min

gham

Ma

nch

est

er

Ed

inb

urg

h

Du

blin

2/4

Lo

nd

on

Cit

y

Lond

on W

est E

nd

€ p

er

Sq

.M p

er Y

r

2017 2016 2013

Figure 40: Cost of constructing a High-Tech Factory, € per square metre, 2016

The cost of constructing

a High-Tech

Factory/Laboratory

varies considerably

across advanced

economies. In Dublin,

cost is estimated at

$2,234, over 6% since

2013. The comparable

figure for London is

$2,494. The highest

increase was recorded in

Amsterdam, where the

cost of construction

increased by 28% over

the five-year period.

Source: Turner and Townsend Construction Cost Survey

0

500

1,000

1,500

2,000

2,500

3,000

So

uth

Ko

rea

(So

eul)

UK

(L

on

do

n)

Ire

lan

d (D

ub

lin)

Sin

gap

ore

Ger

man

y (M

un

ich

)

Ne

ther

lan

ds

(Am

ster

dam

)

Can

ada

(To

ron

to)

Po

lan

d (W

arsa

w)

Ch

ina

(Bei

jing

)

Co

st p

er m

etre

sq

uar

ed (

US

$)

2016 2013


45

Figure 42: One and five-year Growth35 in Cost of renting a prime office unit, € per square metre per year,

Ireland and the UK, Q4 2017

Annual growth rates in

Ireland are much

stronger than in the UK.

Year-on-year increases

in Irish locations ranged

from 67% (Limerick),

29% (Galway), 12%

(Cork) and 9% (Dublin

Suburban). Rental Costs

fell in London city and

West End (1.5%, 8.3%).

On annual basis rents

were unchanged in

Dublin 2/4, Cardiff and

Glasgow.

Source: Cushman and Wakefield, Office Snapshot Reports

Figure 43: Cost of Renting a Prime High Street Retail Unit, € per square metre per month, Ireland and the UK,

Q4 2017

In Q4 2017 prime retail

rents had increased on

an annual basis across

Ireland. The most

expensive location was

Dublin (€3,794, +4%

year-on-year). Costs in

Galway (1,349, +9%),

Cork (€1,265, 0%) and

Limerick (€562, 5%)

compare relatively

favourably to the UK.

Rental costs in the UK

range from €1,267 in

Cardiff to €2,163 and

€16,000 in London City

and West End.

Source: Cushman and Wakefield, Retail Market Snapshots

-20

-10

0

10

20

30

40

50

60

70

80

% C

han

ge

Growth 1 year Growth 5 year

0

2000

4000

6000

8000

10000

12000

14000

16000

Du

blin

(ou

t o

f to

wn

reta

il p

ark)

Lim

eri

ck

Co

rk

Ca

rdif

f

Bir

min

gh

am

Gal

way

Man

ches

ter

Ed

inb

urg

h

Lo

nd

on

Cit

y

Gla

sgo

w

Du

blin

Lo

nd

on

We

st E

nd

€ p

er S

q.M

p Y

ear

46

Figure 44: Time and Cost of Dealing with Construction Permits in building a warehouse36, 2017

Ireland scores well on

building control and

regulatory quality but

poorly on time and cost

to build. The World

Bank estimates it takes

149 days to build a

warehouse in Dublin

compared with 86 days

in London. Cost37 is a

percentage of

warehouse value and

estimated at 4.6% in

Dublin compared to 1%

in London.

Source: World Bank, Doing Business

Figure 45: Time and Cost of Registering a Property, 2017

Figure 45 shows the

time and cost38 involved

in registering property,

in a standardised case of

an entrepreneur

purchasing land and a

building already

registered and free of

title dispute. Ireland

performs relatively well

in terms of cost as a

percentage of value

2.5% compared to 4.8%

in the UK. The process

takes 31 days compared

to 21 in the UK.

Source: World Bank Doing Business

36 This category is based on the procedures, time, and costs to build a warehouse, including obtaining necessary licenses and permits, completing required

notifications and inspections, and obtaining utility connections.

37 Cost is recorded as a percentage of warehouse value. The value is €2 million in Dublin and £1.4 million in London)

38 Cost is recorded as a percentage of the property value, assumed to be equivalent to 50 times income per capita. Only official costs required by law are

recorded, including fees, transfer taxes, stamp duties and any other payment to the property registry, notaries, public agencies or lawyers. Other taxes, such

as capital gains tax or value added tax, are excluded from the cost measure. Both costs borne by the buyer and the seller are included. If cost estimates differ

among sources, the median reported value is used.

0

50

100

150

200

250

300

0

1

2

3

4

5

6

Po

lan

d

Jap

an

Lat

via

Lu

xem

bo

urg

Sw

itze

rlan

d

Finl

and

US

UK

Ger

man

y

De

nm

ark

Isra

el

Ca

na

da

Sw

ed

en

New

Zea

lan

d

Fra

nce

Ital

y

Net

herl

and

s

Ko

rea

Irel

and

Spa

in

Tim

e (d

ays)

Co

st (%

of W

areh

ous

e va

lue)

Dealing with Construction Permits - Cost

Dealing with Construction Permits - Time (Right Axis)

0

10

20

30

40

50

60

70

80

90

0

2

4

6

8

10

12

New

Zea

land

Pola

nd

Swit

zerl

and

Den

mar

k

Latv

ia

Irel

and

US

Can

ada

Finl

and

Swed

en

Ital

y

UK

Kore

a

Japa

n

Net

herl

and

s

Spai

n

Ger

man

y

Fran

ce

Isra

el

Luxe

mbo

urg

Tim

e (d

ays)

(% o

f pr

oper

ty v

alue

)

Registering Property - Cost Registering Property -Time (Right Axis)


47

Chapter 6 – Transport Costs

Figure 46: Europe Brent39 Spot Oil Price, USD per Barrel, 2012-2017

The price for Brent

Crude is one of the

primary benchmarks for

oil prices globally.

While the price of oil has

been relatively subdued

in the period 2014-2016

(with the lowest price

recorded in January

2016 at $30.7 per

barrel), in the second

half of 2017 the price of

oil has been gradually

increasing. Prices were

25% higher in 2017 than

in 2016 averaging

$53/barrel for the year.

Source: US Energy Information Association

Figure 47: Average diesel and petrol costs per litre in Ireland, January 2012-January 2018

Figure 47 shows the

trends in consumer

prices for petroleum

products in Ireland over

the period January

2012-January 2018.

Year-on-year petrol and

diesel prices increased

by 6.3% and 7.8%

respectively in 2017

compared to 2016. The

lowest prices were

recorded in February

2016, at €1.2 per litre for

petrol and €1.04 per litre

for diesel.

Source: US Energy Information Association

39 Brent is the leading global price benchmark and is used to price two thirds of the world's internationally traded crude oil supplies.

0

20

40

60

80

100

120

140

Jan

-20

12

Ap

r-2

012

Jul-

20

12

Oct

-20

12

Jan

-20

13

Ap

r-2

013

Jul-

20

13

Oct

-20

13

Jan

-20

14

Ap

r-2

014

Jul-

20

14

Oct

-20

14

Jan

-20

15

Ap

r-2

015

Jul-

20

15

Oct

-20

15

Jan

-20

16

Ap

r-2

016

Jul-

20

16

Oct

-20

16

Jan

-20

17

Ap

r-2

017

Jul-

20

17

Oct

-20

17

US

$ p

er b

arre

l

Monthly price 5 year median price

1

1.2

1.4

1.6

1.8

09

Jan

uar

y 2

012

09

Ap

ril 2

012

09

Ju

ly 2

012

09

Oct

ob

er 2

012

09

Jan

uar

y 2

013

09

Ap

ril 2

013

09

Ju

ly 2

013

09

Oct

ob

er 2

013

09

Jan

uar

y 2

014

09

Ap

ril 2

014

09

Ju

ly 2

014

09

Oct

ob

er 2

014

09

Jan

uar

y 2

015

09

Ap

ril 2

015

09

Ju

ly 2

015

09

Oct

ob

er 2

015

09

Jan

uar

y 2

016

09

Ap

ril 2

016

09

Ju

ly 2

016

09

Oct

ob

er 2

016

09

Jan

uar

y 2

017

09

Ap

ril 2

017

09

Ju

ly 2

017

09

Oct

ob

er 2

017

09

Jan

uar

y 2

018

Pri

ce p

er

litr

e (

€)

Petrol €/L Diesel €/L

https://en.wikipedia.org/wiki/List_of_crude_oil_products

48

Figure 49: Trends in Transport Related Prices in Ireland, 2012 - Q3 2017

In the transport sector

prices increases have

been relatively

moderate in recent

years, excluding prices

in Air transport which

have been more volatile

and prices in Sea and

coastal transport and

Warehousing, Storage

and Cargo which have

been on a downward

trajectory since Q4

2016.

