Ireland’s Competitiveness Scorecard 2018 July 2018

2

Introduction to the National Competitiveness Council

The National Competitiveness Council (NCC) reports to the Taoiseach and the Government, through the

Minister for Business, Enterprise and Innovation on key competitiveness issues facing the Irish economy and

offers recommendations on policy actions required to enhance Ireland’s competitive position.

In accordance with the European Council recommendation of September 2016 on the establishment of

National Productivity Boards by Eurozone countries, in March 2018, the Government mandated the National

Competitiveness Council as the body responsible for analysing developments and policies in the field of

productivity and competitiveness in Ireland.

Each year the NCC publishes two annual reports:

▪ Ireland’s Competitiveness Scorecard provides a comprehensive statistical assessment of Ireland's

competitiveness performance; and

▪ Ireland’s Competitiveness Challenge uses this information along with the latest research to outline the

main challenges to Ireland’s competitiveness and the policy responses required to meet them.

As part of its work, the NCC also:

▪ Publishes the Costs of Doing Business where key business costs in Ireland are benchmarked against costs

in competitor countries; and

▪ Issues competitiveness bulletins and other papers on specific competitiveness issues.

3

National Competitiveness Council Members

Professor Peter Clinch Chair, National Competitiveness Council

Pat Beirne Chief Executive Officer, Mergon Group

Kevin Callinan Deputy General Secretary, IMPACT Trade Union

Micheál Collins Assistant Professor of Social Policy, University College Dublin

Isolde Goggin Chair, Competition and Consumer Protection Commission

Cathríona Hallahan CEO/Managing Director (Ireland), Microsoft

David Hegarty Assistant Secretary, Department of Business, Enterprise and Innovation

Jane Magnier Joint Managing Director, Abbey Tours

Fergal O’Brien Director of Policy and Chief Economist, Ibec

Seán O'Driscoll President, Glen Dimplex Group

Margot Slattery Country President, Sodexo Ireland

Martin Shanahan Chief Executive, IDA Ireland

Julie Sinnamon Chief Executive, Enterprise Ireland

Ian Talbot Chief Executive, Chambers Ireland

Patrick Walsh Managing Director, Dogpatch Labs

Jim Woulfe Chief Executive, Dairygold Co-Operative Society Limited

Council Advisers

John Conlon Department of Employment and Social Affairs

Patricia Cronin Department of Communications, Climate Action and Environment

Kathleen Gavin Department of Education and Skills

John McCarthy Department of Finance

Conan McKenna Department of Justice and Equality

Sinead McPhilips Department of Agriculture, Food and the Marine

David Moloney Department of Public Expenditure and Reform

Ray O’Leary Department of Transport, Tourism, and Sport

John Shaw Department of the Taoiseach

Kevin Smyth Department of Agriculture, Food and the Marine

David Walsh Department of Housing, Planning, Community and Local Government

Research, Analysis and Secretariat

Marie Bourke Department of Business, Enterprise and Innovation

Santosh Aryal 23 Kildare Street, Dublin 2, D02 TD30

Teodora Corcoran Tel: +353-1-631-2121

John Maher Email: info@competitiveness.ie

4

Table of Contents

Introduction to the National Competitiveness Council 2

Table of Contents 4

Chairman’s Preface 5

Executive Summary 7

How Ireland Performs 8

Ireland’s Competitiveness Challenge - the policy challenges 16

Chapter 1: Ireland’s Competitiveness Performance and Outlook 17

Chapter 2: Sustainable Growth 23

2.1 Quality of Life 26

2.2 National Income 28

2.3 Environmental Sustainability 33

Chapter 3: Competitiveness Outputs 39

3.1 Business Performance 44

3.2 Prices and Costs 53

3.3 Productivity 612

3.4 Employment 69

Chapter 4: Competitiveness Inputs 77

4.1 Business Environment 82

4.2 Physical Infrastructure 90

4.3 Clusters and Firm Sophistication 95

4.4 Knowledge and Talent 100

Chapter 5: Essential Conditions 110

5.1 Institutions 114

5.2 Macroeconomic Sustainability 117

5.3 Endowments 126

Annex 1 Methodology 130

5

Chairman’s Preface

Despite intense competition, Ireland experienced continued strong economic

growth in 2017. The economic outlook for 2018 and 2019 is for the most part,

positive but the Council is concerned that there is a significant threat to

competitiveness and the medium-term sustainability of Ireland’s economy.

In terms of competitiveness, Ireland’s fortunes are changing rapidly. In the

aftermath of the economic crisis, Ireland benefitted from a highly advantageous

set of circumstances that has led to rapid recovery: the low value of the euro

boosted our exports; global interest rates and oil prices remained low; a sizeable

cost reduction due to the downturn increased the competitiveness of firms; and,

excess infrastructural capacity allowed rapid expansion without associated cost

increases or congestion. Most of these factors are now turning against us and we

are beginning to see an erosion of Ireland’s competitiveness. Ireland’s economic model is vulnerable in terms of

our reliance on a small number of firms in a small number of sectors delivering the bulk of our productivity

performance. And, we are beginning to see a return to domestic policies that threaten the sustainability of the

economy such as rapid house-price inflation, transport congestion, failure to meet our climate obligations, and

failure to invest sufficiently in R&D and to address the funding crisis in higher education. Ireland is on an

inevitable path to competitiveness loss placing us in a vulnerable position if the international economic

conditions were to worsen.

Events which influence the performance of the Irish and global economy are unfolding rapidly. Several external

uncertainties and domestic challenges endanger national competitiveness in the medium-term. Global

economic uncertainty, particularly in trade policy, has increased and developments in US tax policy and

international proposals on tax reforms pose a threat to growth. Brexit remains the single biggest, and most

immediate, threat to Ireland’s medium-term prosperity.

Domestically, the economy cannot grow in a sustainable manner unless the macro-environment is stable. We

must avoid, at all costs, a return to short-term policymaking, which results in boom to bust effects when the

economic cycle inevitably slows. While the headline measures of economic growth are positive, it is worrying

that Ireland’s debt per capita is the highest in the EU at over €42,000 per person. In 2007, as the country entered

into the economic crisis, it was less than €11,000. To improve our capacity to absorb and respond to economic

shocks, the Government must continue its efforts to reduce debt and avoid any narrowing of the tax base.

Recent developments in the national accounts highlight the highly globalised nature of economic activity in

Ireland. Multinational enterprises have been, and will remain, integral to our economy. In comparative terms,

the share of multinational activity in Ireland is high, and their activities have a significant bearing on our

economy. A significant concern is that the sustainability of Irish growth is threatened by the reliance of the

economy on a small number of companies, a small number of export markets and a narrow range of products

and services. There is a need to evolve into new products, markets and sectors, whilst maintaining the

competitive advantages in existing ones. Improving Ireland’s relative tax competitiveness to create a supportive

environment for SMEs is crucial.

As the economy continues to grow, cost pressures and capacity constraint are becoming more prominent.

Ireland performs below competitor countries particularly in terms of costs of residential property, labour, credit,

energy and services prices. It is vital that policy development does not negatively impact on enterprise

competitiveness, particularly in terms of increased financial and administrative costs to business. Ireland’s

6

projected failure to meet its 2020 emissions reduction obligations in respect of climate change requires a step-

change in policy development and societal behaviour.

As a small open economy, productivity remains fundamental to growth. Productivity levels and growth rates in

Ireland are strong but our performance is heavily influenced by a small cohort of enterprises which disguises, to

a degree, underperforming sectors and boosts Ireland’s productivity levels. Bridging the productivity gap that

exists between the most productive firms and lagging firms is vital for sustainable growth. The availability of

qualified, work-ready skills and talent is a fundamental source of competitive advantage and a key driver of

productivity growth. As the economy is approaching full employment, job vacancy levels are increasing and the

need for certain skills is becoming more pronounced. Increasingly rapid changes in the world of work, driven by

digitalisation, bring not only the need for ICT specialist skills but also affect the competency requirements across

all sectors, particularly those exposed to the risk of automation. Ireland's main challenge is to equip more than

half of the population with at least basic digital skills. Policies that facilitate skills adaptability are necessary to

prevent polarisation of the labour market.

In an economy approaching full employment, creating conditions for increasing participation rates and

attracting talent from abroad proves crucial. The availability of affordable high-quality child and after-school

care, and policies encouraging older workers to remain in the labour force longer, could help to address skills

shortages and improve Ireland’s attractiveness as a location to work and live. Currently, Ireland’s high marginal

personal tax rates are a major factor in deterring mobile skilled labour. The shortfall and affordability of

residential housing can also influence decisions around relocation of talent. Despite an increase in construction

activity, strong demand, particularly for apartments in urban areas, means that property price inflation is likely

to continue. High rents push the cost of living out of line with other developed European economies. Increasing

property prices and rental costs, combined with a tight labour market, are likely to result in higher wage

demands and diminish Ireland’s ability to attract and retain talent.

Innovation is a key driver of productivity growth. Ireland’s national R&D investment levels lag our key

competitors. Measures which enhance the absorptive capacity of domestic enterprises to utilise technology

would help reduce Ireland’s asymmetric productivity performance. Ireland must transform from an innovation

follower into a leader. Inadequate investment in higher-education, and the associated slide of Irish institutions

in the university rankings, is a perfect example of a failure to invest in Ireland’s future competitiveness.

Targeted and timely capital expenditure in infrastructure is one of the principal means by which government

can enhance productivity and competitiveness. Ireland’s planning and development framework must be

evidence-based, focussed, transparent, timely and agile. A critical challenge now is our capacity to deliver

effectively-connected infrastructure projects that drive future productivity growth, that maximise returns on

investment and which do not contribute to overheating the economy, and to do so in a way than ensures value

for money in the face of low productivity levels and high-demand in the construction sector.

Improving our competitiveness is the key to our efforts to ensure Ireland develops a sustainable economic model

that avoids a boom and bust cycle. Ireland’s recent fall from 6th to 12th most competitive economy, as

benchmarked by the Institute for Management Development, is a timely reminder that our relative

competitiveness is under constant threat. The near-perfect competitiveness conditions Ireland has enjoyed are

over. The risks to Ireland’s prosperity at this point are increasing and the process of reform and improvement

must be intensified if Ireland is to avoid the kind of trajectory that we experienced in the lead up to the last

economic crisis. In this report, the Council is sounding a competitiveness alarm.

