Continued high levels of optimism for Irish economy - but cost and competitiveness are of increasing concerns with regulatory compliance costs high on the agenda
Irish business leaders remain upbeat about the outlook for Ireland’s economy according PricewaterhouseCoopers’ annual CEO Pulse Survey released today. The survey, which incorporates the views of over 200 of Ireland’s CEOs, aims to provide Irish business with a snapshot on the levels of satisfaction on a range of business issues including business environment, Irish Government and business regulation as seen by Ireland’s CEO leaders.
While the survey reveals continued levels of optimism for the Irish economy, cost and competitiveness are of increasing concerns. Irish business leaders believe that our national infrastructure, cost of labour and the cost of regulatory compliance are areas that need to be addressed. The survey reveals increased levels of satisfaction with Irish Government, however support for Social Partnership has declined. Surprisingly, only one third of survey respondents feel that Northern Ireland is an attractive location for investment when compared with the Republic of Ireland.
The survey’s ‘Hot Topic’ this year was Business Regulation. The majority (91%) of Irish CEOs believe that regulatory compliance costs are significant compared to overall operating costs. Consequently, an overwhelming majority of CEOs (92%) felt that Government should examine the administrative burden of regulation compliance while a similar percentage (90%) said that reducing the regulatory compliance costs in Ireland should be top priority. Overall, some 60% of Irish CEOs believe that the cost of business regulation is higher in Ireland compared to other EU countries.
Launching the report, Charlie McCreevy, EU Commissioner for Internal Market and Services said:
“This PwC Initiative provides valuable insights and trends into the latest thinking on some of the key challenges and issues as seen by Ireland’s business leaders.
Not surprisingly, the survey reveals that reducing regulatory compliance costs in Ireland should be a top priority. I believe in all regulation, balance is key. Investors and consumers have to be protected, but entrepreneurs must be free to innovate and experiment. The costs of regulation should not outweigh the advantage of gaining access to capital. Regulation at European level must strike a balance by establishing few key rules at EU level and leaving the details to the markets and Member States. The focus should be on breaking down barriers to cross-border activities. I encourage business leaders, regulators and policy makers to continue to work together to achieve this”.
The report is an excellent platform to assist the business community and policy makers alike in shaping the future direction and continued success of Ireland’s economy”.
Speaking at the launch, Ronan Murphy, Senior Partner Elect, said:
“Our survey aims to be a business confidence barometer giving useful insights into the minds of Ireland’s Corporate Chiefs which will be of benefit to policy makers, commentators and the business community generally.
Ireland has had many years of international business success and it is heartening to see that business leaders have continuing confidence in the strength of the economy. However, our survey also clearly suggests that Irish business leaders now feel our economy’s cost base is too high. In order for Ireland to maintain its competitive advantage the survey suggests a number of areas to be addressed including our national infrastructure, our labour cost and the cost of regulatory compliance. Not withstanding this, with our highly skilled labour force, our positive investment environment and pro-business policies, there are also huge opportunities for business to work together to further progress the Irish success story”.
Ann O’Connell, Partner, Strategy Advisory Services, PwC added:
“In addition to controlling costs, the recruitment and retention of key staff and formulating robust business strategies are cited as key challenges for businesses. Increasingly, we see businesses seeking to simplify and de-layer their organisation structures as well as a heightened focus, especially amongst Irish based companies, on the need to have a well researched and robust business strategy that includes understanding the ever-changing external environment and drivers of change”.
The overall feeling of confidence expressed by Irish CEOs is echoed in the recent PwC US ‘Trendsetter’ survey revealing 70% of participants indicating optimism about their US domestic economy’s prospects over the next year with continued growth in revenue, new hiring and investments
Other key findings in the PwC 2007 CEO Pulse survey included:
Business Confidence
Some 86% of Irish CEOs participating in the survey projected growth in revenues while three quarters (74%) responded favourably when asked about the their views for the outlook of the Irish economy.
Business Challenges
The survey reveals that the single greatest business challenge for Irish CEOs continues to be controlling costs with half of participating CEOs citing controlling costs as the single greatest challenge (50%). This is followed by some distance with Staff Recruitment & Retention, Business Restructuring and Business Strategy being the next biggest challenges (13%, 12% and 10% respectively).
While CEOs are happy (95%) with the overall corporate tax regime, the survey reveals continuing concerns with some other elements of the business environment particularly with our national infrastructure and cost of labour. For example, some 71% of Irish CEOs said they are dissatisfied with the general cost of doing business in Ireland. This is illustrated by over three quarters of participating CEOs being unhappy with our road, rail and airport infrastructure. While the majority of CEOs are happy with labour quality (78%) and availability (69%), three quarters are unhappy with its cost.
Irish Government
Irish business leaders are happier with Irish Government compared to last year. Two thirds (67%) of participating CEOs felt that Irish Government is in touch with their needs and 80% said that the Irish Government is more in touch with their needs compared to Governments in other countries – an increase of 13% on last year in both cases. However, support for Social Partnership has dropped 10% compared to last year. 72% of Irish CEOs surveyed this year said that Social Partnership is necessary compared to 82% last year. Interestingly, two thirds of Irish CEOs were happy that corporate governance regulations are both reasonable and appropriate.