Source: CSO, Services Producer Price Index

60

70

80

90

100

110

120

130

140

150

2010 2011 2012 2013 2014 2015 2016 2017

Ind

ex (

20

10=

100

)

All Sectors Freight & Removal by Road

Sea & Coastal Transport Air Transport

Warehousing,Storage & Cargo Postal & Courier

Figure 48: Diesel and petrol costs per 1,000 litres, January 2018

The costs of 1,000 litres

of diesel (€1,299) and

petrol (€1,399) In Ireland

are higher than the Euro

area average (€1,247

and €1,358 respectively),

ranking Ireland 7th and

6th most expensive in

the Euro area. Taxes on

diesel range from 49%

to 63% across the

countries benchmarked

(Ireland - 57%) and for

petrol from 54% to 67%

(Ireland - 62%).

Source: European Commission, Energy Statistics & Market Observatory

0

200

400

600

800

1000

1200

1400

1600

1800

Po

lan

d

Lat

via

Sp

ain

Ge

rman

y

Eu

ro a

rea

UK

Irel

and

Fin

lan

d

Fra

nce

Sw

eden

Den

mar

k

Ital

y

Net

he

rlan

ds

€p

er 1

,00

0 li

tres

Petrol ( incl Taxes) Diesel (incl Taxes) Petrol (no taxes) Diesel (no taxes)


49

Figure 50: Administrative Costs and Time to Export40, 2017

The ease and cost of

customs and admin

procedures has a

significant impact on

trade flows. Total costs

in Ireland to export a

standardised cargo were

$380 compared with

$305 in the UK. It takes

25 hours to complete

the required procedures

in Ireland, which is

above the OECD time of

15 hours but below the

UK (28 hours).

Source: World Bank, Doing Business 2018

Figure 51: Administrative Costs and Time to Import, 2017

The cost to import a

container in Ireland is

estimated by the World

Bank at $325,

significantly higher than

the OECD high income

average of $137. The

time taken to complete

the necessary

procedures in Ireland

was 25 hours, compared

to 12.2 hours in OECD

high income average.

Times and costs for the

UK are reported as 5

hours and nil

respectively.

Source: World Bank, Doing Business 2018

40 The World's Bank Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures - documentary compliance,

border compliance and domestic transport - within the overall process of exporting or importing a shipment of goods. The most recent round of data

collection was completed in June 2017. Cost estimates of 0 are provided for Denmark, France, Italy, Luxembourg, Spain and Sweden. Average data is provided

by the World Bank for an OECD high income grouping.

0

10

20

30

40

50

60

0

100

200

300

400

500

600

Lat

via

OE

CD

hig

h in

com

e

Ko

rea

Isra

el

US

Sw

itze

rlan

d

Fin

lan

d

UK

Jap

an

Can

ad

a

Sin

gap

ore

Irel

an

d

Ge

rma

ny

Ne

w Z

eal

an

d

Ch

ina

Tim

e to

Exp

ort

(H

ou

rs)

Co

st t

o E

xpo

rt (

US

$)

Cost to export: Border compliance Cost to export: Documentary compliance

Total Time to Export (Right Axis)

0

20

40

60

80

100

120

140

160

180

0

100

200

300

400

500

600

700

800

900

1000

Fin

lan

d

Ge

rma

ny

Lat

via

UK

OE

CD

hig

h in

com

e

Sin

gap

ore US

Sw

itze

rlan

d

Irel

an

d

Can

ad

a

Ko

rea

Isra

el

Jap

an

Ne

w Z

eal

an

d

Ch

ina

Tim

e to

Imp

ort

(H

ou

rs)

Co

st t

o Im

po

rt (

US

$)

Cost to import: Border compliance (USD) Cost to import: Documentary compliance (USD)

Total time (right axis)

50

Figure 52: Growth in traffic by region, Ireland, 2016

Traffic growth was 4.6%

across the network in

2016. The highest

regional growth

recorded in 2016 was in

the South-East with

5.7% for the year. The

Mid-West and Mid-East

experienced growth at

5.4% and 5.2%

respectively. For HGVs,

the Mid-East and South-

West recorded highest

regional growth with

7.4% and 7.2%

respectively.

Source: Transport Infrastructure Ireland

Figure 53: Travelling time for persons at Work, School or College, by region, 2016

Nearly 200,000

commuters (199,922),

representing almost 11

per cent of all

commuters, spent an

hour or more

commuting to work in

2016, with an average

travel time of 74

minutes. This has

increased by almost

50,000 persons (31%) on

the 2011 figure of

152,000. Nearly 53,000

workers commuted 90

minutes or more.

Source: CSO

0 1 2 3 4 5 6 7 8

Border

Midlands

West

Southwest

Southeast

Mideast

Dublin

Midwest

Annual Percentage Change (%)

HGVs All Vehicles

0

10000

20000

30000

40000

50000

600001 h

ou

r - < 1½

ho

urs

Bo

rder

Mid

land

West

Du

blin

Mid

-East

Mid

-West

So

uth

-East

So

uth

-West

1½ h

ou

rs and

over

Bo

rder

Mid

land

West

Du

blin

Mid

-East

Mid

-West

So

uth

-East

So

uth

-West

Po

pu

lati

on

ag

ed 1

5 ye

ars

and

ove

r at

wo

rk

Travel Time by Region

2011 2016

Commute time >1.5 hours

Commute time >1 hour but <1.5 hours


51

Figure 54: Traffic congestion41 levels, Europe 2016

Traffic congestion based

on TomTom's database

shows on average,

journey times in busy

periods take 43%, 34%

and 27% more time in

Dublin, Cork and

Limerick respectively.

Dublin is one of the

most traffic congested

cities in Europe with

morning and evening

congestion times 80%

and 86% higher

compared to a free flow.

Source: TomTom International

Figure 55: Traffic Congestion levels, Ireland, 2008-2016

Figure 55 shows

increased economic

activity and high usage

of private cars relative to

public transport has

resulted in increased

road congestion levels

since 2013. In 2008

journey times in busy

periods took 55%, 39%

more time in Dublin and

Limerick respectively. At

34%, increases in

journey times due to

congestion in Cork were

at 2008 levels in 2016.

Source: TomTom International

41 Increase in overall travel times when compared to a free flow situation. For example, a congestion level of 36% corresponds to 36% extra travel time for any

trip, anywhere in the city, at any time compared to what it would be in a free flow situation. The TomTom Traffic Index figures are based on speed

measurements from TomTom's historical traffic database. These speed measurements are used to calculate the travel times on individual road segments and

entire networks. By weighting based on the number of measurements, busier and more important roads in the network have more influence than quieter, less

important roads.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bu

char

est

Mo

sco

w

Be

lfas

t

Du

blin

Ed

inb

urg

h

Lo

nd

on

Ro

me

Par

is

Bru

ssel

s

Man

che

ste

r

Ath

en

s

Lis

bo

n

Co

rk

Lu

xem

bo

urg

Zü

rich

Vie

nn

a

Be

rlin

Sto

ckh

olm

Fra

nkf

urt

Lim

eric

k

Car

dif

f

Mad

rid

Co

pen

hag

en

Am

ster

dam

Congestion Level Morning Peak Evening Peak

0

10

20

30

40

50

60

2008 2009 2010 2011 2012 2013 2014 2015 2016

Incr

ease

in t

rave

l tim

e co

mp

ared

to

a f

reef

low

si

tuat

ion

(%

)

Dublin Cork Limerick

52

Chapter 7 – Utility Costs

Figure 56: Non-household electricity prices (excluding VAT and other recoverable taxes and levies) 42, S1 2017,

In the first half of 2017,

the Irish weighted

average non-

household43 electricity

prices for non-

household consumers

(in purchasing power

standard) have declined

compared to 2013. At

€0.14, the electricity

prices for business

consuming between 20

and 500 MWh were

below the Euro area

(€0.15) but above the UK

price (€0.13).

Source: Eurostat

Figure 57: Electricity prices for non-household consumers (Purchasing Power Standard), excluding VAT and

other recoverable taxes and levies, low consumption bands, S1 2011-S1 2017

The price of electricity in

the lowest band (<20

MWh) in Ireland was

below the Euro area but

above the UK prices.

The price of electricity in

the 20 to 500 MWh band

fluctuated below and

above the Euro area

prices, but was above

the UK prices. The

highest level of price

convergence was in the

500 to 2000 MWh band.

Source: Eurostat

42 It should be noted that Ireland’s energy supplies, excluding renewables, are often at the end of supply pipelines and this combined with low spatial density

make energy more expensive to deliver in Ireland.

43 Until 2016, the domain of non-household consumers was defined as industrial consumers, consequently reporting authorities were allowed to include

other non-household consumers

0.0000

0.0500

0.1000

0.1500

0.2000

0.2500

Pol

and

Latv

ia

Ital

y

Ger

man

y

Spa

in

Eur

o ar

ea

Irel

and

UK

Net

her

land

s

Fra

nc

e

Finl

and

Den

mar

k

Sw

eden

€ p

er k

ilow

att

ho

ur

(PP

S)

S1 2017 S1 2013

0.0800

0.1000

0.1200

0.1400

0.1600

0.1800

0.2000

0.2200

S12011 S22011 S12012 S22012 S12013 S22013 S12014 S22014 S12015 S22015 S12016 S22016 S12017

€ p

er k

ilow

att

ho

ur

(PP

S)

Euro area <20 MWh Ireland <20 MWh UK <20 MWh

Euro area 20 MWh to 500 MWh Ireland 20 MWh to 500 MWh UK 20 MWh to 500 MWh

Euro area 500 to 2000 MWh Ireland 500 to 2000 MWh UK 500 to 2000 MWh


53

Figure 58: Electricity prices for non-household consumers (Purchasing Power Standard), excluding VAT and

other recoverable taxes and levies, high consumption bands, S1 2011 - S1 2017

The price of electricity

for non-household

consumers in the 2000

to 20000 MWh and

20000 to 70000MWh

bands have been below

the Euro area prices

since 2013. The Irish and

Euro area electricity

prices in the 70000 to

150000 MWh band have

been close throughout

the period examined.