Professor Peter Clinch

Chair, National Competitiveness Council

7

Executive Summary

A range of indicators used in this year’s Scorecard shows that the Irish economy continued its expansion in

2017 and into 2018. As well as the headline measures of economic growth, the labour market and public

finances continue to improve. Our taxation regime, highly skilled young workforce, and environment in which

to do business remain for the most part relatively competitive. Ireland performs well in both subjective and

objective measures of well-being, indicating that the country is an attractive location to live and work.

While the economic outlook for Ireland appears positive, Ireland’s competitiveness is under threat. The

sustainability of growth is threatened by the reliance of the economy on a small number of highly productive

exporting companies. The globalised nature of the economy makes Ireland susceptible to negative economic

shocks, which are outside the influence of domestic policymakers. Global economic uncertainty, particularly in

trade policy, has increased in 2018. Along with continued ambiguity regarding the outcome of Brexit, external

factors as ever pose a serious risk.

Domestically, fast growth is beginning to manifest itself in cost pressures and capacity constraints and if not

addressed, these deficiencies could become more acute in the short term. As the economy continues to grow,

ensuring our economic model is competitive, balanced and resilient to shocks takes on even more significance.

It is important that we do not loosen fiscal discipline (i.e. unsustainable current expenditure increases, or

shrinking tax ratios) at this stage as this would undo much of the progress achieved to date, and would have

potentially significant negative implications for future competitiveness. It is vital that a careful balance is

struck between addressing weaknesses and deficiencies in infrastructure and implementing policy in a manner

which does not contribute to overheating or unbalancing the economy.

Cost competitiveness is critical for an economy like Ireland’s. While cost and price pressure has been modest in

recent years, Ireland remains a relatively expensive country in which to live and work. As the economy

continues to grow, cost pressures are evident in key areas – particularly in relation to property, labour costs,

credit and services prices, where Ireland performs below competitor countries. With the labour market likely

to tighten further, upward pressures on labour costs can be expected in several sectors and across

occupations. Measures to encourage labour force participation can help alleviate labour cost pressure.

Increasing productivity, particularly in the SMEs sector, is also vital. Productivity levels and growth rates in

Ireland are strong, but skewed by globalisation activities. Our performance is heavily influenced by a small

cohort of enterprises. Bridging the productivity gap that exists between the most productive firms and laggard

firms is vital for sustainable growth prospects. Developing Ireland’s infrastructure base is a fundamental

challenge to enhancing productivity. While capital investment levels are projected to increase over the

medium term, at present they remain low and infrastructure pressures are rising. Well planned infrastructure

is important in increasing labour mobility, encouraging enterprise and ensuring Ireland is an attractive location

for talent.

Although Ireland’s export performance is a major contributor to Ireland’s economic growth, the range of

products and services exported and the base of exporting enterprises is relatively concentrated. The

continuous digitalisation of the economy is altering the structure of long established business models, supply

and value chains, and productivity, consumption and competition patterns. Ireland’s long-term productivity

prospects will be dependent on the take up and diffusion of innovative technologies, infrastructure

development, skills availability and reform of regulatory frameworks.

While our competitiveness performance in recent years has been positive, it is vital that we act now to

preserve the progress made to date and to drive further improvements in Ireland’s competitiveness.

8

How Ireland Performs

Competitiveness is a multidimensional concept incorporating many interlinked and interdependent factors;

reflecting this complexity, Ireland’s Competitiveness Scorecard analyses over 170 measures, each of which

articulates an aspect of Ireland’s competitiveness performance.

Given the disparate nature of these indicators, the National Competitiveness Council does not attempt to

create a single quantifiable measure of competitiveness – rather, each indicator is examined individually.

Thereafter, taking a bird’s-eye view of all the data collected, the Council can draw the various strands of

analysis together to present a comprehensive picture of Ireland’s international competitiveness performance.

The 2018 Scorecard is divided into four main sections - sustainable growth (Chapter 2), competitiveness

outputs (Chapter 3), competitiveness inputs (Chapter 4) and essential conditions for competitiveness (Chapter

5) which correspond to the segments of the NCC’s competitiveness pyramid. Key findings are set out below.

Competitiveness performance

Competitiveness performance reflects the interaction of a wide range of factors that, combined, determine

the ability of firms to compete successfully in international markets. Ireland’s performance across several

international competitiveness indices has improved in recent years. The 2017/2018 WEF Global

Competitiveness Report shows Ireland is currently ranked 24th most competitive economy, a decline of one

place in the year. Using the IMD measure of competitiveness, Ireland is currently ranked 12th,a fall from 6th

place in 2017. The World Bank’s 2017 Ease of Doing Business report places Ireland 17th out of 190 economies –

an improvement of one place from the previous year. Ireland’s relative competitiveness is under constant

threat, as other economies are striving to improve. Rankings serve to remind us that competitiveness is a

relative measure. The process of reform and improvement must be continuous.

While data for late 2017 and 2018 points to a slight fall in HCI competitiveness in Ireland, the upward

movement of the indices are linked to the exchange rate movements, with subdued inflation mitigating the

impact on the real HCI. Both the nominal and real Harmonised Competitiveness Indicator are currently at

relatively low levels by historic standards.

Because of the scale of Ireland’s non-euro denominated trade, (i.e. with the UK and US), euro exchange rates

have a greater impact on Ireland’s relative international competitiveness than is the case in many euro area

countries. The euro has appreciated against sterling and the US dollar over the past two years. The euro-

sterling exchange rate average was £0.88 in 2017 compared with £0.82 in 2016 and £0.73 in 2015. The

appreciation of the euro-sterling exchange rate and continued uncertainty regarding Brexit poses difficulties

for Irish export competitiveness.

Quality of Life

Ireland performs relatively well in objective measures of well-being (income, education attainment, air and

water quality) and health. The OECD Better Life Index indicates that Ireland performs better than most other

countries in subjective measures of well-being relating to jobs and earnings, housing, personal security, health

status, education and skills, work-life balance, social connections and environmental quality, but below

average in income and wealth, and civic engagement.

Ireland's exceptionally strong economic growth in recent years is reflected in several indicators: in 2017

Ireland's GDP per capita remains the second highest in the Euro area and the median equivalised income was

also above the Euro area and the UK income. However, annual adjusted disposable income per capita in

purchasing power standard, although increasing, was still below the Euro area average. Ireland's Gini

9

coefficient was 29.5 (0 being the most equal distribution, 100 - the least equal distribution) in 2016, below the

Euro area average (30.7), indicating a more equal income distribution in Ireland than in the Euro area. Ireland's

at-risk-of-poverty rate remained below the Euro area average in 2016. In 2016 the percentage of working

persons at risk of poverty in Ireland fell to 4.8 per cent, half the Euro area average rate. In 2017 the proportion

of people residing in jobless households fell below the Euro area average.

Climate change presents very significant challenges for Ireland, both in terms of mitigating emissions and

achieving national and international binding targets, as well as adapting to the effects of a changing climate.

Ireland's 2020 target is to achieve a 20 per cent reduction of non-ETS sector emissions on 2005 levels, with

annual binding limits set for each year over the period 2013 to 2020. The EPA latest projections show that, at

best, Ireland will only achieve a one per cent reduction by 2020 compared to the 20 per cent reduction

target. Ireland remains heavily dependent on fossil fuel energy sources, which account for 93 per cent of the

gross inland consumption, compared to 73 per cent in the Euro area. In 2016, overall energy consumption grew

by 3.2 per cent. Energy use in transport grew by 3.3 per cent and accounted for 42 per cent of the total energy

use. Consumption in industry grew by 2 per cent and the highest increase in energy consumption (7.8%) was

recorded in the Commercial/Public Services Sector. Between 1990 and 2016 total emissions increased by 10.4

per cent. The agriculture (32%), transport (20%), energy (20%), and residential (10%) sectors accounted for

most of the emissions. Although Ireland has increased its use of renewable energy sources in the period 2012-

2016, at 9.5 per cent, Ireland remains below its target of 16 per cent share of renewables in gross final

consumption.

Business Performance

The 2018 Globalisation Report1 ranks Ireland the most globalised economy in the EU. Exports and Imports as a

percentage of GDP were 120 per cent and 88 per cent respectively in 2017. Trade as a proportion of GDP in

Ireland has increased since 2013 and is significantly above Euro area and OECD averages. 2017 was a record

year in terms of enterprise agency (Enterprise Ireland and IDA Ireland) employment. 209,338 people are now

employed in companies supported by Enterprise Ireland. This represents a net increase of 10,309 jobs for 2017,

taking account of job losses. 210,443 are now employed by IDA Ireland client companies, with employment

growing by 5.3 per cent on an annual basis.

Ireland’s share of total global export markets has increased in the last decade and was 1.3 per cent as of 2016.

Brexit has exposed how Irish export markets are geographically concentrated and the range of products and

services exported has likewise become increasingly concentrated. Ireland’s principal trading partners in terms

of goods exports are the US (27.2% share) and UK (13.4%). The Euro area accounted for 33 per cent of goods

exports, with the Belgium, Germany, Netherlands and France the EU primary markets. The top 15

commodities accounts for approximately 90 per cent of total goods exports from Ireland. The significance of

pharmaceuticals and chemical products is clear with these two commodity groups alone accounting for 45 per

cent of exports. The top 100 traders in Ireland account for 80 per cent of total export value.

New firms are especially relevant for expanding productivity and innovation performance. A continuous flow

of new business start-ups that can survive and thrive in international markets strengthens the productivity

base not only through the creation of new businesses, products and services but also by stimulating improved

performance in existing businesses. The World Bank’s latest Ease of Doing Business report shows that Ireland

has a relatively supportive environment for starting a business compared with many international

competitors. Ireland improved its ranking in terms of Ease of Starting a Business to 8th out of 190 countries

and is the highest-ranking EU member state in this category. The number of newly born enterprises as a

1 2018 Globalization Report, Who benefits most from globalization?

