Ibec - for Irish business
Card 3 of 7

Priority 2: Cost Competitiveness in the context of Brexit

24 March 2017
Firms most affected by Sterling depreciation are those in food and services where the majority of exports go to the UK. Over the coming years it is likely that Sterling will continue to weaken and the euro/sterling exchange rate will remain elevated with the economic situation in the UK expected to deteriorate.
This will not just affect exporters. This fall in Sterling will also mean increased competition on Irish shelves from British products. It will damage tourism flows from the UK and drive retail activity of Irish consumers cross-border and online. This will have the double effect of damaging three of our most employment intensive industries agrifood and drink, retail and tourism. Urgent action is now required to protect our vital exports to the UK market, limit damage in the domestic market from cross-border shopping, and address competitive pressures caused by the fall in Sterling.
An intense ongoing whole of government - focus on cost competitiveness in areas such as labour costs and the minimum wage, on policy decisions that would adversely impact PSO charges on electricity; and on insurance costs.
Labour costs - A strong focus on labour cost competitiveness needs to be maintained in the context of Brexit. Irish exporters selling into the UK have already seen margins disappear as a result of fluctuations in Sterling. The income effect on UK households will also hurt many of our most cost sensitive industries such as agrifood and drink and tourism. Issues such as further increases to the minimum wage, erosion of flexible labour market policy and imposition of further taxes on employment must be addressed in this context.
Insurance costs - Government is now taking action to address the spiralling cost of motor insurance. However, attention also needs to be paid to public liability and employer liability insurance. Typically, these equate to nearly three percent of a company's payroll cost. There are worrying signs that premiums are set to increase sharply. Personal injury awards tend to be far higher in Ireland than elsewhere in the EU. Rising legal costs further add to the burden.
The PSO Levy - The Levy helps Ireland to meet EU-mandated renewable energy targets by supporting investment in clean electricity generation projects that would otherwise not be bankable. However, Irish industry's share of the financial burden is substantially higher than it ought to be. The Commission for Energy Regulation needs to correct this.
Regulatory costs - The government must ensure that further plans to impose regulatory burden are not imposed on Irish business. This includes regulatory costs such as structural separation in retail stores, taxes on sugar sweetened drinks and those recently announced in the medical devices industry. In the light of the opportunities in the financial services sector it must ensure the quality, consistency and efficiency of financial regulation is world class. We must take steps to minimise regulatory divergence. We must be more active in influencing European regulatory policy but also monitor and respond nationally to any changes the UK makes. Government must liaise with our exporting and domestic sectors on complex regulatory issues.