The UK prices in all

bands were above the

Irish prices in the last

three years.

Source: Eurostat

Figure 59: Gas prices for non-household consumers (Purchasing Power Standard), excluding taxes and levies,

2011-S1 2017

The price of natural gas

in the three categories

of non-household

consumers have been

consistently below the

Euro area average over

the period examined,

except for S2 2016. The

price difference

between Ireland and the

Euro area diminished in

2016 and S1 2017. UK

prices categories have

been below the Euro

area and Irish prices

since 2012.

Source: Eurostat

0.0650

0.0700

0.0750

0.0800

0.0850

0.0900

0.0950

0.1000

0.1050

0.1100

0.1150

S12011 S22011 S12012 S22012 S12013 S22013 S12014 S22014 S12015 S22015 S12016 S22016 S12017

€ p

er k

ilow

att

ho

ur

(PP

S)

Euro area 2 000MWh to 20 000MWh Ireland 2 000MWh to 20 000MWh UK 2 000MWh to 20 000MWh

Euro area 20 000 to 70 000MWh Ireland 20 000 to 70 000MWh UK 20 000 to 70 000MWh

Euro area 70 000 to 150 000MWh Ireland 70 000 to 150 000MWh UK 70 000 to 150 000MWh

0.0150

0.0200

0.0250

0.0300

0.0350

0.0400

0.0450

0.0500

0.0550

0.0600

S12011 S22011 S12012 S22012 S12013 S22013 S12014 S22014 S12015 S22015 S12016 S22016 S12017

€ p

er k

ilow

att h

our

(PP

S)

Euro area (< 1 000 GJ) Ireland (< 1 000 GJ) UK (< 1 000 GJ)

Euro area (1000-10000 GJ) Ireland (1000-10000 GJ) UK (1000-10000 GJ)

Euro area (100000-1000000 GJ) Ireland (100000-1000000 GJ) UK (100000-1000000 GJ)

54

Figure 60: Share of non-recoverable taxes and levies in the overall gas price for non-household consumers, S 1

2017

The proportion of non-

recoverable taxes and

levies in the overall

natural gas price in S1

2017 is relatively low in

Ireland (8.2%) compared

to the Euro area (14.8%)

but higher than the UK

(4.7%). At 11.6%, the

proportion of VAT and

other recoverable taxes

and levies is below the

Euro area (16.4%) and

the UK (14.3%).

Source: Eurostat

Figure 61: Business water service costs in Ireland by Local Authority, 2017

Figure 61 shows the

combined charge per m3

of water (including

water supply and

wastewater services) in

each Irish Local

Authority area. The

average cost of water

for business in Ireland is

€ 2.38 per m3 with

significant variation

between Local

Authorities.

Source: Irish Water

0

10

20

30

40

50

60

70

80

90

100

Ne

the

rla

nd

s

Fin

land

Den

mar

k

Ital

y

Eur

o ar

ea

Fra

nce

Ger

man

y

Sw

eden

Ire

lan

d

UK

La

tvia

Pol

and

Sp

ain

Tax

es a

nd

levi

es a

s %

of

ove

rall

pri

ce (

PP

S)

Proportion of price excluding taxes and levies

Proportion of VAT and other recoverable taxes and levies

Proportion of non-recoverable taxes and levies

0

0.5

1

1.5

2

2.5

3

3.5

Kild

are

Co

Co

S. D

ub

lin

Ke

rry

Co

un

ty C

oun

cil

Dub

lin C

ity

Wes

tmea

th

Gal

way

Cit

y

Lo

uth

Mon

agha

n

Cor

k C

o.

Fing

al

Dun

lao

igha

ire-

Rat

hdo

wn

Leit

rim

Car

low

Wat

erfo

rd C

ity

& C

ou

nty

Lo

ng

ford

May

o

Tip

per

ary

Off

aly

Lao

is

Co

rk C

ity

Ga

lwa

y C

o

Slig

o

Cav

an

Do

ne

ga

l

Mea

th

Wex

ford

Lim

eri

ck C

ity

Ro

scom

mon

Cla

re

Kilk

en

ny

Wic

klo

w

€ p

er m

etre

cu

bed

Rate National Average


55

Figure 62: Business Standalone Fixed Voice Basket 44€ per month excluding VAT, Q3 2017,

Figure 62 shows that in

Q3 2017 a basket of

Standalone Fixed Voice

charges for Business in

Ireland was €61.27,

which was 39% more

expensive than the

corresponding basket in

the UK. Year-on-year,

Irish prices increased by

5.7%. The most

expensive country

benchmarked was the

Netherlands (€87.38).

Source: Comreg

Figure 63: Business Fixed Broadband, € per month excluding VAT, Q3 2017,

The price of Fixed

Broadband Services for

business in Ireland

remained flat in the last

four quarters at €35.28.

Although the fixed

broadband charges have

been increasing

gradually in the UK by

8.8% year on year and at

€32 Q3 2017, they are

still lower than the

corresponding charges

in Ireland.

Source: Comreg

44 Standalone fixed voice services are voice services not sold as part of a bundle or other services.

30

40

50

60

70

80

90

Q32016 Q4 2016 Q1 2017 Q22017 Q32017

€ p

er m

on

th e

xcl V

AT

(PP

P)

Ireland UK Germany Spain Denmark Netherlands

20

30

40

50

60

Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

€ p

er m

on

th e

xcl V

AT

(PP

P)


56

Figure 64: Business Mobile Broadband, € per month excluding VAT, Q3 2017

At €19.84 in Q2-Q3

2017, Ireland had the

second lowest Business

Mobile Broadband costs

in the sample of

countries. Prices have

been relatively stable in

recent quarters. The

least expensive country

was the UK (€17.9) while

Spain was the most

expensive country

benchmarked (€39.24).

Source: Comreg

Figure 65: Business post-paid mobile phone services, € per month excluding VAT, Q3 2017

Figure 65 shows that

Business post-paid

mobile services in

Ireland remained

stationary over the

previous 4 quarters

(€28.33) and in Q3 2017

they increased to €30.

While charges are below

Spain, Netherlands and

Germany, Irish charges

were over twice as

expensive compared to

the UK monthly charges

of €12.9.

Source: Comreg

10

20

30

40

50

Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

€ p

er m

ont

h e

xcl V

AT

(PP

P)


10

15

20

25

30

35

40

Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

€ p

er m

ont

h e

xcl V

AT

(P

PP

)



57

Chapter 8 – Credit and Financial Costs

45 Any new agreement between a non-financial corporation and a bank

Figure 66: Interest rates on bank overdraft and revolving loans, 2017

In 2017 Ireland had the

second highest interest

rates on revolving loans

and overdrafts in the

Euro area, with only

businesses in Greece

paying higher charges.

While in most Euro area

countries the mean

interest rate has

declined compared to

2014, in Ireland the

interest rate of 4.9% is

higher than the 2014

figure and almost

double the Euro area

average (2.5%).

Source: European Central Bank

Figure 67: Interest rates for non-financial corporations (new businesses45) by loan size, November 2017

Figure 67 shows that

Irish rates have been

more volatile over the

period examined and are

higher than Euro area

rates. The divergence is

noticeable for loans of

up to €0.25 million,

where Irish interest rates

were 6.7% in November

2017 compared to 2.4%

in the Euro area. For

loans, less than €1

million the Irish rate was

3.6%, Euro area (1.6%).


0

1

2

3

4

5

6

Ire

lan

d

Fin

lan

d

Ge

rman

y

Po

lan

d

UK

Ital

y

Den

mar

k

Lat

via

Eu

ro a

rea

Sw

eden

Fra

nce

Sp

ain

Net

he

rlan

ds

Inte

rest

rat

e (%

)

2017 2014

0

1

2

3

4

5

6

7

Jan

-11

Ap

r-11

Jul-

11

Oct

-11

Jan

-12

Ap

r-12

Jul-

12

Oct

-12

Jan

-13

Ap

r-13

Jul-

13

Oct

-13

Jan

-14

Ap

r-14

Jul-

14

Oct

-14

Jan

-15

Ap

r-15

Jul-

15

Oct

-15

Jan

-16

Ap

r-16

Jul-

16

Oct

-16

Jan

-17

Ap

r-17

Jul-

17

Oct

-17

Inte

rest

rate

(%)

Ireland ≤ €0.25m Ireland > €0.25 ≤ €1m Euro area ≤ €0.25m Euro area > €0.25 ≤ €1m

58

Figure 69: Interest rates for Irish SMEs (outstanding amounts), Q1 2015-Q3 2017

The interest rates on

outstanding amounts to

SMEs were consistently

lower than the rates on

gross new lending and

the difference is

particularly prominent in

the Construction Sector.

