Competitive boost needed to lessen impact of external threats on economy - report

The Irish economy is at a critical juncture and steps must be taken to improve the country’s competitiveness given the wide number of external threats that could impact growth.

That is according to the latest report from the National Competitive Council (NCC), which said while the overall economic outlook is positive, the economy faces a number of dangers including Brexit, a potential shift in trade and taxation policy in the US and the uncertain trajectory of global growth

The council said many of the country's strengths, including having a highly-skilled young workforce and a good environment in which to do business, remain. However, chairman Prof Peter Clinch said there is scope for improvement in areas such as fiscal discipline, service and labour costs and infrastructure bottlenecks.

“As the economy continues to grow, maintaining our competitiveness is crucial as we face into challenges such as Brexit. Staying competitive will help us avoid another boom-bust cycle of fast growth followed by recession,” he said.

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“Placing competitiveness at the centre of Ireland’s economic model will ensure Irish businesses can compete successfully in international trade, protect the resilience of the Irish economy throughout the economic cycle, and provide the funds to improve public services such as health, education and social protection,” Prof Clinch added.

The council said Brexit represents the foremost downside economic risk for Ireland with far-reaching implications for Irish competitiveness across a range of policy areas, including trade, investment and skills. It also warned of an overreliance on a concentrated number of multinationals.

“The sustainability of Irish growth is not only threatened by the potential for boom and bust, but the reliance of the economy on a small number of highly productive large companies,” said Prof Clinch.

“Many Irish-owned companies export a narrow range of products and services, and rely on a small number of export markets. Smaller companies, which provide the majority of employment, are far less productive, less likely to invest in innovation, least likely to be able to afford the management talent they need and most prone to cost increases,” he added.

The council said an innovative mix of responses is required to enable more SMEs to compete internationally and ensure they can survive the challenges of Brexit. This involves a relentless focus on innovation, product diversification, cost control, productivity and the pursuit of new markets.