10

proportion of the total number of active enterprises is increasing. The largest increase in births was in the

Construction sector. Ireland has a very high proportion of high growth enterprises (growth in employment by

10% or more). 86 per cent of the enterprises born in Ireland in 2014 survived in 2015. 3-year and 5-year survival

rates are significantly higher than most EU countries where less than half survive for a 5-year period.

Despite intense competition, Ireland has maintained a remarkably robust performance in terms of jobs and

investments from inward investment. Foreign-owned enterprises account for 2 per cent of all enterprises,

they account for 63 per cent of gross value added and 22 per cent of all persons engaged. In Industry, they

account for 89 per cent of value added and 42 per cent of all persons engaged. Foreign-controlled enterprises

outside the EU generated 43 per cent of the value added in the Irish non-financial business economies in 2014,

compared to 18 per cent in the UK and 11 per cent in the EU. Deepening and broadening the FDI base and

maintaining Ireland’s competitive advantage as a location for new and existing mobile investment should

continue as a cornerstone of enterprise policy.

Prices and Costs

The Council published its Costs of Doing Business in Ireland report in June 2018 and concluded that in terms of

consumer prices, Ireland remains an expensive location in which to live and do business with a price profile

which can be described as “high cost and rising”. Irish consumer prices in 2017 were 23.7 per cent above the

European Union average and increasing at an annual rate of 0.2 per cent. Services prices in Ireland have risen

continuously since the beginning of 2012 and the magnitude of the increase has been higher than the Euro

area average during this period also.

Despite robust growth in employment, labour cost growth has remained modest in recent years and below the

growth experienced in both the UK and the EU. However, this masks considerable divergence at sectoral level,

and most likely firm level. It is vital that Ireland’s labour cost base does not move significantly out of line with

competitors, particularly the UK.

Ireland is an expensive place to live, relative to many EU member states, particularly in terms of property

costs. Continued strong demand means property price inflation and rent increases are likely to continue in the

short term until additional supply becomes available. Commercial property price levels in Ireland compare

favourably to comparable cities in the UK and Europe. However, strong rental growth can be observed. The

supply and demand for credit has improved significantly since the height of the crisis. However, the cost of

credit, while falling, continues to remain relatively high. The divergence between Irish and Euro area interest

rates for enterprise is particularly noticeable for loans of up to €0.25 million, where the interest rate on new

business loans in Ireland was more than double the Euro area average rate throughout 2017.

The high dependence on imported fossil fuels makes Ireland’s transport and energy prices vulnerable to

substantial oil price fluctuations. Weighted average electricity prices (in purchasing power standard) for non-

household consumers in the lower consumption bands (below 20,000MWh) increased in the second half of

2017 but remained below the Euro area. However, average electricity prices in the high consumption bands

(20,000 to 70,000 MWh and 70,000 to 150,000 MWh) surpassed the Euro area average prices in the second half

of 2017. Given Ireland’s dependence on energy imports from the UK, Brexit could potentially have a significant

impact on Ireland’s energy market.

The openness of the economy means the enterprise sector remains vulnerable to negative price pressures and

cost shocks, which are outside the influence of domestic policymakers. Many downside risks have already

emerged that could undermine national competitiveness, growth and living standards. These include

unfavourable exchange rate movements, higher international energy prices and imported inflation from

Ireland’s major trading partners, particularly the UK. In the face of growing supply side constraints, there is a

risk that rising costs outstrip productivity gains, push up prices and erode competitiveness.

11

Productivity

In the long-run, Ireland’s productivity is the primary determinant of living standards and the engine of

economic growth. Irish productivity growth rates and levels have been above the OECD average since the

recession. The economic cycle and more generally trends in the composition of value added and employment

have a significant effect on measured productivity levels in Ireland. Ireland had the highest output per hour

worked among OECD member states in 2016. Output per hour was $88 in 2017 and $83.1 in 2016 in GDP

terms, compared to $51.6 in the UK and $47.1 in the OECD in 2016. On average over the period 2006-2016,

Ireland’s productivity growth rate (4.6%) has been well above most Member States and the OECD total

(0.9%).

In recent years, Ireland’s performance is significantly affected by globalisation activities, which are reflected in

the national accounts. Irish labour productivity growth has been above that in competitor countries since

2010. However, corporate restructuring, including the relocation of firms with significant IP assets and aircraft

leasing, led to noteworthy increases in labour productivity, particularly in 2015.

Labour productivity growth was low immediately prior to the recession, with economic growth concentrated

in the Domestic and Other sectors, reflecting the importance of Construction over the period. Economic

growth considerably weakened to an average annual growth rate of around 2 percent for the period 2009-

2011. Over the course of the recession (2009-2011) as output and employment growth collapsed, labour

productivity growth increased at a stronger rate. The period 2015 and 2016 saw a significant increase in

industrial sector productivity due to the relocation of large multinational companies to Ireland. Gross Value

Added (GVA) substantially exceeded labour growth in 2014 and 2016, which explains increased labour

productivity. GVA grew by 27 per cent in 2015 because of major globalisation events, causing a 23 per cent

increase in labour productivity.

Ireland’s growing base of multinationals in high value-added, capital intensive sectors (particularly a small

cohort of manufacturing and ICT firms) disguises, to a degree, underperforming sectors and boosts Ireland’s

productivity levels. Recent research by the Department of Finance shows most businesses have experienced a

decline in productivity growth in recent years. The research suggests that the top 10 per cent of firms account

for 87 per cent of value added in manufacturing and 94 per cent in services. This highlights Ireland’s exposure

to firm-specific shocks. While Ireland’s productivity growth is relatively strong, there is a need to increase

productivity across many sectors and occupations. Supporting an uplift in productivity performance at firm

level across all sectors remains a significant competitiveness challenge across a range of policy spheres.

Employment

Employment is approaching peak pre-recession levels, illustrated by the over 2.2 million employed in Q1 2018,

an increase of 2.9 per cent or 62,100 in the year to Q1 2018. Employment increased in eleven of the fourteen

economic sectors over the year to Q1 2018. Consistent with the increase in employment levels, headline and

long-term unemployment are also on a steady downward trajectory. In Q1 2018 the seasonally adjusted

number of unemployed and long-term unemployed was 137,300 and 50,100 respectively. Long-term

unemployment accounted for 37.7 per cent of total unemployment in Q1 2018. The difference in

unemployment rates across Ireland's eight regions (18%) was the lowest in the Euro area. The youth

unemployment rate declined further in 2017 and 2018, and at 11.8 per cent in May 2018 it was below the Euro

area average of 16.8 per cent. The robust performance of the economy is reflected in the increasing number of

employment permits. At 11,361, the total number of employment permits issued (new and renewed) in 2017 is

almost three times the number of permits issued in 2013 (3,863), with the largest number of employment

permits issued in the Service sector (4,270).

12

As the labour market is approaching full capacity, job vacancy levels are increasing and certain skills needs are

becoming more pronounced. There is a divergence in job vacancy rates not only at sectoral level within the

Irish economy, but also between Ireland, the Euro area and the UK in 2017. The sectors with the highest job

vacancy rates in Ireland are Professional, Financial & insurance and ICT.

Business Environment

While access to and affordability of credit has improved, Irish business continues to face higher interest rates

and greater volatility in those rates than competitors abroad. The divergence between the interest rates is

particularly noticeable in relation to new loans of up to €250,000, where the interest rate is more than the

double the Euro area average. Bank loans remain the relevant form of external financing for 55 per cent of

Irish SMEs (compared to 48% at EU level). Diversifying the lending market remains a challenge. Although

private equity investment as proportion of GDP increased in Ireland in the period 2013-2016, at 0.18 per cent

of GDP in 2016, it is below the UK (0.64%) and the best EU performers. The proportion of non-performing

loans (this includes all lending) in Ireland has decreased from 25 per cent to 14 per cent in the period 2012-

2016, however, Ireland’s performance remains below the Euro area average of 4.1 per cent and the OECD of

2.9 per cent in 2016.

Maintaining a growth and entrepreneurship-friendly taxation system, whilst simultaneously broadening the

tax base, is critical to maintaining existing levels of employment and creating new jobs. A broader stable tax

base is also crucial in achieving sustainability of the public finances. In terms of tax base, income tax remains

the Government’s largest tax stream (€20.5bn in 2017). The rise in income tax receipts illustrates the

improvement in the labour market. Over the period 2012-2017, income tax receipts recorded an increase of 34

per cent. Corporation tax receipts increased by 99 per cent over the same period. Ireland’s exposure related to

the concentration of corporation tax receipts among a very small cohort of firms remains a serious risk in

terms of the long-term sustainability of the public finances.

In terms of income tax and social security contributions for married couples and individuals as a per cent of

total labour costs, Ireland is more competitive than the Euro area. Marginal rates of income tax in Ireland for

married couples and individuals earning below the average wage are lower than the rates in the UK, Euro area

and OECD. The rates for individuals earning the average wage and above are less competitive.

Ireland’s corporation tax rate remains internationally competitive and is the third lowest in the OECD at 12.5

per cent. However, while Ireland’s rate has remained consistent over recent years, many economies have

reduced their rates (e.g. the UK and in 2018, the US). Ireland’s headline Capital Gains Tax (33%) is the third

highest in the OECD and above the UK tax rate of 28 per cent.

Physical Infrastructure

Government investment as percentage of GDP remains below pre-crisis levels in Ireland and across the OECD.

In 2015, average investment spending across OECD countries amounted to 3.2 per cent of GDP. Ireland’s

measures relative to GDP are skewed by the activities of multinationals and the equivalent figure for Ireland

was the second lowest in the OECD at 1.7 per cent. Expenditure increased to 1.9 per cent in 2016 but remains

low. Over the medium term, capital investment levels are projected to increase, but at present remain low

relative to pre-crisis levels. Developing Ireland’s infrastructure base is a fundamental challenge to enhancing

competitiveness. Perceptions regarding the overall quality of infrastructure in the economy remain low in

Ireland. Ireland’s score in international competitiveness rankings fell over the past five years to 2015 and in

2017 remains below the EU average (4.9). Ireland is ranked 51st in the world with the UK 27th. In an EU

context Ireland is ranked 21st with the UK 12th.

