CEO Update: Ibec's Regional Insights Series and Royal Irish Academy Membership

Dear member,

Earlier this week, Ibec concluded our Regional Insights Series. Sponsored by ESB and open eir, Ibec hosted events in Donegal, Galway, Cork, Limerick, Kilkenny and Dublin where we had extensive engagement with CEOs.

It is clear that business sentiment remains very buoyant with the majority of firms in expansionary mode. Challenges in other investment locations such as the US and UK, means that Ireland is still a location of choice for new investment and CEOs see substantive growth opportunities.

However, a universal theme from the Regional Insights Series is that capacity pressure in relation to both physical and human capital is now the most significant choke point for the economy. Ireland’s reputation as a place to do business faces material risk unless we are able to demonstrate more effective deliverability.

Informed by these insights Ibec’s position is that the projected budgetary surplus must be put to work as part of a more ambitious investment programme which can both address these capacity pressures and also support social cohesion at a time when it faces significant challenges.

Ibec has a number of policy proposals which will address these issues:

• Infrastructure and housing delivery must be rapidly accelerated and increased resourcing is urgently needed for planning, regulation and other public services which are struggling to keep pace with private sector growth. The continued under-resourcing of many parts of the public sector is proving detrimental to the delivery of investment right across the economy.
• With the economy at full employment, labour supply is a major challenge. It remains unconscionable that there is a €1.5 bn surplus of employer contributions sitting in the National Training Fund at a time when there is such urgent need for workforce upskilling and reskilling.

Ensuring the tax system rewards work, as wages rise, is also a key concern for business. In Ireland, during the 2000’s, the income tax system broadly kept pace with increases in wages. However, over the past decade the real value of both tax bands and credits has fallen significantly due to decisions to not index the tax system to wages.

Not indexing tax bands and credits to wages in the economy is a decision to increase taxes in real terms, so called ‘bracket creep’. Full indexation of the income tax and USC system would cost close to €1 billion in 2024 but any tax package less than this, because of bracket creep, would in fact represent a tax increase in real terms. Ibec will be advocating for a tax package in Budget 2024 which ensures that work continues to be rewarded.

The corporate and income tax bonanza of recent years means that we now have a unique opportunity to invest ambitiously in a more sustainable and productive economy but the vast opportunities available can only be seized if we increase both our ambition and our ability to deliver effectively.

On a personal note, I was admitted last Friday to Membership of the Royal Irish Academy, Ireland’s highest academic honour. I believe the recognition is for the interface of Irish business and academia which is potentially the future competitive advantage for our economy and society over the next generation.

As always, I welcome you feedback and insights.

Best regards,

Danny McCoy, MRIA

CEO

Ibec