Inflation may dull high-tech edge study


Ireland's future competitiveness as a high-technology centre is being jeopardised by high inflation, high salary levels, office rentals and personal taxation, a new study has warned. But Ireland's corporation tax rates are seen as a positive factor, according to the report by consultants Prospectus and sponsored by Bank of Ireland.

"It's not time to panic yet," said Prospectus director Ms Mary Cryan. "But the report does indicate stress factors that will need to be addressed if Ireland is to continue its success to date in high tech."

The report warns about inflation. "Traditionally a low cost location, Ireland's spiralling inflation rates are beginning to erase the advantageous conditions of the past decade. With wage costs being driven upwards due to shortage of supply and rentals doubling over the past five years in many locations, basic expenditure demands are negating the tax benefits."

Sixty per cent of the 700 firms surveyed by Prospectus said the skills shortage was a major obstacle to growth and the report stated that recruitment and retention of staff had reached crisis levels.

Half the companies surveyed identified a lack of sales, marketing and/or business development skills as a significant barrier to the firm increasing revenues in international markets. "The results of the survey do paint a bleak picture for companies currently trying to recruit essential staff, " said Ms Cryan. She added. "It does emphasise, however, the importance of Ireland being competitive, for example in the area of personal taxation and treatment of share options."

Despite the roller-coaster ride of technology stocks this year, Irish companies are still bullish about the ability to raise capital. Fewer than one-third of the respondents said inadequate finance was a barrier to expansion and Ireland was viewed positively as a source of venture capital funding.

The report finds a healthy increase in services profit margins with a quarter of respondents reporting margins up by over 25 per cent. Only 15 per cent said margins had declined over the past two years while 43 per cent reported no significant change in their margins.