Small businesses have been hammered by increases in business costs such as energy, water, local authority charges, rents and professional services that are two or three times higher than their larger rivals.
According to a survey by the business and employer organisation, IBEC, business costs rose significantly in 2005, especially for companies with less than 50 employees.
The survey revealed an average increase in business costs for small companies of 15.6% in 2004 and 13.9% in 2005, giving a cumulative increase of 31.6%, three times higher than the cumulative figure of 10.4% for companies with 50-250 employees. Larger businesses reported a cumulative increase of 17.5%.
IBEC found the largest cumulative increase in costs for all businesses was for professional services, up 33.9% across 2004 and 2005. Energy costs, identified as the biggest concern for most companies, experienced a cumulative increase of 26.6%, closely followed by rents on 25.6%.
Despite the huge increase in charges for professional services, it was not identified as a big area of concern. Instead, respondents expressed concern about rents, transportation and warehousing, waste collection and treatment.
IBEC claimed the results demonstrated that the cost of doing business in Ireland was “spiraling out of control” and threatening the viability of indigenous and multinational companies.
Costs were rising at three times the rate of inflation, a situation described as “indefensible and unsustainable,” by IBEC director of enterprise Brendan Butler. ‘Unless meaningful action is taken to address this imbalance, the ability of Irish business to compete will be seriously threatened and this will ultimately put jobs at risk,” he warned.
Butler claimed costs in Ireland were rising “much more rapidly than in competitor countries. Non-pay costs are now a significant and increasing part of a company’s cost base and the survey demonstrates that such costs now account for almost half of overall costs”.
Amid all the rising costs, IBEC welcomed an eight per cent fall in insurance costs in 2005 and below inflation increases in the telecommunication and postal communication sectors.
IBEC also revealed that 6,000 jobs had been shed in the first quarter of this year in Ireland, compared to 4,300 in the same period in 2005.
IBEC’s ten point plan to control Ireland’s cost base
1. Increases in indirect taxes should be avoided, as was the case in the 2005 budget
2. Excise duty on fuel should be reduced in the 2006 budget
3. Increases in local authority charges must be resisted by a stronger focus on efficiency
4. Government to continue to drive the agreed inflation target rate of two per cent
5. Wage increases must not exceed levels obtaining in other European countries
6. Concentrated focus on value for money within the public sector must be pursued
7. More aggressive implementation of competition policy in sheltered sectors
8. Develop an appropriate energy policy to reflect market conditions in Ireland
9. Prioritise completion of major infrastructure projects to reduce congestion
10. Conduct rigorous regulatory impact assessments on existing and proposed legislation
Subscribers 0
Fans 0
Followers 0
Followers