13

Sustained investment needs to be made in quality public transport projects, broadband and housing which

offer the highest economic and social returns and is future-proofed. In view of demographic change and the

long lead times for the delivery of road, air and sea port infrastructure and services, it is critically important

that planning is effective and future proofed to ensure Ireland is well positioned to meet longer term

infrastructure needs.

Clusters and Firm Sophistication

Ireland has a relatively high degree of specialisation and cluster presence in biopharma, digital, medical

devices and business services sectors. Competitiveness and productivity is driven by firms capable of using

knowledge intensive production processes. In terms of relative sophistication of business processes as

perceived by national executives, Ireland is ranked 14th in the world and 7th in the Euro area and scores above

the Euro area average. Ireland is a strong innovation follower with performance improving over time but

behind the UK and the best innovation leaders. 46 per cent of SMEs in Ireland are reported as having

introduced a product or process innovation in 2016, the second highest in the EU. The proportion of SMEs in

Ireland who introduced a marketing or organisational innovation is high (52. 5%).The comparable figure in the

UK is 45 per cent with the EU average 35 per cent. E-sales accounted for 33 per cent of the total turnover

generated by Irish enterprises in 2016, which was the highest share recorded in Europe. The EU and UK rates

were both 18 per cent. Overall, the share of e-sales in total turnover has been increasing for Irish SMEs and

remains the highest in the EU.

Knowledge and Talent

In an international context, the IMD’s Competitiveness Yearbook 2018 ranks Ireland 5th for attracting and

retaining talent. Ireland’s other strengths are in relation to the availability of financial skills (7th) and the ability

to attract foreign talent (8th). Relative weaknesses include the pupil-teacher ratio in secondary education (43rd)

and language skills (46th).

In 2016, Irish expenditure on R&D as percentage of GDP accounted for 1.18 per cent, below the EU average

(2.03%) and UK (1.69%). Business expenditure on R&D (BERD) accounted for 0.8 per cent, with public

expenditure accounting for 0.3 per cent. R&D investment has increased in recent years but GNP/GDP levels

have increased at a faster rate. In 2016, Gross expenditure on R&D (GERD) increased to €3,243m and is at its

highest level in the period 2007-2016.

The proportion of the working age population with tertiary (third level) education in Ireland is above the Euro

area average the OECD average. As a percentage of total third level graduates, Ireland produced more

science, maths & statistics and ICT graduates than the Euro area. However, the proportion of engineering,

manufacturing and construction graduates is below the Euro area average. Ireland surpasses both the Euro

area and OECD average attainment for secondary education participation. With 6.1 per cent classified as early

school leavers, Ireland's retention rates in secondary education are above the Euro area average of 11 per cent.

However, the percentage of people aged 25-64 in receipt of education and training (both formal and non-

formal) in Ireland remains below the Euro area average.

Institutions

The World Bank's Doing Business index assesses regulations affecting SMEs and measures regulations

applying to companies throughout their life cycle. Ireland improved its ranking in 2017 and is now ranked 17th

in the world and 4th in the Euro area. Ireland ranks highly for ease of paying taxes, starting a business and

protecting minority investors. Relative to the UK, the biggest deficiencies are Ireland’s scores in enforcing

contracts, getting electricity and trading across borders. Ireland’s lead in registering a property and starting a

14

business is slim. Perceptions regarding institutional effectiveness and the quality of public services and

regulatory effectiveness are above the OECD average but behind the UK. Ireland's trade in services is relatively

open and Ireland has a relatively low level of trade restrictiveness across 19 major services sectors.

Macroeconomic sustainability

The Irish economy recorded strong growth in 2017 (7.8 %). The European Commission forecasts economic

growth of 5.7 per cent and the Department of Finance - 5.6 per cent in 2018. However, the Modified Gross

National Income (GNI*), which more accurately reflects the underlying state of the Irish economy as it

excludes the impact of multinationals’ activities, was more than 30 per cent lower (€189.2 billion) than the

Gross Domestic Product (€275.6 billion) in 2016.

Both the EU and Euro area economies grew by 2.4 per cent in 2017 and are predicted to grow by 2.3 per cent in

2018. National accounts data suggests that exports were the key driver of economic growth in Ireland in 2017

with both goods and service sector performing well. The growth in exports combined with significant

contractions in imports (-6.2%), resulted in an increased net export figure of 14.39 per cent (-9.11% in 2016).

Year on year, consumption spending grew moderately (1.9%) and there was a significant drop in investment

(-22%); the latter largely due to a low level of investment in intangible assets as well as the significant decline

in aircraft purchase.

Ireland’s GDP per capita remains the second highest in the EU after Luxembourg and significantly above the

Euro area average. Ireland’s current account surplus was €37bn for 2017, an increase of nearly €28bn on 2016.

Ireland’s debt as a percentage of GDP continued to decline in recent years and is below the UK (87.7%) and the

Euro area (86.7%) in 2017. It was 68 per cent in 2017 and is expected to decline to 66 per cent in 2018.

However, the Irish GDP figures are skewed by the activities of the multinational sectors, and the debt-to GNI*2

ratio, a better measure of sustainability in Ireland, remains very high (100.1 %) but are predicted to fall in the

period 2018-2021. Measured per capita, Ireland’s debt is the highest in the EU at over €42,000 per person. In

2007, as we entered into the economic crisis, it was less than €11,000. The Government’s mid-term budgetary

objective in accordance with EU Fiscal rules remains the achievement of a structural deficit of 0.5 percent of

GDP. Earlier estimates of achieving this target, as outlined in the government’s (MTO)3, by 2018 have been

revised and the Department of Finance now predicts it to be achieved around 2021. The general government

deficit was 0.3 percent of the GDP in 2017, in line with the threshold (3 percent of GDP) set out in the Stability

and Growth Pact. The exchequer’s revenue income represented 25.7 per cent of GDP in 2017, a fall of almost 2

per cent on 2016 (27.5%). Similarly, expenditure as a percentage of GDP also fell from 28 per cent in 2016 to

26.1 per cent in 2017. Beyond the public finances, Irish household debt as a proportion of income fell more

than 60% during the period 2011-2016. However, Irish households remain the fourth most indebted

households in the EU.

Endowments

In 2017, Ireland continued to have the youngest population in the Euro area. In the period 2012-2017, the Irish

population increased by 4.2 per cent. Ireland’s birth rate remains considerably higher compared to other EU

countries, even though it declined by around 3 percent in the period 2011-2016. The combination of positive

net migration and natural increase resulted in an overall increase in the population (population estimate of

4.79 million in April 2017). The median age of the Irish population remained below the EU average.

2GNI* - Modified Gross National Income

3 MTO- Medium Term (Budgetary) objective

15

The change in dependency ratios are important for long-term planning across a range of policy spheres.

Ireland has the 7th lowest old age dependency ratio in OECD and 2nd lowest in Europe. However, the Irish

dependency ratio rose in the period 2000-2015 and is expected to rise further by 2025. Ireland’s labour force

grew by almost 5 per cent in the period 2012-2017. In 2017, the overall labour force participation rate in Ireland

was 72.6 per cent, slightly below the Euro area average (73.1%). The female rate was below the Euro area

average, the male rate was above the Euro area average. The CSO recorded net inward migration in 2017

(+19,800), the highest level since 2008.

Population density in a country determines the infrastructures demand, such as road networks, educational

institutions, broadband connections and the transport system, and these are vital in maintaining and

improving a country’s competitiveness. Ireland is one of the most sparsely populated countries in the EU.

Census 2016 data shows the significant differences in change in population density between urban and rural

areas in the period 2011-2016, with density averaging 2,008 people per km2 in urban areas and 27 people per

km2 in rural areas in 2016.

16

Ireland’s Competitiveness Challenge _ the policy challenges

The future resilience of our economy will rely on the ability of our enterprises to compete effectively in

international markets and to anticipate and respond to customer demands for new products, services and

solutions in new and existing markets. Our improved performance is reflected in strong employment growth

across sectors and regions. However, the sustainability of Ireland’s economic model is under threat. There are

significant challenges in the external environment, particularly global ecomonic uncertainty, changes to the

business tax landscape, protectionist policies and Brexit related risks. Domestic pressures are also

undermining our ability to compete. Our debt levels remain high, increasing property prices and rental costs

diminish our ability to attract and retain talent, and the the economy relies on a small number of highly

productive companies, a small number of export markets, and a narrow range of products and services. The

overarching themes emerging from the analysis in Ireland’s Competititveness Scorecard 2018, which will be

considered in the Council’s 2018 Competitiveness Challenge Report are:

▪ Ensuring the sustainability of the economic model: The economy cannot grow in a sustainable

manner unless the macro environment is stable. Ireland’s debt levels remain high. The State cannot

provide services efficiently if it must make high-interest payments on its past debts. It is important to

improve Ireland’s tax competitiveness to support and reward employment, investment and

entrepreneurship. Ireland’s export performance remains strong, however the range of products and

services exported, the base of exporting enterprises, and the market destinations are relatively

concentrated. We need to continue to improve the environment for business in Ireland in order to

expand the export base and range of exported products and services.

▪ Maintaining cost competitiveness: As the economy continues to grow, cost pressures and capacity

constraints have emerged in key areas. Cost pressures are evident in property, labour, credit, services

and energy prices, where Ireland performs below competitor countries. Ireland remains an expensive

location in which to do business with a price profile described as “high cost and rising”. Increasing

business costs reduce the competitiveness of enterprises based in Ireland and our attractiveness as a

location for mobile investment. As the pressure on costs increases, it is critical that domestic policies

do not contribute to overheating the economy.

▪ Bridging the productivity gap between “the best and the rest”: productivity is a key driver of

national competitiveness. Improving levels of labour and capital productivity enables enterprises to

improve their efficiency and profitability, and enhances the ability of countries to maintain

international competitive advantage and sustainably improve living standards. Productivity levels and

growth rates in Ireland are strong but skewed by globalisation activities. Our performance is heavily

influenced by a small cohort of enterprises, which disguises, to a degree, underperforming sectors

and boosts Ireland’s productivity levels. Bridging the productivity gap that exists between the most

productive firms and laggard firms is vital for sustainable growth prospects. While we are improving

our innovation performance, we cannot stand still. Ireland’s firms must continue to move up the value

chain and embrace and support new technologies and opportunities, particularly in the digital

economy.

