EY warns wage costs may affect economy

Accounting firm predicts Republic’s economic growth will slow from above 8% this year to 4.4% in 2019

Daniel Mackey and Peter Coppinger of Teamwork.com, overall winners of this year’s  International Award at the EY Entrepreneur of the Year Awards. Photograph: Dave Meehan

Daniel Mackey and Peter Coppinger of Teamwork.com, overall winners of this year’s International Award at the EY Entrepreneur of the Year Awards. Photograph: Dave Meehan

 

Accounting firm EY has predicted that economic growth in the Republic will slow from above 8 per cent this year to 4.4 per cent in 2019.

The latest EY “Economic Eye” report predicts that growth will slow further to 4 per cent in 2020, but the Republic will still remain one of Europe’s best-performing economies.

Its authors estimate that about 70,600 net new jobs will have been created by the end of 2018, but labour shortages mean that wage growth, currently running at 3.6 per cent per annum, may soon become an influencing factor.

“With [...]growth comes a host of other challenges for businesses such as the ongoing war for talent which our report finds remains a significant obstacle for companies,” said Neil Gibson, EY Ireland’s chief economist.

“Coupled with housing price increases, wage costs are rising and will act as a natural break on hiring intentions as well as a potential accelerator of investment in technological solutions.”

North’s labour market

North of the Border, EY predicts that growth rates will dip below that of Britain in 2019 and 2020, and that close to 5,000 jobs will be lost.

According to EY this will signal a major turnaround in the North’s labour market, which has expanded in the past six years.

It expects the labour market will peak this year in Northern Ireland but “long standing productivity problems, coupled with growing uncertainty around the UK economy” will then begin to impact.