Tuesday 25 October 2016

Irish competitiveness gains overstated says watchdog, as skills gap pushes up costs

Colm Kelpie and Peter Flanagan

Published 01/06/2016 | 02:30

Professor Peter Clinch
Professor Peter Clinch

A global ranking highlighting a marked improvement in Ireland's competitiveness shouldn't distract from outstanding problems, the head of the State's competitiveness watchdog has warned.

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The National Competitiveness Council, headed by UCD economist Professor Peter Clinch, welcomed Ireland's ranking rise.

But Prof Clinch sounded a note of caution, saying: "While we should be pleased that Ireland's improving competitiveness is recognised globally, we cannot afford to become complacent about our performance or relax our efforts to drive improvements.

"Amongst all the good news in the IMD figures, a number of urgent challenges are also evident."

Ireland has surged from 16th place last year to seventh, according to the latest analysis from the Swiss-based IMD World Competitiveness Center.

But the competitiveness council said issues such as unemployment - particularly youth and long-term unemployment - plus capital investment and improving access to credit for businesses, especially non-bank finance, must be addressed.

It argued that the State's enterprise base needs to be diversified and needs to expand into new markets and sectors.

More needs to be done to tackle the residential property problem, and to maximise the impact of investment in R&D, the council said.

The watchdog urged the Government to maintain vigilance in the public finances, and ensure a pro-business friendly tax regime is in place.

Prof Clinch said the council would be raising these issues in its upcoming competitiveness scorecard.

In April the council published a damning report highlighting a number of problems that risked derailing Ireland's competitiveness, including the fact that businesses here are paying 80pc more for loans than the Eurozone average.

It comes as a separate report found that the worsening skills shortage in the construction industry means the cost of building in Dublin is now increasing at the fifth fastest rate in the world.

The survey from construction consultancy Turner & Townsend found that construction costs in Dublin rose 6pc in 2015, That was the fifth fastest rate out of 38 regions surveyed by the firm, and was ahead of the likes of London, New York, San Francisco and Hong Kong.

The report now categorises the Dublin market as "hot" alongside Kuala Lumpur, London and San Francisco. That is one notch below Turner & Townsend's categorisation of "over heating". While the property market has recovered sharply in Dublin in recent months, the survey finds the skills shortage is so acute now that it accounts for a large proportion of the increase in costs.

Turner & Townsend believe costs will continue to rise.

"Construction activity will mainly be driven by a raft of large projects in Dublin, with demand uneven in other parts of the country.

"Construction prices look set to increase by 6pc and the industry will continue to face resourcing challenges to meet demand," it said.

Company global managing director for real estate Steve McGuckin warned the "endemic" skills shortage "risks driving up construction costs even in markets with weak demand".

Irish Independent

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