Euro weakness makes business costs in Ireland increase

The cost of doing business in Ireland is increasing due to a weak euro foreign exchange rate, according to a new report on Friday.

The report, released from the National Competitiveness Council, finds that Ireland remains an expensive location in which to do business.

Ireland is the third most expensive location in the euro area for consumer goods and services, it said, adding that this improvement is largely being driven by external factors beyond the control of domestic policymakers: a weak euro foreign exchange rate, low interest rates, and low international fuel prices have all combined to improve Irish cost competitiveness.

A number of upward domestic cost pressures are now emerging, however, particularly in relation to labor, property and business services, according to the report.

It said gross and net earnings are the eighth highest in the euro area. Gross earnings are below euro area averages but net earnings are 11.6 percent above average.

It also said commercial rents for both office and retail space grew strongly last year and concerns persist about the shortage of available prime office space for rent in Dublin, Cork and Galway cities as the market tightens and vacancy rates decline.

With regard to transport and utility costs, it said diesel prices are 5.5 percent more expensive in Ireland than in the euro area. The weak euro may result in further fuel price increases since crude oil is priced in dollars.

Within the European Union (EU), Ireland is one of the most expensive countries for electricity. It is the fifth and seventh most expensive location in the euro area for small and medium-size enterprise (SMEs) and large electricity users respectively.

The report said there is a need to refocus efforts on minimizing domestically controllable costs to the extent possible.

It highlights the difficulty of achieving further cost reductions against a backdrop of low inflation throughout the EU, and the significant risk that recent competitiveness gains will be eroded as economic growth strengthens. Endit