The interest rates to

SMEs engaging in

Transport & Storage,

Manufacturing and

Construction were

higher than the rates in

the remaining sectors.


2.50

2.70

2.90

3.10

3.30

3.50

3.70

3.90

4.10

4.30

4.50

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17

Inte

rest

rat

e (%

)

Total Manufacturing Construction

Wholesale/Retail Trade & Repairs Transportation and Storage Hotels and Restaurants

Information and Communication

Figure 68: Interest rates for non-financial corporations (outstanding amounts) by duration, Jan 2011-Nov 2017

In the period 2011-mid-

2014, interest rates on

outstanding amounts in

Ireland were universally

lower than the Euro

area. As of late 2016,

rates for all durations

are significantly higher

in Ireland, and the gap

between the Irish and

the Euro area interest

rates is widening. Rates

are inversely correlated

with duration in Ireland.


0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Jan

-11

May

-11

Se

p-1

1

Jan

-11

May

-12

Se

p-1

2

Jan

-13

May

-13

Se

p-1

3

Jan

-14

May

-14

Se

p-1

4

Jan

-15

May

-15

Se

p-1

5

Jan

-16

May

-16

Se

p-1

6

Jan

-17

May

-17

Se

p-1

7

Inte

rest

rat

e (%

)

Ireland > 5 yr Ireland 1 ≤ 5 yr Ireland < 1 yr Euro area > 5 yr Euro area 1 ≤ 5 yr Euro area < 1 yr


59

Figure 70: Interest rates on gross new lending46 for Irish SMEs, Q1 2015-Q3 2017

The interest rates on

gross new lending for

SMEs decreased

between Q1 2015 and Q3

2017 in most economic

sectors except for ICT.

The interest rates to

SMEs in Construction

and Transport & Storage

were consistently higher

than the rates in the

remaining sectors. The

interest rates in

Wholesale/Retail Trade

& Repair sector were

least volatile.


46 Gross new lending excludes restructures or renegotiations which do not increase the size of outstanding loans. It does include new funds drawn down following a restructure or renegotiation of an existing facility that were not included in credit advanced at the end of the previous quarter.

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

Mar

-15

Jun

-15

Sep

-15

Dec

-15

Mar

-16

Jun

-16

Sep

-16

Dec

-16

Mar

-17

Jun

-17

Sep

-17

Inte

rest

ra

te (

%)

Total Manufacturing Construction

Wholesale/Retail Trade & Repairs Transportation and Storage Hotels and Restaurants

Information and Communication

60

Chapter 9 – Business Services and Other Input Costs

Figure 71: Services producer price index47, Q1 2006-Q4 2017

In Q4 2017, the SPPI

stood at 113.6.

Following a period of

decline during the

recession, an upward

trend has been evident

since 2011. Services

prices were on average

4.2% higher in Q4 2017

when compared with Q4

2016. In Q4 2017 notable

price changes were:

Warehousing, Storage

and Cargo Handling

(+2.9%), Employment

and Human Resource

Activities (+2.4%).

Source: CSO

Figure 72: Services Producer Price Index, Annual Percentage change, Q3 2017

The most notable

changes in the year

were: Postal and Courier

(+9.1%), Air Transport

(+7.2%), Computer

Programming and

Consultancy (+6.0%)

and Sea and Coastal

Transport (-8.5%). In

terms of contribution to

the overall SPPI

increases in Computer

Programming

Consultancy account for

60% of the total change.

Source: CSO

47 The SPPI measures changes in the average prices charged for a range of business service. The SPPI is an experimental data set and the indices are still

under development. In most cases the services measured are provided to business customers only and so individual price indices should not be considered

indicative of more general price trends in the economy. The index covers transaction costs from business to business and excludes consumers who are

covered in the Consumer Price Index (CPI). Individual price indices are aggregated together to create a “service industry” index that is limited in coverage.

90

95

100

105

110

115

20

06

Q1

20

06

Q3

20

07

Q1

20

07

Q3

20

08

Q1

20

08

Q3

20

09

Q1

20

09

Q3

20

10 Q

1

20

10 Q

3

20

11 Q

1

20

11 Q

3

20

12 Q

1

20

12 Q

3

20

13 Q

1

20

13 Q

3

20

14 Q

1

20

14 Q

3

20

15 Q

1

20

15 Q

3

20

16 Q

1

20

16 Q

3

20

17 Q

1

20

17 Q

3

Ind

ex (

20

10 =

100

)

-10 -5 0 5 10

Postal and Courier

Air Transport

Computer Programming and Consultancy

Architecture, Engineering,Technical Testing

Warehousing, Storage, Cargo Handling

Employment and Human Resource Activities

Industrial and Building Cleaning

Legal, Accounting,PR,Consultancy

Freight and Removal by Road

Advertising, Media, Market Research

Security and Investigation

Sea and Coastal Transport

Annual Percentage Change


61

Figure 73: Comparison of Service producer prices, 2016 (latest full year comparison)

Figure 73 compares

Service Producer Prices

levels in Ireland relative

to other European

Countries. Producer

Prices was in 2014 when

prices increased by

2.5%. Overall since

2010, service prices in

Ireland increased by

7.6% compared to than

the Euro area average

(1.4%) and 4% in the UK.

Source: Eurostat

48 This category is based on the ease or difficulty of enforcing commercial contracts. This is determined by following the evolution of a payment dispute and

tracking the time, cost, and number of procedures involved from the moment a plaintiff files the lawsuit until actual payment. Cost is recorded as a

percentage of the claim value, assumed to be equivalent to 200% of income per capita or $5,000, whichever is greater

85 90 95 100 105 110 115

Denmark

Spain

Italy

Luxembourg

France

Lithuania

Euro area (19 countries)

Finland

Netherlands

UK

Poland

Sweden

Germany

Ireland

Austria

Index (2010 =100)

Figure 74: The cost of a commercial contract, 201748

Ireland is a relatively

expensive location in

which to resolve a

commercial dispute

through a first-instance

court. In terms of total

cost, at 26.9 %, broken

down as a percentage of

total costs in Attorney

Fees (19%),

Enforcement (6%), court

(2%), Ireland is above

the OECD (high income

countries) 21.5% but

well below the UK

(46%).

Source: World Bank Doing Business 2018

0

5

10

15

20

25

30

35

40

45

50

Lu

xem

bo

urg

Kor

ea

Ger

man

y

Ch

ina

Fin

lan

d

Spa

in

Fran

ce

Po

lan

d

Can

ada

Ital

y

Latv

ia

Den

mar

k

Japa

n

Ne

the

rla

nd

s

Sw

itze

rlan

d

Isra

el

Sin

gap

ore

Irel

and

New

Zea

lan

d

Sw

eden U

S

UK

Co

st (P

erce

ntag

e o

f cla

im)

Attorney fees Court fees Enforcement fees

62

49 This category is based on the ease or difficulty of enforcing commercial contracts. This is determined by following the evolution of a payment dispute and

tracking the time, cost, and number of procedures involved from the moment a plaintiff files the lawsuit until actual payment. Time is counted from the

moment Seller decides to file the lawsuit in court until payment. This includes both the days when actions take place and the waiting periods in between. The

average duration of the following three different stages of dispute resolution is recorded: (i) filing and service; (ii) trial and judgment; and (iii) enforcement.

Time is recorded in practice, regardless of time limits set by law if such time limits are not respected in the majority of cases.

Figure 75: Time to enforce a commercial contract, 201749

In terms of time taken to

resolve a dispute, the

World Bank reports the

time taken for filing and

service, trial and

judgement and

enforcement (including

time for appeal) is 650

days in Ireland

compared to 437 days in

the UK and 578 days on

average across OECD

High income countries.


Figure 76: Cost of starting a business, percentage of GNI per capita, 2017 Updated

In the last five years

Ireland, has maintained

its competitive position

in terms of the cost to

register a business as a

percentage of gross

national income. In 2017

Ireland ranks first in the

Euro area and joint-

second in the European

Union and OECD (0.2%).

At 0 per cent, the UK

ranks first.


0

200

400

600

800

1000

1200S

ing

ap

ore

Ne

w Z

ea

lan

d

Ko

rea

Lu

xem

bo

urg

Jap

an

Fra

nce US

UK

La

tvia

Sw

ed

en

De

nm

ark

Finl

and

Ch

ina

Ger

man

y

Spa

in

Sw

itze

rlan

d

Ne

the

rla

nd

s

Ire

lan

d

Po

lan

d

Ca

na

da

Isra

el

Ital

y

Tim

e (D

ay

s)

Filing and service Trial and judgment Enforcement of judgment

0

2

4

6

8

10

12

14

16

Ko

rea

Ital

y

Po

lan

d

Jap

an

Sp

ain

Net

her

lan

ds

OE

CD

Eu

ro a

rea

Sw

itze

rlan

d

Ger

man

y

Lat

via

US

Fin

lan

d

Fran

ce

Ch

ina

Sw

eden

New

Zea

lan

d

Den

mar

k

Irel

and

UK

Co

st o

f b

usi

nes

s st

art-

up

pro

ced

ure

s(%

of G

NI p

er c

apit

a)

2017 2013


63

Figure 77: Insurance consumer price inflation, 2013-2017

Insurance is a significant

element within the CPI

basket with a weighting

of 6%. While headline

price inflation has been

stable in recent years

there has been a notable

increase in insurance

price inflation in the

period, mid 2015-mid

2017. Motor insurance

has moderated in recent

months, in the period

2014-2016, prices as

measured by the CPI

increased by 38%.