Ireland’s Competitiveness Scorecard does not provide the answers to these challenges. Rather, this report

informs the evidential base to assist in the identification of the key challenges affecting enterprise

competitiveness. The Council will put forward proposals to address many of these issues in its annual policy

document, Ireland’s Competitiveness Challenge, which will be published later this year.

17

Chapter 1: Ireland’s Competitiveness Performance and Outlook

International competitiveness performance

Competitiveness is a complex concept incorporating a myriad of interlinked and interdependent factors;

reflecting this complexity, Ireland’s Competitiveness Scorecard analyses data over 170 indicators each of

which tells a part of Ireland’s competitiveness story. These measure a range of inputs, outputs and outcomes.

Given the disparate nature of these indicators, the National Competitiveness Council does not attempt to

create a single quantifiable measure of competitiveness – rather, each indicator is examined individually.

Thereafter, taking a bird’s-eye view of all the data collected, the Council can draw the various strands of

analysis together to present a comprehensive picture of Ireland’s international competitiveness performance.

Figure 1.1 presents Ireland’s ranking across a range of international indices. In this figure, a ranking of 1 (i.e.

close to the centre of the chart) represents a robust performance (i.e. a ranking of 1 would imply that Ireland is

deemed to be the most competitive of 33 countries in the OECD). Ireland’s performance is compared relative

to Denmark and the UK. In comparison to the UK, Ireland performs well in international competitiveness

rankings as benchmarked by the IMD but is behind the UK in Global Innovation (Ireland is ranked 10th, the UK

5th in the Global Innovation Index), Entrepreneurship (Ireland is ranked 7th, the UK 4th in the Global

Entrepreneurship Index) and Ease of Doing Business (Ireland is ranked 17th, the UK 7th) indices.

Figure 1.1 Overview of Ireland’s international rankings amongst OECD countries 2016

These indices cover

several policy areas –

some based on directly

quantitative aspects of

policy (e.g. the World

Bank Doing Business

Index); others measure

qualitative, more

subjective issues; indices

such as the IMD and

WEF competitiveness

indices capture a

mixture of both.

Source: Various International Organisations

Indices and rankings are useful, if imperfect, measures of competitiveness performances. In some instances,

Ireland’s ranking is not a question of absolute deterioration or improvement in these categories, but rather a

matter of other countries improving their position relative to Ireland's. Advanced economies such as Ireland, at

the upper end of the rankings, can find it harder to get high impact from their reforms due to their already

robust performance (i.e. as a country nears the frontier or limit of best practice, the harder marginal

improvements are to achieve). In addition, the methodology, surveys and data used in these benchmarking

reports differ significantly. Methodologies are frequently revised and this can have an impact on Ireland’s

ranking. While acknowledging that year-on-year fluctuations in data may be subject to “data noise”,

(particularly about perception based indicators) performance across these rankings indicates the dynamic and

24

12

177

8

10

0

5

10

15

20

25

WEF Global

Competitiveness Report

2017

IMD World

Competitiveness

Yearbook 2017

World Bank Doing

Business 2017

Global Entrepreneurship

Index 2017

Forbes Best Countries for

Business 2016

Global Innovation Index

2017

Ireland UK Denmark

18

global nature of competitiveness. Figure 1.2 examines how Ireland’s ranking has evolved in the last decade in

two of the most high-profile enterprise competitiveness-related indices. Ireland’s position in the World

Economic Forum (WEF) and Institute for Management Development (IMD) rankings deteriorated prior to and

over the course of the recession but has gradually started to recover in recent years. The 2017/2018 WEF

Global Competitiveness Report shows Ireland is currently ranked 24th most competitive economy, an

improvement of 1 place in the year. Using the IMD measure of competitiveness Ireland is currently ranked 12th,

a fall of 6 places from the previous year. Ireland’s fall in the IMD ranking is due to several reasons. Our

economic performance decline in the IMD ranking is due to distortions to Ireland’s GDP figures and gross fixed

capital formation. Perceptions of Government efficiency declined largely due to high effective personal tax

rates. Many of Ireland’s traditional assets continue to remain competitive. Ireland is ranked first in the world

by the IMD for labour productivity of industry, flexibility and adaptability of our workforce. We also perform

well in relation to the attracting and retaining talent (5th) competitiveness of our tax regime (2nd) and

measures which consider ease of doing business (7th) and ease of starting a business (5th). In terms of

quantitative data, international indices of competitiveness such as the WEF and IMD reports combine current

economic performance metrics (e.g. economic growth, fiscal position, productivity levels, employment, prices

indicators) with measures of potential future success (e.g. investment in infrastructure, education and

innovation) as well as qualitative measures.

Figure 1.2 Ireland’s global competitiveness rankings, 2007-2017

Since 2011, the trend in

Ireland’s international

competitiveness

ranking, as measured

by the IMD and WEF,

has generally been

upward. After strong

improvements in 2016

and 2017, Ireland is now

ranked 12th in the IMD’s

World Competitiveness

Yearbook 2018 and is

ranked 24th in the WEF

Global Competitiveness

Report 2017/2018.

Source: IMD, WEF

The World Bank’s 2017 Ease of Doing Business report places Ireland 17th out of 190 economies – an

improvement of 1 place from the previous year. While Ireland’s performance and overall score has

improved, other countries have also improved their performance and improved at a faster rate. Globally,

Ireland is a top 20 performer regarding measures of paying taxes (5th), ease of starting a business (10th),

protecting minority investors (13th) and resolving insolvency (18th). Ireland’s ranking is less impressive in

getting credit (32nd), getting electricity (33rd), dealing with construction permits (38th), registering property

(41st), trading across borders (47th) and enforcing contracts (90th).

12

24

1

6

11

16

21

26

31

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Less

Co

mpe

titi

ve

Ran

kin

g

M

ore

Co

mpe

titi

ve

Ireland IMD Ranking Ireland WEF

19

Harmonised Competitiveness and exchange rate trends

Ireland’s competitiveness narrative can be illustrated using Harmonised Competitiveness Indices (HCIs)4. The

purpose of HCIs is to provide comparable measures of countries' price and cost competitiveness that are

consistent with the real effective exchange rates.

Figure 1.3: Harmonised Competitiveness Indicators, Ireland, February 2012-February 2018 (1999 = 100)

HCI data for February

2018 show that the

nominal HCI increased

by 6% on an annual

basis. In real terms, the

HCI increased by 4.6%.

The upward movement

of the indices indicates a

decline in this measure

of competitiveness

linked to exchange rate

movements, with low

inflation mitigating the

impact on the real HCI.

Source: Central Bank of Ireland

Factors outside of the control of Irish policy makers and enterprises, such as exchange rates, exert a

considerable influence on national competitiveness and the cost base for enterprise based in Ireland.

Favourable exchange rates, vis-à-vis Ireland’s main trading partners, make firms based in Ireland more cost

competitive and allow them to trade more effectively in international markets. Because of the scale of

Ireland’s non-Euro denominated trade, (i.e. with the UK and US), euro exchange rates have a greater impact

on relative international competitiveness than is the case in many Euro area countries. The euro has

appreciated against sterling and the US dollar over the past year. The appreciation of the euro-sterling

exchange rate poses significant challenges for Irish export competitiveness to the UK. The €/£ exchange rate

average was £0.88 in 2017 compared with £0.82 in 2016 and £0.73 in 2015. In April 2018, the euro averaged

£0.87; this compares to an average value of £0.81 from 2007-2016. The permanency of the exchange rate shift

is an important competitiveness consideration. Analysis by the Central Bank5 has modelled the effects of a

sterling depreciation shock (the pound depreciates by 10% relative to the euro) on Irish output. The analysis

suggests the export economy is most affected with a decline in relative competitiveness leading to a fall in

output of 0.4 per cent after 3-4 years and by 0.2 per cent in the long run. Domestic demand and the non-

traded sector would also be affected negatively. In addition, inflation would be lower due to a decline in import

4 Features of the Irish economy can HCI can affect movements in HCIs and care should be taken in interpreting movements in the indices as a measure of

competitiveness. The nominal HCI is affected by exchange rate developments and relative to other Euro area countries a high share of Ireland’s exports are

destined for non-Euro area countries (UK and US). Real HCIs consider, relative price movements relative to trading partners. Using consumer prices as a

deflator means the impact of intermediate goods and capital goods are not directly considered and the influence of indirect taxes and non-traded goods and

services on the CPI limited its usefulness as an indicator of good indication of international competitiveness. See Barry, F, (2017) The Central Bank’s

harmonised, competitiveness indicators, users beware, Administration, vol. 65, no. 4, O’Brien, D. (2010) Measuring Ireland’s price and labour cost

competitiveness. Central Bank Quarterly Bulletin, Q1, 2010. 5 Central Bank of Ireland, Quarterly Bulletin No.2 2018

85

90

95

100

105

110

115

Feb-

12

May

-12

Aug

-12

Nov

-12

Feb-

13

May

-13

Aug

-13

Nov

-13

Feb-

14

May

-14

Aug

-14

Nov

-14

Feb-

15

May

-15

Aug

-15

Nov

-15

Feb-

16

May

-16

Aug

-16

Nov

-16

Feb-

17

May

-17

Aug

-17

Nov

-17

Feb-

18

Inde

x (1

999

=100

)

Nominal HCI Real HCI

20

prices. The Central Bank estimate the aggregate impact of the shock as a reduction of the GDP level of

approximately 0.2 per cent in the long run.

Figure 1.4: Euro/Dollar, Euro/Sterling, exchange rates, April 2007-2018

The euro has

appreciated against

sterling and the US

dollar over the past year.

In the year to April 2018

the euro appreciated by

14% relative to the

dollar and 10% relative

to sterling. Since the

Brexit referendum, the

value of sterling has

been volatile and

depreciated by 10 per

cent relative to the euro.

In April 2018, the euro

averaged £0.87; this

compares to an average

value of £0.81 from

2007-2016.

