Cost-of-living crisis hits Ireland’s ranking as place for private businesses to thrive

Ireland has slipped two places in a ranking of countries where private businesses thrive, with a significant fall in the “macroeconomics” category due to the cost-of-living crisis.

The State was ranked ninth among 33 major economies in Europe, the Middle East,and Africa in the latest PwC Private Business Attractiveness Index, up from 14th place two years ago, but down from seventh position last year.

Ireland fell from first place to sixth in its ranking for macroeconomics. “Much of this significant slip in ranking for the macroeconomic metric stemmed from the costs-of-living crisis,” the report said.

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It also pointed to cost increases in the private businesses sector. “In this regard, Ireland ranked 30 out of 33 for the cost of electricity and 29 out of 33 for the cost of living metrics leading to an impact on our overall macroeconomic standing,” PwC said.

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Ireland scored 13th and eighth respectively for “sustainability and climate” and “social, responsibility and governance”.

PwC partner Colm O’Callaghan said Ireland’s fall in the index “reflects the intense pressure that some private businesses are under and the urgent need for continued supports for this important sector of our economy”.

“Over the last few years, private businesses had to deal with the pandemic, then a period of steep inflation, high interest rates, electricity price increases and other cost pressures often while working with restrained cash flows,” he said.

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“As it stands, private businesses are facing even more cost pressures from an increased minimum wage, pension auto enrolment and employer PRSI hikes all coming together.”

Mr O’Callaghan said it was welcome that the Government had cut the interest rate on tax debt frozen since the pandemic to zero, and that Revenue had indicated it would take a flexible approach to repayments.

However, he added that “new or creative long-term solutions may still, nevertheless, be ultimately needed to help businesses service or repay the debt due while continuing to grow”.

Elsewhere, Ireland improved one position to sixth place in the “start-up ecosystem” category, while it also improved its ranking to ninth place from 12th last year for “education, skills and talent”.

The country was ranked 10th for “tax and regulatory environment”, up from 11th place last year. However, there was a marked improvement from 20th position in 2021.

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PwC partner Nicola Quinn said Ireland must take a “whole of government approach” to attracting and retaining private business. “We need to continue to prioritise supports to help these businesses meet the increased costs of doing business in Ireland,” she said.

“We also need to look at additional tax incentives to encourage digital transformation, investment in SMEs and energy transition.

“We welcome the Government consultation on simplifying Ireland’s business tax regime and it is vital that measures to implement this are brought forward in the next budget.”

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