Source: CSO

Figure 78: HICP Insurance price levels, Index 2012-2017

Figure 78 shows the

comparative trend in

transport insurance

price changes in Ireland,

the UK and Euro area

index form. Since 2015

price changes for

transport insurance in

Ireland and the UK have

been well above EU

rates. On average

transport insurance

prices in Ireland were

17% above 2015 levels in

2017. In the UK prices

were 24% above 2015

levels.

Source: Eurostat

40

50

60

70

80

90

100

110

2013

M01

20

13M

03

20

13M

05

20

13M

07

2013

M09

2013

M11

20

14M

01

2014

M03

2014

M05

2014

M07

20

14M

09

2014

M11

2015

M0

1

20

15M

03

2015

M0

5

2015

M0

7

20

15M

09

20

15M

11

20

16M

01

2016

M03

20

16M

05

20

16M

07

2016

M09

2016

M11

2017

M01

20

17M

03

2017

M05

2017

M07

20

17M

09

20

17M

11

20

18M

01

Ind

ex (D

ec 2

016

=100

)

Insurance Insurance connected with the dwelling

Insurance connected with health Insurance connected with transport

All items

60

70

80

90

100

110

120

130

140

2012

M01

20

12M

03

20

12

M0

5

2012

M07

2012

M09

20

12M

11

20

13M

01

2013

M03

20

13M

05

20

13M

07

2013

M09

2013

M11

2014

M01

2014

M03

2014

M05

2014

M07

20

14M

09

20

14M

11

2015

M0

1

20

15M

03

20

15M

05

20

15M

07

2015

M0

9

2015

M11

20

16M

01

2016

M03

2016

M05

2016

M07

20

16M

09

2016

M11

2017

M01

20

17M

03

20

17M

05

20

17M

07

2017

M09

2017

M11

Ind

ex (2

015

=10

0)

Ireland UK EU 28 Euro area 19

64

Figure 80: Commercial rates, receipts from central government, and rates as a percentage of total local

authority revenue, 2012-2017

Revenue collected

through commercial

rates doubled over the

period 2002-2017. Rates

as a proportion of total

Local Authority revenue

stood at 34.4% in 2017.

The proportion of

revenue received from

Government grants and

subsidies was 27%.

Source: Department of Housing, Planning and Local Government

31%

32%

33%

34%

35%

36%

37%

38%

39%

€0

€200

€400

€600

€800

€1,000

€1,200

€1,400

€1,600

€1,800

20

12

20

13

20

14

20

15

20

16

20

17

Co

mm

erci

al R

ates

as

a %

of

To

tal

Rec

eip

ts

Lo

cal A

uth

ori

ty R

even

ue

(€m

)

Government Grants & Local Government Fund (left-hand axis)

Commercial rates (left-hand axis)

Commercial rates as % of total receipts (right-hand axis)

Figure 79: HICP Insurance price levels, 2012-2017

Figure 79 shows the

annual average rate of

change transport

insurance prices as

measured by the HICP.

Price change in Ireland

and the UK appear more

volatile than in the Euro

area. On an annual

basis, Irish transport

insurance declined by

5.7% in 2017 compared

to increases of 11% and

1.1% in the UK and Euro

area. However, this

follows three successive

years of significant Irish

inflation of 6% in 2014,

19.5% in 2015 and 24.7%

in 2016.

Source: Eurostat


65

Figure 81: Commercial rates, as a percentage of total local authority expenditure, 2013-2017

In the period 2013-2017,

the revenue collected by

Local Authorities

through the levy of

commercial rates varied

between 34 and 38%. In

all counties, except for

Fingal, South Dublin and

Limerick, the

commercial rates to be

levied as a percentage

of gross expenditure

increased in the five-

year period.


Figure 82: Local Authority Income from Commercial rates to be levied, percentage change, 2013-2017

There is significant

divergence in the rate of

valuation and

commercial rates levied

and the proportion of

total local authority

income accounted for by

rates. Comparing 2013

with 2017, local

authority income from

commercial rates has

increased considerably

in Waterford (+300%),

Sligo (+286%), Tipperary

(189%), Louth and

Fingal.


0

10

20

30

40

50

60

Fin

gal

So

uth

Du

blin

Du

n L

aog

hai

re R

ath

do

wn

Co

rk

Kild

are

Cla

re

Gal

way

Lo

uth

Wex

ford

Mea

th

Ker

ry

Off

aly

Car

low

Wic

klo

w

Kilk

enn

y

Wat

erfo

rd

May

o

Wes

tmea

th

Mo

nag

han

Cav

an

Do

neg

al

Tip

per

ary

Ro

sco

mm

on

Lao

is

Slig

o

Lo

ng

ford

Lei

trim

Lim

eric

k

Co

mm

erci

al r

ate

s to

be

levi

ed a

s %

of

gro

ss e

xpe

nd

itu

re

2017 2013

-50

0

50

100

150

200

250

300

350

Wat

erfo

rd

Slig

o

Tip

per

ary

Lo

uth

Fin

gal

May

o

Lao

is

Wex

ford

Co

rk

Mo

nag

han

Wic

klo

w

Cav

an

Lei

trim

Kilk

enn

y

Lim

eric

k

Ker

ry

Lo

ng

ford

Kild

are

Wes

tmea

th

Me

ath

So

uth

Du

blin

Du

n L

aog

hai

re R

ath

do

wn

Car

low

Off

aly

Do

neg

al

Gal

way

Cla

re

Ro

sco

mm

on

Inco

me

fro

m C

om

mer

cial

Rat

es t

o b

e le

vied

(%

chan

ge

20

13-2

017

66

Chapter 10 – Broader Costs Environment

Figure 83: Harmonised Index of Consumer prices, annual changes 2008-2017

Figure 83 shows the rate

of consumer inflation in

the Euro area, its major

economies, and the UK

has been increasing at a

faster rate than Irish

inflation in the last two

years months. In 2017

Irish consumer prices

increased by 0.3% (yoy)

compared with 1.5% for

the Euro area and 2.7%

in the UK. Irish inflation

has tended to be below

the Euro area average

since 2009.

Source: Eurostat

Figure 84: Consumer Price Index, January 2011-2018

While inflation and core

inflation have grown at a

very subdued rate in

recent years, there has

been significant

divergence in the rate of

price inflation for goods

and services in Ireland

since 2013. The annual

average rate of inflation

in 2017 was 0.4%. The

price of Goods

decreased on average by

2.1%. The price of

Services (which includes

mortgage interest) rose

by 2.1%.

Source: CSO

-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.54.04.55.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

An

nu

al a

vera

ge

rate

of

chan

ge

(%)

Ireland UK Euro area 19 Germany France

80

85

90

95

100

105

110

115

120

20

11M

01

20

11M

04

20

11M

07

20

11M

10

20

12M

01

20

12M

04

20

12M

07

20

12M

10

20

13M

01

20

13M

04

20

13M

07

20

13M

10

20

14M

01

20

14M

04

20

14M

07

20

14M

10

20

15M

01

20

15M

04

20

15M

07

20

15M

10

20

16M

01

20

16M

04

20

16M

07

20

16M

10

20

17M

01

20

17M

04

20

17M

07

20

17M

10

20

18M

01

Ind

ex (

Dec

emb

er 2

011

=10

0)

CPI CPI excluding Energy and Unprocessed Food Goods Services


67

Figure 85: Consumer price levels, 2016 and rate of inflation 2017

Figure 85 shows both

changes in prices

(inflation) and the price

level. Ireland’s current

price profile could be

described as ‘high cost,

and rising’ while the UK

is ‘high cost, rising

quickly’. Price levels in

Ireland were 23.7 per

cent above the EU 28

average in 2016 and

increasing by 0.3% in

2017; the UK was 21.6

per cent above the EU

average and increasing

by 2.7% in 2017.

Source: Eurostat

Figure 86: Average annual CPI inflation and contribution to total CPI inflation, 2017

Figure 86 examines the

contribution of

individual categories of

goods and services to

inflation (i.e. taking

account of inflation

rates and the weighting

attached to each good

or service). The

divisions which caused

the largest contributions

to inflation were

Housing, Water,

Electricity, Restaurants

& Hotels and Transport.