Source: Central Bank

Figure 1.5: Real effective exchange rate (REER), Ireland, deflated by Consumer Prices, 2011-2017

The REER is a country’s

exchange rate relative to

a basket of exchange

rates of other countries

weighted by respective

trade shares. A negative

value indicates

improved

competitiveness. Recent

developments in

exchange rates and

inflation have served to

improve Ireland’s

performance.

Source: Eurostat

0.40

0.60

0.80

1.00

1.20

1.40

1.60

Ap

r-0

7

Oct

-07

Ap

r-0

8

Oct

-08

Ap

r-0

9

Oct

-09

Ap

r-10

Oct

-10

Ap

r-11

Oct

-11

Ap

r-12

Oct

-12

Ap

r-13

Oct

-13

Ap

r-14

Oct

-14

Ap

r-15

Oct

-15

Ap

r-16

Oct

-16

Ap

r-17

Oct

-17

Ap

r-18

€E

xch

ang

e R

ate

US$ GB£

82

84

86

88

90

92

94

96

98

100

2011 2012 2013 2014 2015 2016 2017

Ind

ex 2

010

=10

0

EA 19 EU 28 37 Countries 42 Countries

21

Economic outlook

The European Commission’s forecast for economic growth for Ireland together with our major trading

partners are shown in Table 1.1 below. With a growth rate of 7.8 percent, the Irish economy outperformed the

rest of the Euro area countries, the EU and major global economies in 2017. The substantial improvement in

the labour market conditions meant the unemployment rate is projected to decrease year on year to 4.9 per

cent over 2018-2019. The European Commission report also indicates a slowing down in the economy in the

next two years with predicted growth rate of 5.7 per cent in 2018 and 4.1 in 2019 respectively. The Department

of Finance forecasts economic growth of 5.6 per cent in 2018 and 4 per cent in 2019. In the short-term the

major economic indicators such as private consumption, exports and investments are projected to remain

robust. The short-term economic outlook for both the EU and the Euro area is also positive. The EU is

forecasted to grow by 2.3 per cent in 2018 and 2 per cent in 2019 and the Euro area by 2.3 per cent and 2

percent in the same period.

Source: European Commission Spring Economic Forecast 2018

The OECD Outlook for Ireland report highlights the various domestic and foreign risk factors that could cloud

the Irish economic outlook in the short and long term. Domestically, the forecast warns that, combination of a

growing economy, expanding labour market and the disequilibrium in the housing sector could once again

lead to speculative property bubbles and elevated levels of property related loans. Also, the tightening of the

labour market could put upward and unsustainable cost pressure on businesses and dampen private

investment. Additionally, an open economy like Ireland is highly dependent on the global economic

environment and vulnerable to global/external risk factors. The combination of the global trade slowdown,

due to the rising possibility of the global trade war, and uncertainty caused by the Brexit poses a significant

challenge to the Irish economy.

Table1.1: Economic Growth Outlook (Annual percentage change), European Commission

2017 2018 2019

World 3.7 3.9 3.9

EU 2.4 2.3 2

Euro area 2.4 2.3 2

Ireland 7.8 5.7 4.1

Germany 2.2 2.3 2.1

France 1.8 2 1.8

Italy 1.5 1.5 1.2

UK 1.8 1.5 1.2

US 2.3 2.9 2.7

China 6.9 6.6 6.3

Japan 1.7 1.3 1.1

22

Table 1.2: Forecast Annual percentage change key indicators, Ireland,2018

GDP GNP HICP

Employment

Rate

Department of Finance 5.6 5.6 0.8 2.7

Central Bank of Ireland 4.8 4.4 0.8 2.4

ESRI 4.8 4.7 NA 2.7

European Commission 5.7 NA 0.9 NA

IMF 3.4 NA 1.5 1.6

OECD 2.9 NA 1.4 NA

Source: Various Bodies

The continuing negotiations on the future trading relationship between the EU and UK means the impact of

Brexit on the overall Irish economy remains uncertain. As the UK remains Ireland’s largest market in the EU,

the predicted low UK growth rate in the next two years (1.5% in 2018 and 1.2% in 2019) coupled with the

continued volatility of sterling would have an adverse effect on export demand and negatively affect the

overall economy. The economic outlook for the US, our principle trading partner outside the EU, indicates that

the US economy will continue to grow by 2.9 per cent in 2018 and2.7 per cent in 2019. This can change

significantly as the recent policy initiatives from the US administration have increased volatility in global

markets.

Despite domestic challenges and the uncertain global economic environment, the positive outlook for labour

force expansion, private investment, exports and consumption are the basis for a forecast of moderate growth

in the Irish economy in the short to medium term.

Table1.3: Forecast Annual percentage change in the composition of Irish economic growth, 2017-2021

2017 2018 2019 2020 2021

Real GDP 7.8 5.6 4 3.4 2.8

Real GNP 6.6 5.6 3.7 3.1 2.6

Exports 6.9 6.9 5.4 4.5 3.9

Imports -6.2 6.6 5.9 4.8 4.4

Personal Consumption 1.9 2.6 2.4 2.3 1.9

Government Consumption 1.8 1.9 1.9 1.8 1.7

Investment -22.3 8.5 7.4 5.2 4.7

Source: Department of Finance Stability Program Update 2018

23

Chapter 2

Sustainable Growth

24

Sustainable Growth

Competitiveness is not an end, but is a means of achieving sustainable improvements in growth and living

standards. The Council monitors progress on this goal by assessing economic, social and environmental

dimensions of societal wellbeing. Both in Ireland and internationally, there is increasing interest in

benchmarking quality of life improvements — incorporating aspects of living standards, income levels,

equality, health and life expectancy. The Scorecard benchmarks three elements of sustainable growth: quality

of life, income (growth rates, levels and distribution) and environment sustainability.

• Quality of Life: A key objective of competitiveness is to support a high quality of life, which is broader

than material living standards. Quality of life is measured by indicators of life satisfaction, health and

life expectancy.

▪ Ireland performs relatively well in objective measures of well-being (income, education attainment,

air and water quality). Eurostat data shows that life expectancy in Ireland has increased over the past

decade and in 2016 Irish life expectancy is 81.8 years, above the EU average of 81 years and

marginally below the Euro area average of 82 years. Healthy life years at birth for Irish females were

estimated at 69.8 years in 2016, the third highest rate in the EU and 5.6 years above the EU average.

Male healthy life years at birth in Ireland in 2016 were estimated at 67.3 years, the fourth highest rate

in the EU and 3.8 years above the EU average.

▪ Ireland performs well in many measures of subjective well-being relative to most other countries as

illustrated by the OECD Better Life Index. Data for 2015 shows that Ireland ranks above the average in

measures relating to social connections, jobs and earnings, housing, personal security, health status,

education and skills, work-life balance, and environmental quality. Ireland scores below average in

income and wealth, and civic engagement. Ireland continues to perform strongly in the UN’s Human

Development Index, which measures average achievement in three basic dimensions of human

development — a long and healthy life, knowledge and a decent standard of living. Ireland’s ranking is

8th in the world and above the OECD average. The World Happiness report 2018, which measures

happiness in terms of GDP per capita, healthy life expectancy, social support, generosity, perception

of corruption and freedom to make life choices, shows that Ireland ranks 13th happiest country (4th in

the Euro area). Ireland performs strongly within the Euro area in variables related to GDP per capita

(2nd), social support (2nd), generosity (3rd) and perceptions of corruption (3rd). Ireland also ranks

13th in terms of happiness of its immigrants.

• National Income: High and rising incomes are a key measure of the success of national

competitiveness. The indicators used in this section cover the level, growth and distribution of

Ireland’s national income. Indicators include median incomes, income distribution, risk of poverty

and material deprivation.

▪ Ireland's exceptionally strong economic growth in recent years has been reflected in GDP per capita:

in 2017 Ireland's GDP per capita remains the second highest in the Euro area. The median equivalised

income in Ireland was also above the Euro area and the UK income. However, annual adjusted

disposable income per capita in purchasing power standard, reflecting the idea of household income

better than GDP, shows that although disposable income increased by 2.6 per cent compared to

2012, in 2016 it was still below the Euro area average (Figure 2.2.3).

▪ Ireland's Gini coefficient was 29.5 in 2016, compared with 30.5 in 2012. The score is below the Euro

area average of 30.7, indicating a more equal income distribution than in the Euro area (Figure 2.2.9).

▪ Ireland's at-risk-of-poverty rate (16.6%) remained below the Euro area average (17.4%) in 2016. Social

transfers play a significant role in reducing poverty risk in Ireland; excluding social transfers, the at-

25

risk-of poverty rate was 34.7 per cent. In 2016 the percentage of working persons at risk of poverty in

Ireland fell to 4.8 per cent compared to 2012 (5.6%), and was significantly below the Euro area

average rate of 9.5 per cent and the UK rate of 8.6 per cent. The improvement in the labour market

has seen a significant reduction in the scale of household joblessness - the share of adult population in

jobless households was, 10.0 per cent in 2017 (14.4% in 2013), below the Euro area of 10.2 per cent.

• Environmental Sustainability: The quality of a natural environment and the commitment to

environmentally sustainable policies is a key determinant of sustainable growth. The essence of

environmental sustainability is a stable relationship between human activities and the natural world,

one that does not diminish the prospects for future generations to enjoy a quality of life at least as

good as our own. Indicators in this section include per capita CO2 emissions, waste generation and

renewable energy use.

▪ The Paris Agreement, in force since November 2016, represents a global effort to limit global

temperature increases to less than 2 degrees and to pursue efforts to limit the temperature increase

to 1.5 degrees above pre-industrial levels. Within Europe one of the main instruments to reduce

greenhouse gas emissions is the EU Emissions Trading Scheme (ETS), which currently covers about

45 per cent of EU emissions, and 28 per cent of total emissions in Ireland. The Scheme has an

objective to reduce emissions in energy intensive industry covered by the Scheme by 21 per cent

relative to 2005 levels by 2020 and 43 per cent by 2030. Under the 2009 EU Effort Sharing Decision

(ESD), which applies to the non-ETS sector, Ireland has a series of particularly challenging

commitments. Between 2013 and 2020, Ireland has a target to reduce GHG emissions to 20 per cent

below 2005 levels. This target is partially calculated based on GDP per capita and is one of the most

demanding 2020 reduction target allocated under the ESD — one shared only by Denmark and

Luxembourg. Ireland has also committed to increasing the share of renewables in final energy

consumption to 16 per cent by 2020 and to moving towards a 20 per cent increase in energy

efficiency.

