Ireland’s competitiveness is on a downward trend, and there remains a “critical need” to address key infrastructure deficits at a time when the country’s economic outlook is “firmly tilted to the downside”, according the findings of a major report.
The report, Ireland’s Competitiveness Challenge 2025, was drafted by the National Competitiveness and Productivity Council, which advises the Government on key issues facing the economy.
While Ireland is ranked as the most competitive country in the euro area and the seventh most competitive economy in the world, it has fallen from second place just two years ago.
The decline was largely due to a drop in “business efficiency” from third place to 11th.
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A key issue highlighted by the report is shortcomings in Ireland’s critical infrastructure, such as access to water and electricity.
“There remains a critical need to enhance the delivery of our economic infrastructure to address growing deficits,” the report notes.
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“Significant infrastructural demand arising from strong population growth, in combination with an insufficient supply response has resulted in growing deficits across housing, energy, water and transport.”
The report says planning delays “continue to hamper our ability to meet targets”, and that the Government should consider the introduction of mandatory timelines in relation to licensing, including for environmental licences.
The council says productivity in the construction sector remains “unacceptably low” in a period of “critical need for increased output”, and that there is a need to “better understand” the drivers of this.
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The report also deals with personal injury claims, which it says are emerging as a “major cost driver” for businesses in Ireland through their “significant influence” on insurance premiums and risk assessments.
Legal costs in litigation are “disproportionately high”, it says, calling for a re-examination of the methodology used to benchmark the level of awards in advance of the next review of the personal injuries awards guidelines.
Indeed, the report deals extensively with the cost of doing business, which it says “continues to present significant competitiveness challenges despite overall economic resilience”.
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It notes that labour costs in Ireland “have risen sharply” in recent years and are projected to continue increasing due to wage growth and public policy moves to improve working conditions.
The report also refers to the new “enhanced reporting requirements”, which require employers to provide detailed reporting on expenses paid to employees or directors without the deduction of tax, as a “new source of increased labour-related cost”, and calls for them to be reviewed.
“For employers submitting relevant returns outside of standard payroll filings, this represents a new administrative burden,” it says. “There is a concern about the proportionality of requiring all employers to provide such information.”
Some 11,170 company liquidations occurred last year, with the number of insolvent liquidations up threefold to 1,917. Meanwhile, the number of solvent liquidations was higher than in any of the previous 10 years.
Some 320 new companies in the hospitality sector and 276 new companies in the retail sector were incorporated in the first five months of this year. Both numbers were down by almost half on last year.
The council believes all of the issues outlined in the report are harming Ireland’s competitiveness at a time when it is already under pressure from “uncontrollable” geopolitical factors such as US president Donald Trump’s aggressive trade policies.
Indeed, the report notes the concentration of trade with partners in the United States “has been jeopardised” in recent months, and calls on the Government to help Irish firms to diversify export markets and supply chains.
It says the risks to Ireland’s economic outlook “remain firmly tilted to the downside”, while efforts to incentivise reshoring by US multinationals and the repatriation of intellectual property out of Ireland could have “major and lasting implications” for Ireland.