Source: CSO

EU 28

Euro area 19

Denmark

Germany

Ireland

Spain

FranceItaly

Latvia

Luxembourg

Netherlands

Poland

Finland

Sweden

UK

Switzerland

US

0.0

0.5

1.0

1.5

2.0

2.5

3.0

40 60 80 100 120 140 160 180

HIC

P 1

2 m

on

th M

ovi

ng

Ave

rag

e P

erce

nta

ge

Ch

ang

e (2

017

)

Comparative price levels of final consumption by private households including indirect taxes, 2016 (EU28 = 100)

Food & Non-alcohol beverages

Alcoholic Beverages & Tobacco

Clothing & footwear

Housing, Water,

Electricity, Gas, Other …

Furnishing & Household Equipment

Health

Transport

Communications

Recreation & Culture

Education

Restaurants & Hotels

Miscellaneous Goods & Services

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

-0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5

Ch

ang

e o

ver

12 m

on

ths

for

Co

nsu

mer

Pri

ce

Ind

ex (

%)

Contributions to overall CPI percentage change in 12 months (%)

68

50 Correction coefficients are calculated as the ratio between the 'economic parity' and the exchange rate to the Euro (where applicable). The economic parity

tells us how many currency units a given quantity of goods and services costs in different countries. By definition, the correction coefficient for Brussels and

Luxembourg is fixed to 100.

Figure 87: HICP Irish consumer price levels relative to the European Union 28, 2016

Irish prices are above the

Euro area average all

categories of goods and

services. Ireland is below

the UK in Services prices

but above in goods.

Health and

Communication prices

are relatively high in

Ireland. The differential

in alcohol and tobacco

prices is primarily due to

taxation policy.

Source: Eurostat

Figure 88: Cost of living correction coefficient50 for EU capitals, 2006-2017

Correction coefficients

are used by the

European Commission

to ensure equality of

purchasing power of

European civil servants'

remuneration between

different locations

within the EU. Figure 88

shows a cost of living

correction coefficient for

EU capitals relative to

Brussels. Dublin is the

fifth most expensive

location in 2017, 20%

more expensive than

Brussels.

Source: Eurostat

90 100 110 120 130 140 150 160 170 180

Food and non-alcoholic beverages

Alcoholic beverages, tobacco and narcotics

Clothing and footwear

Housing, water, electricity, gas and other fuels

Health

Transport

Communication

Recreation and culture

Education

Restaurants and hotels

Miscellaneous goods and services

Consumer goods

Consumer services

Government services

Index (EU 28=100)

Euro area 19 UK Ireland EU 28

40

60

80

100

120

140

160

Co

pen

hag

enLo

ndon

Sto

ckho

lmH

elsi

nki

Dub

linP

aris

Am

ster

dam

Vie

nna

Bru

ssel

sL

uxe

mb

ou

rgB

erlin

Ro

me

Mad

rid

Val

lett

aLi

sbo

nLj

ublja

na

Tal

linn

Ath

ens

Pra

gue

Bra

tisl

ava

Zag

reb

Rig

aB

uda

pes

tN

ico

sia

Viln

ius

War

saw

Bu

char

est

Sof

iaInd

ex (B

russ

els/

Luxe

mb

our

g =

100)

2017 2014 2010 2006


69

Figure 89: Cost of living correction coefficient for EU capitals, 2006-2017

Building on the above,

Figure 89 shows the

comparative cost of

goods and services, and

excluding rent relative

to Brussels. A basket of

comparable goods and

services in Dublin costs

120 % of the cost of a

similar basket in

Brussels. Excluding rent,

while Dublin prices

remain relatively high

they are only 5% higher.

Source: Eurostat

40 50 60 70 80 90 100 110 120 130 140

Sofia

Bucharest

Warsaw

Vilnius

Nicosia

Budapest

Zagreb

Riga

Bratislava

Prague

Athens

Tallinn

Ljubljana

Lisbon

Valletta

Madrid

Rome

Berlin

Brussels

Luxembourg

Vienna

Amsterdam

Paris

Dublin

Helsinki

Stockholm

London

Copenhagen

Index (Brussels/Luxembourg =100)

Excl Rents Total

70

Chapter 11 – Focus on Residential Property and Childcare

Figure 90: Residential Construction cost index-in national currency 2004-2017

The index shows the

trend in the cost for new

residential buildings.

Between 2005 and mid-

2008 costs increased

sharply in Ireland. After

its peak in the third

quarter of 2008 the

index began to fall and

reached its lowest level

about one year later.

During the last 4 years

prices have shown a

moderate quarterly

growth. In Q 3 2017 the

Irish index was 101

compared to 108 in the

Euro area and 120 in the

UK.

Source: Eurostat

Figure 91: Annual Percentage Change sales of newly-built and existing dwellings; Index, 2010-2017

Figure 91 shows how

Irish prices dipped

significantly in the

period 2010-2013 and

recovered in the period

to 2017. In Q2 2017 the

index for Ireland was

109.3, Dublin 124. The

index for the UK was

129 and 181 for London.

While growth has been

relatively constant in

the Euro area, the UK

has experienced a

pronounced uplift in

prices, particularly in

London up to 2016.

Source: OECD

80

85

90

95

100

105

110

115

120

125

20

04

Q4

2005Q

2

20

05Q

4

2006Q

2

20

06

Q4

2007Q

2

20

07Q

4

2008Q

2

2008Q

4

2009Q

2

2009Q

4

2010Q2

2010Q4

20

11Q2

2011Q4

20

12Q

2

2012Q4

20

13Q2

2013Q4

20

14Q

2

2014Q4

2015Q2

2015Q4

2016Q2

2016Q4

2017Q2

Ind

ex (2

010=

100)

Ireland Euro area 19 UK

40

60

80

100

120

140

160

180

200

2010 2011 2012 2013 2014 2015 2016 Q1-2017 Q2-2017

Inde

x (2

010

=100

)

Ireland Dublin UK London Euro Area


71

Figure 93: Residential Property Price Index, Ireland 2007-2017

In the year to December

2017, residential

property prices at

national level increased

by 12.3%. Dublin prices

increased by 11.6%.

Apartments in Dublin

increased by 14.7%.

National prices

excluding Dublin were

13.3% higher. House

prices in the Rest of

Ireland increased 13.2%

over the period.

Overall, the index is

22.9% lower than its

highest level in 2007.

Source: CSO

40

50

60

70

80

90

100

110

120

130

140

200

7M0

1

200

7M0

5

200

7M0

9

200

8M01

200

8M05

200

8M09

200

9M01

200

9M05

200

9M09

201

0M

01

201

0M

05

201

0M

09

201

1M0

1

201

1M0

5

201

1M0

9

201

2M

01

201

2M

05

201

2M

09

201

3M0

1

201

3M0

5

201

3M0

9

201

4M

01

201

4M

05

201

4M

09

201

5M01

201

5M05

201

5M09

201

6M

01

201

6M

05

201

6M

09

201

7M01

201

7M05

201

7M09

National - all residential propertiesNational excluding Dublin - all residential propertiesDublin - all residential properties

Figure 92: House price index (2015 = 100), rate of change-annual data, 2007-2017

Eurostat data shows

residential property

price inflation across

most benchmarked

countries in 2017. The

rate of annual increase

in Irish house prices,

estimated at 10.6% in

Q2 2017, is at pre-

recession levels and the

second highest in the

EU (behind Czech

Republic). The

equivalent growth rates

in the UK for 2017 are

estimated at 5% and 3%

respectively.

Source: Eurostat

-50

-40

-30

-20

-10

0

10

20

30

40

50

Irel

and

Lat

via

Sw

ed

en

Ne

the

rla

nd

s

Luxe

mb

ourg

De

nm

ark

Sp

ain

UK

Po

lan

d

EU

(Ch

ang

ing

Co

mp

osi

tio

n)

Eur

o A

rea

(Cha

ngi

ng C

om

pos

itio

n)

Ger

man

y

Fra

nce

Fin

lan

d

Ital

y

An

nu

al

rate

of

cha

ng

e (%

)

2017Q2 2013Q2 2009Q2 2007Q2

72

Figure 95: Annual average rate of change in actual rents paid by consumers, 2008-2017

Figure 95 uses HICP

data to show the rapid

and sharp changes in

rental prices which have

occurred in Ireland

recently relative to the

UK and Euro area. In

2017, Irish rent prices

paid increased by 6.7%.

While the rate of

increase is less than

2016, they are the

second highest in

Europe and well above

rent inflation in the UK

(1%) and Euro area

(1.2%)

Source: Eurostat

-20

-15

-10

-5

0

5

10

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Ann

ual a

vera

ge

rate

of c

han

ge

%

Ireland UK EU 28 Euro area 19

Figure 94: Residential Property Index, Average annual Percentage Change, 2017

On average in 2017 the

rate of increase in house

prices was highest in the

West (16%) and lowest

in Fingal (6.6%).

National prices

increased by 10.8%. On

a national basis

apartments increased

by 11% with prices

increasing by 9% in

Dublin.

