Inside the world of business
Signs are that pay cuts are becoming part of the norm
A RECURRING debate since recession hit these shores is which sections of the population have felt the most pain.
In advance of last month’s budget, union leaders, particularly Irish Congress of Trade Unions boss David Begg, suggested the Government’s insistence on public sector pay cuts rather than a proposal for 12 days of unpaid leave was part of a plan to cut wages across the economy. A currency devaluation by stealth, if you will, but while remaining in the euro.
Begg even suggested the media was overplaying the level of private sector wage cuts because media companies were among the first to impose them.
CSO data released just days before Christmas showed that average weekly earnings fell 1.1. per cent in the year to June 2009. While private sector pay was down on average 3.1 per cent, public sector wages actually rose 1.3 per cent. Adjusting the figures for the impact of the pension levy on public servants, and that lower paid workers have joined the dole queues in greater numbers than the relatively high paid, both sectors saw wages fall in the range of 4-5 per cent.
New data suggest the cuts have now gone even deeper. Grant Thornton’s International Business Report for 2010 surveyed Irish firms and found that 65 per cent reported cutting wages last year. Of this group, 59 per cent implemented cuts greater than 5 per cent.
Tomorrow, US business group the Conference Board will publish its annual productivity report which provides data on productivity growth rates, GDP, employment and hours worked for 123 countries. This will provide clear signs on whether the cuts are making us more competitive.
Personal pain, in the form of wage cuts, might be easier to take if, through the process, the country has a chance of economic recovery in the medium term.
Busy time for Tullow
Tullow Oil is in for a busy few weeks. The company is set to buy out Heritage, its partner in blocks 1 and 3a in Uganda’s Lake Albert region, (it owns 100 per cent of block two), for an initial $1.35 billion cash, and a further contingency payment of $150 million after exercising pre-emption rights to match the sum being offered by ENI.
Once its shareholders and the Ugandan government agree to that deal, the largest in the company’s history, the Irish exploration group will recruit a new partner which will share the $5 billion cost of developing the assets and building the infrastructure needed to get the oil out of the ground and on to the market.
Reports yesterday mentioned both Exxon and French giant, Total, as being in the running. Those reports were not confirmed, but the fact that majors are thought to be interested indicates the scale of what Tullow is sitting on.
The company has proved that its Ugandan interests hold 700 million barrels of oil, and potentially contain a further 1.5 billion. Either way, that’s a lot of oil.
Tullow needs a partner as its expertise lies in finding oil rather than than bringing it to market. The Irish company is likely to make its decision some time next month, and may recruit more than one company to join it in the project. Actual production could begin – on a small scale at least – in about two years.
The group is one of the biggest explorers in Africa, with on and offshore licences in the continent’s central, southern and western regions, many of which either have proven reserves or have advertised their potential. Even if it does not do a deal with a major this time around, it could well do so in the future.
Lights, cameras, action
THE IRISH Film Board has taken the chance to celebrate the advent of the Hollywood awards season with a press release announcing the imminent arrival of more A-listers to our tax-friendly shores: Steven Soderbergh's Knockout, a spy thriller set to star Gina Carano, Ewan McGregor and Irish actor Michael Fassbender, has been confirmed for production in Ireland next month, bringing 100 film industry jobs for Irish crew.
None of this glamorous activity would be possible without the support of the tax relief provided under Section 481, according to the film’s Irish producer Alan Moloney.
“Section 481 is a key element in facilitating film and film-making in this country,” Minister for Arts, Sports and Tourism Martin Cullen said, which is interesting as the Government has threatened to remove or change the terms of the tax relief on countless occasions. In fairness, the last change, in the 2008 Finance Act, made improvements to the relief, while the Commission on Taxation also gave this part of the tax code its seal of approval last September.
Keeping some semblance of a film industry here through tax reliefs generates more wealth for the exchequer than it costs it (the benefits in 2004-2006 were €96.3 million and the costs were €90.9 million, according to the 2007 Indecon review).
Much of Section 481's pulling power now lies in the fact that its tax incentives apply to television production as well as film, which is not the case under the UK's equivalent scheme. Bagging the production of ITV's Saturday night sci-fi series Primeval– which starts filming here in March – may not be quite as satisfyingly "Hollywood" as a Soderbergh flick, but it's likely to make a more lasting contribution to Ireland's reputation as a friendly place to roll cameras.
TODAY
The report of an inspector appointed to investigate unlawful insider dealing by DCC and its former chief executive Jim Flavin, in the €106 million sale of the DCC stake in Fyffes 10 years ago returns to the Commercial Court today where Mr Justice Peter Kelly will decide on its publication.
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