Inside the world of business

Time to heed the National Competitiveness Council

YOU WOULD have to feel some sympathy for the National Competitiveness Council. Every year for the last 10 years or so it has produced a report on competitiveness issues facing the Irish economy.

It was something of a lone voice in recent years, sounding a warning about the loss of competitiveness in an economy drunk on cheap credit and propelled by consumer spending and a property bubble. As such it is to be commended for resisting the temptation to say we told you so in its latest report published yesterday. Things are perhaps a little too serious for that.

It would be a grave mistake if the Government once again disregards the views of one of the only State bodies whose analysis of the economy over the past decade stands up to any sort of scrutiny. But given the virtual silence yesterday from the albeit somewhat distracted Government, the fear is that this is exactly what will happen. Yesterday’s report will probably end up in the same dusty filing cabinet where the rest of the NCC’s output is filed, apparently unread but definitely unheeded.

The report was limited in scope and focused on how to stimulate exports. But, as the NCC points out, export-led growth is the only sustainable route out the current economic difficulties. Indeed, if it were not for the very strong performance of chemical, medical and pharmaceutical exports, the economic situation would be significantly worse.

The report identifies six key initiatives that will help Irish firms exploit opportunities to grow exports in areas such as medical technology and what might be termed the “green services” industry.

Many of them are not all that new or fresh, particularly those that call for a more focused education system, more co-ordination between State agencies and better infrastructure in the West. But just because the NCC is in effect reiterating the message it has been sending out for the last few years does not make it wrong. If anything it makes its right. If the Government had put as much effort and taxpayer money into implementing NCC recommendations as it did into blowing up the property market, we would be a lot better off today.

Banks wield the knife

ONCE AGAIN, the foreign-owned banks in Ireland are taking much tougher choices than the domestic State-guaranteed banks, despite the same challenges facing both.

National Irish Bank, which is owned by Danish group Danske, has announced plans to cut its staff by almost a quarter – from 634 to 484 employees – and its branch network by 43 per cent from 58 to 33 branches over the next 18 months.

The bank lost almost €500 million during the first nine months of the year, after taking further losses on its €10 billion loan book.

Last May, Dutch-owned ACC, the most aggressive bank in the Irish market when it comes to addressing its problems, said that it would close 16 of its 25 branches and seek 200 job cuts, almost a third of the bank’s workforce.

Ulster Bank, which is owned by Royal Bank of Scotland, said at the start of this year that it would seek 750 redundancies with the closure and merging of First Active. It later increased this to 1,000 cuts.

The large domestic banks have largely resorted to recruitment freezes, career breaks and early retirement plans to reduce their payroll costs and employee numbers, even though the activities of the banks have contracted sharply.

AIB has reduced its headcount by 1,500 this year through non-replacement of departing staff and has signalled that further job cuts lie ahead.

Bank of Ireland’s staff numbers were 1,658 lower at September 30th last from a year earlier through a policy of not replacing staff, though the bank has reduced its UK workforce by 600 this year.

The exceptions to the more attritional approach are Irish Life Permanent (ILP), which last week said it would shed 120 staff at Permanent TSB, and State-owned Anglo Irish Bank, which is cutting 230 jobs initially and a similar number over the next two years.

The foreign-owned lenders are operating on a different scale to the large domestic retail banks. Applying the same level of job cuts that NIB has announced would lead to 5,800 redundancies at AIB, 3,500 at Bank of Ireland and 1,200 at ILP. These banks face difficult choices in a rapidly shrinking banking sector.

Smart economy at standstill

IT IS almost a year since Brian Cowen announced his ambitious plans for Ireland to become a smart economy.

One of the central planks of that scheme was the establishment of a €500 million venture capital fund, the Innovation Fund Ireland, which would support Irish start-ups that engage in research and development.

Although Government officials have been talking to investors here and in Silicon Valley since, there is still no sign of any of the five €75-€150 million funds, which will make up the overall Innovation Fund, being established. Like most of the smart economy initiatives they are on hold pending the report of the Innovation Task Force.

It’s a classic example of announcing the good news and then setting up a committee to tell you that you are doing the right thing.

The task force is due to report early next year and it’s probably going to be another six months before the funds are established, and longer again before any Irish firms see an investment.

The glacial speed of action is not going down well in Silicon Valley, even among the Irish-American constituency.

The Irish Technology Leadership Group (ITLG) is establishing its own Irish Technology Capital fund and is hoping to tap the Innovation Fund for support. VC and ITLG member Richard Moran now says that while there have been “many meetings and many calls for a sense of urgency”, what we are really seeing from Government is a “false sense of urgency”.

While Moran clearly has a vested interest, he believes universities, VC firms, government agencies and entrepreneurs on both sides of the Atlantic are uniquely ready to act in concert but the funding is urgently needed.

Should Brian Lenihan yield the axe to the Smart Economy strategy in tomorrow’s Budget, a large amount of political capital will have been squandered in Silicon Valley.

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