Source: CSO

0 2 4 6 8 10 12 14 16 18

West - housesSouth-East excluding South Tipperary -…

Midland - housesSouth-West - houses

Mid-East including Louth - housesSouth Dublin - housesNational - apartments

National - all residential propertiesDublin City - houses

Border excluding Louth - housesNational - houses

Dublin - apartmentsMid-West including South Tipperary - houses

Dublin - all residential propertiesDublin - houses

Dún Laoghaire-Rathdown - housesFingal - houses

Percentage Change


73

Figure 96: Residential Tenancies Board National Rent Index, Q4 2007-2017

The RTB Index for Irish

residential rents stood

at 107 in 2017 Q4. The

Index for apartment and

house rents stood was

104 and 118

respectively. Rental

growth has been strong

since 2012 and

accelerated in 2014-

2017. As of Q4 2017 the

average national rent for

houses and apartments

was €1055 and €1152

respectively. Higher

rents for apartments

reflect the higher share

of this housing type in

major urban centres.

Source: RTB

Figure 97: Residential Tenancies Board National Rent Index, Annual Percentage Change, Q4 2012-2017

Figure 97 shows the

upward trend in price

changes for houses and

apartments since 2012.

On a year-on-year basis,

rents for houses

increased by 6.5% in

2017 Q4. Apartment

rents increased by 5.3%

on a similar basis. As

noted by the RTB, rents

are seasonal in nature so

quarterly growth rates

can be volatile.

Source: RTB

60

70

80

90

100

110

120

130

Q4

20

07

Q2

20

08

Q4

20

08

Q2

20

09

Q4

20

09

Q2

20

10

Q4

20

10

Q2

20

11

Q4

20

11

Q2

20

12

Q4

20

12

Q2

20

13

Q4

20

13

Q2

20

14

Q4

20

14

Q2

20

15

Q4

20

15

Q2

20

16

Q4

20

16

Q2

20

17

Q4

20

17

Ind

ex (

Q3

20

07=

100

)

National Index Houses Apartments

-2

0

2

4

6

8

10

12Q

4 2

012

Q1 20

13

Q2

20

13

Q3 20

13

Q4

20

13

Q1 20

14

Q2

20

14

Q3 20

14

Q4

20

14

Q1 20

15

Q2

20

15

Q3 20

15

Q4

20

15

Q1 20

16

Q2

20

16

Q3 20

16

Q4

20

16

Q1 20

17

Q2

20

17

Q3 20

17

Q4

20

17

Yea

r o

n Y

ear

Per

cen

tag

e C

han

ge

Houses Apartments

74

Figure 99: Rents on a County by County Basis, Q4 2017

At County and City level,

rents are highest in

Dublin, the surrounding

counties and larger

urban counties such as

Cork, Galway and

Limerick. As of 2017 Q4,

there were 6 counties

where the average rent

exceeds €1,000 per

month (Cork, Dublin,

Galway, Kildare, Meath

and Wicklow). The

highest standardised

average rents were in

Dublin. The lowest

standardised average

rents are in Leitrim.

Source: RTB

51 The GDA contains counties Meath, Kildare and Wicklow.

0

200

400

600

800

1000

1200

1400

1600

Dub

linD

ub

lin C

ity

Wic

klo

wK

ildar

eC

ork

Cit

yM

ea

thG

alw

ay C

ity

Co

rkG

alw

ayLo

uth

Lim

eric

kLi

mer

ick

Cit

yK

ilken

ny

Slig

oLa

ois

Car

low

Wes

tmea

thK

erry

Wat

erfo

rdW

exfo

rdO

ffa

lyC

lare

Tip

pe

rary

Wat

erfo

rd C

ity

Mo

nagh

anM

ayo

Cav

anR

osc

om

mon

Long

ford

Don

egal

Leit

rim

Sta

ndar

dis

ed A

vera

ge

Mo

nth

ly R

ent,

€

Average Rent Q4 2017 Average Rent Q4 2016

Figure 98: Irish Rents Index Dublin and GDA Q4 2007-2017

The Dublin Rent Index

stood at 119 in Q4 2017,

14 index points higher

than the previous peak

in 2007 Q4. The GDA51

Rent Index stood at 108

and outside the GDA

was 100. For Q4 2017,

the average rent for a

house stood at €1,557 in

Dublin, €1,155 in the

GDA (excluding Dublin)

and €789 outside the

GDA. The average

monthly rental prices for

apartments stood at

€1,530, €1,036 and €808

respectively.

Source: RTB

60

70

80

90

100

110

120

130

Q4 2

007

Q2 2

008

Q4 2

008

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

Q4 2

015

Q2 2

016

Q4 2

016

Q2 2

017

Q4 2

017

Ind

ex (

Q3

20

07

=10

0)

Dublin Greater Dublin Area (Excluding Dublin) Outside GDA


75

52 'Full-time' care is defined as care for at least 40 hours per week. Data for countries marked with an * are based on estimates for a specific region or city,

rather than for the country as a whole. Average earnings/the average wage refers to the gross wage earnings paid to average workers, before deductions of

any kind (e.g. withholding tax, income tax, private or social security contributions and union dues) (see OECD, 2007: 186-187). See the OECD Tax and Benefit

Systems website (http://www.oecd.org/els/soc/benefits-and-wages.htm) for more detail on the methods and assumptions used and information on the

modelled for each country.

Figure 100: Gross fees for two children (age 2 and 3) attending full-time care52 at a typical childcare centre, as %

of average earnings (AW), 2015

Gross childcare fees in

Ireland are relatively

high compared to EU

and OECD averages and

are the 8th highest in

the OECD overall. As a

percentage of average

wages, childcare fees

account amount to 50%

in Ireland compared to

the Euro area average of

22%. Fees are highest in

Switzerland 70%) and

the UK (England, 64%).

Source: OECD

Figure 101: Out-of-pocket childcare costs for a two-earner couple family,2015

Net Irish childcare costs

for parents with two

children and combined

income at 167% of AW

as a % of income are

amongst the highest in

the OECD. Childcare

benefit/rebates (11.2%)

are above the UK, Euro

area and OECD

averages, but high fees

(50% of average wages)

means the out of pocket

costs for Irish childcare

are relatively high.

Source: OECD

0

10

20

30

40

50

60

70

80S

wit

zerl

and

*

UK

Ne

ther

lan

ds

Lu

xem

bo

urg

Ne

w Z

eal

an

d

Irel

an

d

Jap

an * US

OE

CD

Ave

rag

e

Po

rtu

gal

Po

lan

d *

Sp

ain

Eu

ro a

rea

Ave

rag

e

EU

Av

erag

e

Fra

nce

Lat

via

Fin

lan

d *

Ko

rea

De

nm

ark

Ge

rma

ny

*

Sw

eden

Gro

ss C

hild

care

Fee

s (%

of

Ave

rag

e W

ages

)

-60

-40

-20

0

20

40

60

80

Sw

itze

rlan

d *

UK

Ne

the

rla

nd

s

Lu

xem

bo

urg

New

Zea

lan

d

Irel

and

Japa

n *

US

OE

CD

Ave

rage

Po

lan

d *

Sp

ain

Eur

o a

rea

Ave

rag

e

EU

Ave

rag

e

Fran

ce

Latv

ia

Fin

lan

d *

Ko

rea

Den

mar

k

Ger

man

y *

Sw

eden

Ch

ildca

re re

late

d c

ost

s an

d b

enef

its

(%o

f ave

rag

e w

age)

Childcare fee Childcare benefit/rebates Tax reduction

Changes in other benefits Net cost Net cost, % of family net income

76

0

20

40

60

80

100

120

140

160

180

200

Dublin State South-West Mid-East West Border Mid-West Midland South-East

Ave

rag

e C

ost

per

Wek

(€

)

All children 0-12 Pre-school children Primary school children

Figure 102: Out-of-pocket childcare costs for a lone parent family,2015

For lone parents

(earning 50% of the

average wage) with two

children Ireland is the

most expensive OECD

location in terms of fees

paid. As a proportion of

income, childcare

accounts for 42% of

family income in Ireland

compared to 23% in the

UK and 12% in the Euro

area. This the second

highest proportion in

the OECD.

Source: OECD

Figure 103: Average Weekly Childcare Costs, Ireland, 2016

The average cost per

week per child for pre-

school children is

€118.00, while the

average weekly cost per

primary school child is

€73. The average weekly

cost for a child aged 0-

12 is €96. There is

considerable divergence

between Dublin and

other regions. The

average weekly cost per

child is highest in

Dublin, at €150 per child

per week. It is lowest in

the South-East at €83.

Source: CSO

-80

-60

-40

-20

0

20

40

60

80S

wit

zerl

and

*

UK

*

Net

herl

and

s

Luxe

mb

ourg

New

Zea

lan

d

Irel

and

Jap

an *

US

*

OE

CD

Ave

rag

e

Po

lan

d *

Spa

in

Eur

ozo

ne A

vera

ge

EU

Ave

rag

e

Fra

nce

La

tvia

Finl

and

*

Kor

ea

Den

mar

k

Ger

man

y *

Sw

eden

Ch

ildca

re re

late

d c

ost

s an

d b

enef

its

(%o

f ave

rag

e w

age)

Childcare fee Childcare benefit/rebates Tax reduction

Changes in other benefits Net cost Net cost, % of family net income


77

Figure 104: Consumer Prices for Childcare, Ireland, 2012-2017

Figure 104 shows the

trend in consumer prices

for childcare services

relative to services and

overall consumer price

inflation. While childcare

price levels have risen in

recent years, they are

not out of line with

movement in overall

prices. In the year to

November 2017, on

average, childcare

services prices increased

by 1.3% compared to a

rate of increase of 2.2%

for services and 0.3% for

all items.

