Insurance 'biggest cost problem'

The costs of doing business in the Republic are "spiralling out of control" with insurance fast becoming the biggest problem, the IBEC National Survey of Business Costs has found. Emmet Oliver reports.

The survey of 455 companies found that business costs were rising at more than three times the rate of inflation. Insurance costs for companies increased 102 per cent over the last two years, it discovered.

The organisation acknowledged the setting up of the Personal Injuries Assessment Board would help reduce motor premiums, but added that much more needed to be done.

"All sectors reported high levels of increase in the cost of insurance over both periods, with the highest average increases occurring in the mid-size sector in 2001/2002 and in companies with over 250 employees in the current period".

Our cost base was now seriously out of line with our competitors and the deterioration was across a large number of headings, said IBEC. The 455 firms who participated employed 191,606 employees. Some 44 per cent of the firms were from the Dublin region with the rest outside Dublin.

Commenting on the survey results, IBEC's director of enterprise, Mr Brendan Butler, said: "It is clear that the cost of doing business in Ireland is spiralling out of control and threatening the viability of both indigenous and multinational companies". He said IBEC had proposed a 10-point plan to reduce "our crippling cost base".

He said total non-pay costs rose by an average of 15.7 per cent in 2002 and were likely to rise by 11.4 per cent this year. According to the survey, this represented a cumulative increase of 29 per cent over the period from 2001 to 2003 against a cumulative inflation rate over the same period of 8.5 per cent.

The survey found that insurance was the "predominant" issue for companies. Some 59 per cent of companies ranked it as their top concern. "In cumulative terms insurance costs will have more than doubled in the past 24 months," it stated. IBEC said the Government should proceed rapidly with the remainder of reforms in the insurance sector.

The next largest cumulative cost increases were water, sewage and waste disposal (up 47 per cent betweeen 2001 and 2003) and rents, up 43 per cent during the same period. Telecommunications showed the lowest cumulative increase (16 per cent).

Energy costs were also identified by companies as an area of concern with 9 per cent of respondents ranking this as their top priority. Increases in the cost of energy identified in the survey were 12 per cent in the period 2001 - 2002 and 10.6 in the current period. IBEC said the solution to this was to make competitiveness a "stronger criterion in energy policy".

Local authority charges were another area of ongoing concern. Increases of 13.1 per cent and 12.8 per cent were recorded for the two periods of the survey. "The shortfall in local authority funding and the cost of paying public sector benchmarkng awards suggest it is an area that could come under continuing pressure," said the survey.