Inward and Outward Investment
Irish CEOs surveyed were fairly upbeat where further investment in Ireland was concerned with the majority of CEOs of indigenous companies (81%) saying they would not relocate existing Irish based activities overseas. Some two thirds (63%) of multinational CEOs said they were considering additional investment in Ireland. However, a note of caution as some 77% of these CEOs believed that Ireland is only capable of attracting certain types of FDI.
Looking at where outward investment by Irish companies might be located, EU member states still remain the most likely beneficiaries of investment. However, there is a clear shift in investment as between multinational and indigenous companies with the multinationals more likely to invest in the new EU member states while indigenous companies are more likely to invest in Asia (China and India) and North America.
Northern Ireland
Interestingly, the survey revealed that two thirds of CEO respondents believed that Northern Ireland was not as attractive a location for investment when compared with the Republic of Ireland. However, more than twice the number of indigenous based CEOs (48%) believe Northern Ireland to be an attractive a location for investment compared to their MNC counterparts (22%).
ENDS
Notes to the Editor
About the survey.
The survey was carried out amongst Ireland’s top 800 CEOs in late 2006. It consisted of a postal questionnaire and 229 responses were received.
Key Findings in the survey were:
Business Confidence
74% said they were favourable re Outlook for the Irish economy. (2006: 76%). Indigenous companies were more favourable compared to their MNC counterparts (78% of indigenous companies were favourable compared to 69% of MNCs)
- 86% said they anticipated growth in revenues; (2006: 87%)
- 89% said they anticipated growth in costs; (2006: 87%)
- 72% said they anticipated growth in net profits; (2006: 77%)
- 47% said they anticipated growth in employment; (2006: 48%)
- 61% said they anticipated growth in capital investment; (2006: 60%)
- 39% said they anticipated growth in R&D spend; (2006 42%)
- 74% said they anticipated growth in Irish expenditures; (2006:77%)
Capital Investment: Indigenous companies anticipate a 14% greater level of capital investment compared to their MNC counterparts.
Business Challenges
Major business challenges are :
Controlling costs (2007:50%; 2006:56%)
- Staff Recruitment & Retention (2007: 13%; 2006: 8%)
- Business restructuring (2007: 12%; 2006: 4%)
- Formulating business strategy (2007: 10%; 2006: 7%)
Satisfaction with Ireland’s Business Environment
- 95% satisfied with corporate tax regime (2006: 94%)
- 78% satisfied with quality of labour (2006: 80%)
- 69% satisfied with availability of labour (2006: 68%)
however,
-71% dissatisfied with general cost of doing business (2006: 74%)
- 89% dissatisfied with road infrastructure (2006:90%)
- 79% dissatisfied with rail infrastructure (2006: 88%)
- 84% dissatisfied with airport infrastructure (2006: 84%)
- 75% dissatisfied with cost of labour (2006:77%)
- 59% dissatisfied with telecoms infrasture (2006: 51%)
Satisfaction with Irish Government
- 80% said Irish Government is more in touch with needs of business than Governments of other countries (2006: 67%)
- 67% said Irish Government more in touch with their needs (2006: 54%)
- 45% said political leaders in Ireland are more responsive (2006: 45%)
- 66% said corporate governance regulations in Ireland are reasonable and appropriate( 2006: 57%)
- 72% said Social Partnership is necessary (2006: 82%)
Inward & Outward Investment
- 80% said Ireland would feature in Co expansion plans (2006: 66%)
- 81% would not relocate existing Irish based activities overseas (2006: 79%)
- 77% said Ireland capable of attracting certain forms of FDI (2006: 80%)
Countries benefiting from Investment
- Indigenous companies most likely to invest in original EU 15 (2007:39% ; 2006:51%)
- MNCs most likely to invest in New EU 10 (2007: 38% ; 2006: 27%)
- Indigenous companies next most likely to invest in Asia – China and India
- MNCs next most likely to invest in original EU15 (2007:29%; 2006: 10%) followed by Asia – predominantly in China
- 19% of Indigenous companies would invest in North America.
- MNCs unlikely to invest in North America
Northern Ireland
- 67% said NI was not as attractive a location for investment compared to ROI.
- 78% of MNCs said NI not as attractive a location for investment
- 52% of Indigenous companies said NI not as attractive a location for investment
- 90% of CEOs surveyed said incentives offered in Ireland compared favourably to most developed countries.
Business Regulation
- 69% said Government is sufficiently involved in regulation formulation
- 55% said Government influences the passage of EU legislation
- 92% said Government should examine the administration burden of regulation compliance
- 91% agreed that regulatory compliance costs are significant
- 90% agreed that reducing regulatory compliance costs in Ireland should be top priority
- 64% said that regulatory costs in Ireland are higher in a global context
- Employment related areas are considered to be the most regulated areas followed by Environment and Planning areas.