▪ Figure 2.3.3 shows that Ireland remains heavily dependent on fossil fuel energy sources, which

account for 93 per cent of the gross inland consumption, compared to 73 per cent in the Euro area. In

2016, overall energy consumption grew by 3.2 per cent. Energy use in transport grew by 3.3 per cent

and accounted for 42 per cent of the total energy use. Consumption in industry grew by 2 per cent

and the highest increase in energy consumption (7.8%) was recorded in the Commercial/Public

Services Sector.

▪ Between 1990 and 2016, total emissions increased by 10.4 per cent to 61,188 kt of CO2 equivalent.

The agriculture (32%), transport (20%), energy (20%), and residential (10%) sectors accounted for

most of emissions. While emissions by agriculture and industrial sectors have declined below 1990

levels, transport emissions have increased by 138 per cent.

▪ Increasing the share of renewables in gross final consumption of energy is one of the headline

indicators of the Europe 2020 strategy. Although Ireland has increased its use of renewable energy

sources in the period 2012-2016, at 9.5 per cent Ireland remains below its target of 16 per cent share

of renewables in gross final consumption.

▪ The EU 2030 targets envisage a domestic EU greenhouse gas reduction target of at least 40 per cent

compared to 1990. Ireland's emissions levels have been falling since 2008 on a year-on-year basis.

Since 2012 there has been an increase in the greenhouse emissions, and in 2015 they were 9.2 per

cent above the 1990 level.

26

2.1 Quality of Life

Figure 2.1.1 OECD Better Life Index, Indicators of Life satisfaction6, Ireland 2015

Ireland performs well in

measures of well-being

in the Better Life Index.

Ireland is a top

performer in social

connections and above

average in jobs and

earnings, housing,

personal security, health

status, education and

skills, subjective well-

being, work-life balance,

and environmental

quality. Ireland is below

average in income and

wealth, and civic

engagement.

OECD rank: n/a

Source: OECD Economic Surveys, Ireland

Figure 2.1.2 Human development index, 2010-2015

The Human

Development Index

measures average

achievement in three

basic dimensions of

human development - a

long and healthy life,

knowledge and a decent

standard of living.

Ireland continues to

perform strongly in this

indicator, ranking 8th in

the world and above the

OECD average.

OECD rank: 8th

Source: UN

6 Life satisfaction is measured on a scale from 0 to 10, with 0 being the lowest score – indicating least satisfied

0123456789

10Income and wealth

Jobs and earnings

Housing

Work and life balance

Health status

Education and skillsSocial connections

Civic engagement and

governance

Environmental quality

Personal security

Subjective well-being

Ireland Best performing country UK

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Sw

itze

rlan

d

Ge

rma

ny

De

nm

ark

Net

her

lan

ds

Ire

lan

d

US

New

Ze

ala

nd

Sw

ede

n

UK

Ja

pan

Sou

th K

ore

a

Fra

nce

Fin

lan

d

OEC

D

Ital

y

Sp

ain

Po

lan

d

Po

rtu

gal

Hu

ng

ary

Lat

via

Bra

zil

Ch

ina

Hu

ma

n D

evel

op

men

t In

dex

ra

nk

2015 2010

27

7 The overall length of each country bar represents the average ladder score. Each of these bars is divided into seven

segments, the first six sub-bars being GDP per capita, social support, healthy life expectancy, freedom to make life choices, generosity, and freedom from

corruption. The seventh bar, Dystopia (which has values equal to the world’s lowest national averages for 2015-2017 for each of the six key variables) is used

as a benchmark against which all countries can be favourably compared (in terms of each of the six key variables), thus allowing each sub-bar to be of positive

width.

Figure 2.1.3 Ranking of Happiness7, 2015-2017

The indicator measures

happiness in terms of six

key variables. At 7.0,

Ireland's overall

happiness rank is 13th

out of 156 countries (the

best performer is

Finland with a score of

7.6). Ireland performs

strongly within the Euro

area in GDP per capita

(2nd), social support

(2nd), generosity (3rd)

and perceptions of

corruption (3rd).

Euro area rank: 4th

Source: Sustainable Development Solutions Network

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0

South Korea

Japan

Latvia

Italy

Poland

Spain

Euro area

France

UK

US

Germany

Ireland

Sweden

New Zealand

Netherlands

Switzerland

Denmark

Finland

Score 0-10 (0=worst possible l ife, 10=best possible l ife)

GDP per capita Social support Healthy life expectancy

Freedom to make life choices Generosity Perceptions of corruption

Dystopia (1.92) + residual

28

2.2 National Income

Figure 2.2.1 GDP per capita, current prices, 20178

Ireland's exceptionally

strong economic growth

in recent years is reflected

in GDP per capita. At

€61,700, in 2017 Ireland's

GDP per capita remains

the second highest in the

Euro area. Over the course

of the recession, Ireland’s

GDP per capita declined

but remained relatively

high.

Euro area rank: 2nd

Source: Eurostat

Figure 2.2.2 GDP per capita, constant prices (PPS), 2016

Despite the economic

crisis, Ireland's GDP per

capita at purchasing

power standard (i.e.

adjusted for living costs

differences) remained

relatively stable and has

been on an upward

trajectory since 2012. At

€63,131, Ireland's GDP

per capita is the second

highest in the Euro area

(€37,480) in 2016.

Euro area rank: 2nd

Source: OECD

8 No data available for Switzerland for 2017, data from 2016 used instead.

0

10000

20000

30000

40000

50000

60000

70000

80000

Swit

zerl

and

Ire

lan

d

De

nm

ark

Swed

en

Net

her

lan

ds

Fin

lan

d

Ge

rma

ny

UK

Fran

ce

Eu

ro a

rea

EU

Ital

y

Spa

in

Latv

ia

GD

P p

er c

ap

ita

(€)

2017 2012

0

10000

20000

30000

40000

50000

60000

70000

Irel

and

Swit

zerl

and

US

Net

herl

ands

Swed

en

Den

mar

k

Ge

rma

ny

UK

Fin

lan

d

OEC

D

Japa

n

Euro

are

a

Fran

ce EU

Ko

rea

New

Zea

land

Ital

y

Spai

n

Pola

nd

Latv

ia

GD

P p

er c

apit

a (P

PP

$)

2016 2012

29

Figure 2.2.4 Median equivalised10 disposable income, 2016

Following a decline

during the recession, the

median equivalised net

income has been on an

upward trajectory since

2013. In 2016 the

median equivalised

income in Ireland was

€22,407, above the Euro

area income of €18,240

and the UK income of

€21,136.

Euro area rank: 5th

Source: Eurostat

9 Adjusted gross disposable income of households per capita in PPS reflects the net resources, earned by households which are available for consumption

and/or saving. It includes the flows corresponding to the use of individual services which households receive free of charge from the government. These

services, called "social transfers in kind", mainly include education, health and social security services.

10 Equivalised disposable income is defined as the total income of a household, after tax and other deductions, divided by the number of household

members.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Sw

itze

rlan

d

De

nm

ark

Sw

eden

Fin

lan

d

Ne

ther

lan

ds

Irel

an

d

Fra

nce

Ge

rma

ny

UK

Eu

ro a

rea

EU

Ital

y

Sp

ain

Lat

via

Po

lan

d

Eq

uiv

alis

ed i

nco

me

(€)

2016 2012

Figure 2.2.3 Adjusted gross disposable income of households per capita in PPS9, 2016

Disposable income, as a

concept, is closer to the

idea of household

income than GDP.

Ireland's annual adjusted

disposable income per

capita in PPS was

20,001, below the Euro

area figure of 23,280.

The disposable income

increased by 2.6%

compared to 2012.

Euro area rank: 9th

Source: Eurostat

0

5000

10000

15000

20000

25000

30000

35000

Swit

zerl

and

Ge

rma

ny

Fran

ce

Swed

en

Fin

lan

d

Fin

lan

d

Net

herl

ands

De

nm

ark

Euro

are

a

UK

Ital

y

Irel

and

Spai

n

Po

lan

d

Latv

ia

Gro

ss d

isp

osa

ble

inco

me

of h

ou

seh

old

s -

per

ca

pit

a in

PP

S

2016 2012

30

Figure 2.2.5 At-risk-of poverty rate (60% of median income after social transfers), 2016

Ireland's at-risk-of-

poverty rate (16.6%)

remained below the

Euro area average

(17.4%) in 2016. Social

transfers play a

significant role in

reducing poverty risk in

Ireland; excluding social

transfers, the at-risk-of

poverty rate was 34.7%.

Euro area rank: 8th

Source: Eurostat

0

5

10

15

20

25

Fin

lan

d

De

nm

ark

Ne

ther

lan

ds

Fra

nce

Sw

itze

rlan

d

UK

Sw

eden

Ge

rma

ny

Ge

rma

ny

Irel

an

d

Po

lan

d

EU

Eu

ro a

rea

Ital

y

Lat

via

Sp

ain

At

risk

of

po

vert

y ra

te (

per

cen

tag

e o

f to

tal p

op

ula

tio

n)

2016 2012

Figure 2.2.6 In-work at-risk-of poverty rate, persons employed aged 18+, 2016

In 2016 the percentage

of working persons aged

18+ at risk of poverty in

Ireland has fallen to

4.8% compared to 2012

(5.6%). Ireland's rate

remained significantly

below the Euro area

average rate of 9.5%

and the UK rate of 8.6%.

Euro area rank: 17th

Source: Eurostat

0

2

4

6

8

10

12

14

Fin

lan

d

Irel

an

d

De

nm

ark

Ne

ther

lan

ds

Sw

eden

Sw

itze

rlan

d

Fra

nce

Lat

via

UK

Eu

ro a

rea

Ge

rma

ny

EU

Po

lan

d

Ital

y

Sp

ain

Po

pu

lati

on

at

wo

rk a

t ri

sk o

f p

ove

rty

(%)

2016 2012

31

11 Students living in households composed solely of students of the same age class are not included

Figure 2.2.7 Share of persons aged 18-5911 who are living in households where no-one works, 2017

The improvement in the

labour market has seen

a significant reduction in

the scale of household

joblessness — the share

of adult population in

jobless households was,

10.0 per cent in 2017

(14.4% in 2013), below

the Euro area of 10.2 per

cent.