Source: CSO

80

85

90

95

100

105

110

115

120

20

12M

11

20

13M

03

20

13M

07

20

13M

11

20

14M

03

20

14M

07

20

14M

11

20

15M

03

20

15M

07

20

15M

11

20

16M

03

20

16M

07

20

16M

11

20

17M

03

20

17M

07

20

17M

11

Ind

ex (D

ec 2

016

=10

0)

All items Services Childcare Services

78

Appendix 1 – NCC Policy Recommendations on Costs 2017

Policy Recommendations

This report provides part of the evidential base to assist policymakers to identify the key challenges

confronting Irish enterprise in terms of the relative costs of doing business in Ireland. The Council will further

consider these challenges in its annual policy document, Ireland’s Competitiveness Challenge, which will be

published later in 2018.

Based on the benchmarking analysis contained in the Costs of Doing Business 2017 and Competitiveness

Scorecard 2017 reports, the Council identified a range of policy areas relating to costs requiring action to

enhance Ireland’s competitiveness performance. The most recent recommendations, drawn from the

Council’s Competitiveness Challenge report published in December 2017 are restated below.

Cost Competitiveness Challenges

Taxes and Labour Costs

• Conduct a review of the Irish Tax System as it applies to SMEs and Small Mid-Caps to consider how its

competitiveness could be enhanced in the context of Brexit.

• Continue to reform and simplify the current regime of taxes and charges on employment, specifically

to further encourage the take-up of employment, recruitment and retention of talent, whilst

simultaneously maintaining a broad personal tax base. In the context of progressing Budget 2018,

remove anomalies in relation to PAYE and the USC to support labour market participation and

entrepreneurship.

• Review income taxes (e.g., credits, thresholds and rates.) to support improvements in after-tax

income, enhancing the incentive to work while simultaneously protecting labour cost competitiveness.

Building on the changes in recent Budgets, the entry point to the top marginal income tax rate should

be increased and maximum marginal rates for all employees should be below 50 per cent.

• Consider further changes to the income tax system which will contribute to the decline in replacement

rates as part of the Government’s consideration of income tax, and considering the factors

encouraging take-up of employment.

• Review VAT exemptions and outline the case for current reduced rates and exemptions. Consider the

merits of further standardisation of rates to allow for reductions in more distortionary taxes such as

those on labour.

• Wage growth in both the public and private sectors should be underpinned by productivity growth. In

this regard, there is a role for both the public and private sectors alike to proactively manage their cost

base and drive efficiency, thus creating a virtuous circle between the costs of living, wage expectations

and cost competitiveness. It is essential that we continue to monitor labour cost trends with a specific

eye on relative international competitiveness, and ensure that Irish wage levels do not move in a

manner that undermines enterprise competitiveness and threatens job sustainability.

Property Costs

• Continue the periodic review of Rebuilding Ireland: Action Plan for Housing and Homelessness,

focussing in more detail on various elements of the Plan’s five constituent pillars.

• Introduce the Vacant Site Levy and regularly update the register to which the Levy applies.

• Continue to evaluate the costs and benefits of demand inducing interventions in the residential

property market.


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• Consider the mandate of the Residential Tenancies Board regarding regulation of the rental sector and

allow it to refine Rent Pressure Zone’s where necessary. Undertake detailed analyses of rental data to

assist in evidence based policy making.

• Publish the Report of the Expert Group on Cost Rental and grow the capacity for delivering cost rental

options.

• Expedite the development of a commercial property price register encompassing data on commercial

sales and leases.

• Continue work on the development of a Commercial Property Statistical System once administrative

data sources on commercial property have been developed by public bodies.

• Prioritise the recommendations and actions arising from the Working Group on Construction costs and

develop an implementation plan to take steps to tackle costs which are out of line with international

norms and to inform policy decisions in relation to the development of both multi-storey apartment

schemes in urban areas and traditional housing/duplex homes in suburban locations

• Urgently commence the competition to champion best practice and cost-effective design of residential

property and publish findings regarding efficiencies and innovative processes. Analyse the cost savings

and disseminate the learnings from the competition to housing stakeholders.

Transport Costs

• Ensure that the public transport component of the forthcoming 10-year National Investment Plan, and

the development of the new National Planning Framework prioritises investment in a manner that is

evidence-based and responds to strategic challenges and opportunities for all regions.

• Continue to invest in ongoing maintenance of the motorway and national road network to facilitate

access to major urban areas, and to optimise the substantial investment already made while reducing

the need for significant remedial work in the future. Examine the adequacy of the allocation for road

infrastructure (in terms of the balance between expenditure on maintenance and upgrading, and new

works) in the context of the National Investment Plan.

• Consider and address the strategic development requirements and capacity needs of Tier 1 and Tier 2

ports as part of the Regional Spatial and Economic Strategies (RSES).

• Implement in full the ports services regulation by 2019.

• Publish a policy statement on public transport considering policy drivers (such as climate change

targets from the Paris Agreement and the EU’s Effort-Sharing Decision on 2030 emissions targets),

and the improving domestic economic context and associated pressure this places on transport-related

emissions.

• Undertake an assessment from an enterprise perspective of the National Mitigation Plan to evaluate

green economy opportunities as well as potential negative impacts on the enterprise sector,

particularly potential costs implications for enterprise.

• Set out a medium- and long-term policy on fuel taxation. The Council recommends that, should

Government decide on a policy of equalisation of diesel and petrol prices through alteration of excise

duties or carbon tax rates, this should be done over successive Budgets.

• In reviewing the carbon tax consider the impact of changes to the tax on business costs and enterprise

competitiveness in addition to the contribution of the tax to the decarbonisation of the Irish economy.

• Consideration to be given to provision of assistance to Brexit-exposed enterprise sectors currently

reliant on diesel-fuelled vehicles (e.g. subsidies towards the purchase of lower-emitting or electric/

hybrid vehicles).

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Utility Costs

• Progress and enact the provisions of the Water Services Bill 2017 about the future funding of public

water and wastewater services in Ireland.

• Commence the consultative process to inform the harmonisation of non-domestic water tariffs to

develop a framework to ensure non-domestic customers are charged fairly for usage of water and

wastewater services

• Prioritise the recommendations and actions arising from the OECD Review of utilities regulation in

Ireland and set out an implementation plan for action. Alter the mandate of the CER accordingly to

allow for best practice in the regulation of both electricity and gas.

• Improve electricity supply/demand matching by location.

• Review supports for electricity generation.

Credit and Financial Costs

• Continue to monitor the landscape for enterprise finance so that viable businesses are not constrained

by an inability to access finance. Where gaps are identified, develop proposals to increase the use of

non-bank finance by SMEs.

• Consider devising competition indicators showcasing the degree of concentration in the business

lending market to benchmark and track the level of competition in the sector.

• Consider the development of an appropriate regulatory framework for the crowdfunding market

• Clarify the eligibility criteria for the Brexit Working Capital Scheme and engage with industry

stakeholders accordingly to optimally develop the Scheme.

• Broaden the distribution capability and market coverage of the SBCI by adding new on-lenders and

working to develop innovative products, thereby serving to drive competition in the SME finance

market.

• Continue to facilitate partnerships between SBCI and international lenders, especially in non-bank

finance, to increase competition and provide alternative sources of finance for SMEs.

• Remove specific barriers identified in the Mobile Phone and Broadband Taskforce Report thereby

alleviating telecommunications deficits in Ireland and assisting the rollout of the National Broadband

Plan.

• Award the National Broadband Plan intervention to a contractor(s) and confirm the revised

deployment schedule to ensure the timely rollout of the Plan. Ensure that the network is scalable and

proofed to meet future demand for significantly higher download speeds (in excess of 100 Mbps) and

higher upload speeds.

Business Services Costs

• Continue to develop a more comprehensive and representative data set on legal service prices

• Commence as quickly as possible the implementation of the regulatory functions of the Legal Services

Regulatory Authority and thereby introduce measures to reduce legal costs.

• Establish the Office of the Legal Costs Adjudicator. Publish and maintain a public register of allowable

legal costs.

• Expedite the establishment of both the national claims information database and the Master Licence

Record Project as set out in the Report on the Cost of Motor Insurance.

• Prioritise the recommendations and actions arising from the second phase of the Cost of Insurance

Working Group in relation to the Employer Liability and Public Liability insurance sectors. Devise a

clear implementation plan for addressing issues identified. The plan should have specific timelines,

reporting mechanisms and assigned responsibility.

National Competitiveness Council c/o Department of Business, Enterprise and Innovation 23 Kildare Street, Dublin 2, D02 TD30 Tel: 01 6312121 Email: [email protected] Web: www.competitiveness.ie

Documents

Costs of Doing Business in Ireland 2018 - … of doing...Costs of Doing Business 2018 7 Recent Trends in Cost Competitiveness In terms of business costs, as a small open economy dependent