Euro area rank: 7th

Source: Eurostat

Figure 2.2.8 Percentage of population defined as severely materially deprived, 2016

Material deprivation

covers issues including

economic strain,

durables and housing.

After an increase in the

proportion of the

severely materially

deprived population

during the recession,

since 2013 the rate has

gradually decreased and

in 2016 it is 6.5%,

marginally below the

Euro area of 6.6% but

above the UK (5.2%).

Euro area rank: 8th

Source: Eurostat

0

2

4

6

8

10

12

14

16

18

Ge

rma

ny

Po

lan

d

Ne

ther

lan

ds

Lat

via

UK

Sw

eden EU

De

nm

ark

Irel

an

d

Fin

lan

d

Eu

ro a

rea

Fra

nce

Sp

ain

Ital

y

Per

cen

tag

e o

f to

tal p

op

ula

tio

n

2017 2013

0

5

10

15

20

25

30

Swed

en

Swit

zerl

and

Fin

land

Den

mar

k

Net

herl

ands

Ger

man

y

Fran

ce UK

Sp

ain

Ire

lan

d

Eu

ro a

rea

Po

lan

d

EU

Ita

ly

Latv

ia

Per

cen

tage

of

tota

l p

op

ula

tio

n

2016 2012

32

Figure 2.2.10 Unadjusted gender pay gap13, 2016

Female employees were

paid 13.9% an hour less

than male employees in

Ireland in 2014. This is

an increase on 12.2% in

2012. The average EU

gender pay gap in 2016

was 16.3% and 21% in

the UK. The lowest

gender pay gap in the

EU in 2016 was in

Romania at 5.8%, while

the highest was in

Estonia at 26.9%.

EU rank: 9th lowest

Source: Eurostat

12 The Gini coefficient is a measure of equality of income in the population where 0 represents a situation where all households have an equal income and 1

indicates that one household has all national income. 13 Data for enterprises employing 10 or more employees, NACE Rev. 2 B to S (-O) * Data for Ireland for 2016 is 2014 data. Data for UK provisional and

estimated by Eurostat. Data for Finland and Germany is provisional.

0

5

10

15

20

25

Ital

y

Lu

xem

bo

urg

Po

lan

d

Sw

eden

Irel

an

d*

Sp

ain

De

nm

ark

Fra

nce

Ne

ther

lan

ds

EU

Lat

via

Sw

itze

rlan

d

Fin

lan

d*

UK

*

Ge

rma

ny*

Dif

fere

nce

bet

wee

n a

vera

ge

gro

ss h

ou

rly

earn

ing

s o

f m

ale

and

fem

ale

emp

loye

es (

% o

f m

ale

gro

ss

earn

ing

s)

2016 2012

Figure 2.2.9 Gini12 coefficient of equalised disposable income, 2016

The Gini coefficient is a

measure of equality of

income in the

population. Ireland's

Gini coefficient was 29.5

in 2016, down from 30.5

in 2012. The score is

below the Euro area

average of 30.7, an

indication of a more

equal income

distribution than in the

Euro area.

Euro area rank: 11th

Source: Eurostat

0

5

10

15

20

25

30

35

40Fi

nla

nd

Net

her

lan

ds

Swed

en

De

nm

ark

Fran

ce

Swit

zerl

and

Ge

rma

ny

Ire

lan

d

Po

lan

d

Eu

ro a

rea

EU

UK

Ital

y

Spa

in

Latv

ia

Co

effi

cien

t o

f eq

uiv

ali

sed

dis

po

sab

le in

com

eSc

ale

(0-1

00

)

2016 2012

33

2.3 Environmental Sustainability

Figure 2.3.1 Environmental performance index (Scale 0-100), 2018

The Yale Environmental

Performance Index

assesses 24 indicators

grouped in 10 categories

which measure

environmental health

and ecosystem vitality.

Ireland's performance

over a 10-year period

has improved by 2.5%

and at 78.8 is above the

OECD average of 73.1

but below the UK of 80.

OECD rank: 8th

Source: Yale Centre for Environmental Law and Policy

Figure 2.3.2 Components of the ECO-Innovation index14, Ireland 2017

The European Eco-

Innovation Index

measures eco-

innovation performance

across five dimensions.

Ireland is considered an

average eco-innovation

performer, with scores

above the EU average in

inputs and resource

efficiency outcomes but

behind in socio-

economic outcomes,

outputs and activities.

EU-28 rank: 13th

Source: European Commission

14 The index covers various aspects of eco-innovation by applying 16 indicators grouped into five dimensions: 1) inputs comprising investments (financial or human resources), 2) activities, illustrating the extent companies are active in eco-innovation, 3) outputs, quantifying activities in terms of patents, academic literature, etc. 4) resource efficiency, covering resource (material, energy, water) efficiency and GHG emissions, 5) outcomes, illustrating the extent eco-innovation performance generates positive outcomes for social aspects (employment) and economic aspects (turnover, exports).

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

0

10

20

30

40

50

60

70

80

90

100

Swit

zerl

and

Fran

ce

De

nm

ark

Swed

en

UK

Ire

lan

d

Fin

lan

d

Spa

in

Ge

rma

ny

Ital

y

New

Ze

ala

nd

Net

her

lan

ds

Jap

an

OEC

D

USA

Latv

ia

Po

lan

d

Sou

th K

ore

a

Bra

zil

Ch

ina

Ten

yea

r p

erce

nta

ge c

ha

nge

in

sco

re

Sco

re (

0-1

00

)

2018 EPI score (left axis) 10-Year percentage change (right axis)

99

113

58

69174

55

0

20

40

60

80

100

120

140

160

180

Eco-Innovation Index

Eco-Innovation Inputs

Eco-Innovation Activities

Eco-Innovation Outputs

Resource Efficiency Outcomes

Socio Economic Outcomes

Ireland EU average

34

Figure 2.3.3 Gross inland consumption, percentage by fuel type, 2016

There is considerable

heterogeneity across

the EU in terms of fuel

consumption. Ireland

remains heavily

dependent on fossil fuel

energy sources (93% of

gross inland

consumption, compared

to 73% in the Euro area).

Rank: n/a

Source: Eurostat

Figure 2.3.4 Total final energy consumption by sector, Ireland, 1990-2016

In 2016, overall energy

consumption increased

by 3.2% to 11,679 ktoe.

Energy use in transport

accounts for 42% of the

total and grew by 3.3%.

Consumption in industry

grew by 2%. The highest

increase in energy

consumption (7.8%) was

recorded in the

Commercial/Public

Services Sector.

Rank: n/a

Source: SEAI

-10%

10%

30%

50%

70%

90%

110%

Irel

an

d

Sp

ain

Ne

ther

lan

ds

De

nm

ark

UK

Eu

ro a

rea

Ital

y

EU

Ge

rma

ny

Lat

via

Fra

nce

Fin

lan

d

Po

lan

d

Sw

eden

Gro

ss i

nla

nd

co

nsu

mp

tio

n (%

)

Total petrolium products Solid fuels

Gas Nuclear heat

Renewable energies Electrical energy

Waste (non-renewable)

0

2000

4000

6000

8000

10000

12000

14000

1990 2000 2005 2010 2011 2012 2013 2014 2015 2016

Kilo

to

nn

es o

f o

il eq

uiv

alen

t (k

toe)

Industry Transport Residential Commercial/Public Services Agriculture

35

Figure 2.3.5 Components of energy consumption, 2016

Since 2012 Ireland's

dependence on oil and

natural gas to meet its

energy consumption

needs has declined

marginally, from 75% to

74.7% but remains

above the OECD figure

of 64.8%. Green energy

accounts for 9.9% of the

energy consumption in

Ireland, above both the

OECD average of 4.9%

and the EU average of

8.3%.

OECD rank:

Oil dependency: 6th

Source: BP statistical review of world energy

Figure 2.3.6 Emissions by national climate change sectors (Kt CO2 equivalent), Ireland, 1990-2016

Between 1990 and 2016,

total emissions

increased by 10.4% to

61,188 kt of CO2

equivalent. The

agriculture (32%),

transport (20%), energy

(20%), and residential

(10%) sectors account

for most of emissions.

Emissions by agriculture

and industrial sectors

have declined below

1990 levels, but

transport emissions

have increased by 138%.

Rank: n/a

Source: EPA

-

10

20

30

40

50

60

70

80

90

100

Sin

gap

ore

Ne

ther

lan

ds

De

nm

ark

Bra

zil

Irel

an

d

Sp

ain

So

uth

Ko

rea

Jap

an UK

Sw

itze

rlan

d

Ital

y

US

OE

CD

EU

Ne

w Z

eal

an

d

Ge

rma

ny

Fin

lan

d

Hu

ng

ary

Fra

nce

Sw

eden

Po

lan

d

Ch

ina

Per

cen

tag

e o

f en

erg

y co

nsu

mp

tio

n

Oil Natural Gas Coal Nuclear Energy Hydro electric Renewables

0

5000

10000

15000

20000

25000

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

kt C

O2

eq

uiv

alen

t

Agriculture Energy Industries Transport

Residential Manufacturing Combustion Industrial Processes

36

Figure 2.3.8 Share of renewable energy in gross final consumption, 2016

Increasing the share of

renewables in gross final

consumption of energy

is one of the headline

indicators of the Europe

2020 strategy. Although

Ireland has increased its

use of renewable energy

sources in the period

2012-2016, at 9.5%

Ireland remains below

its target of 16% share

of renewables in gross

final consumption.

EU Rank: % distance

from target: 26th

Source: Eurostat

0

10

20

30

40

50

60

Swed

en

Finl

and

Latv

ia

Den

mar

k

Ital

y

Spai

n

EU

Fran

ce

Ger

man

y

Pol

and

Irel

and

UK

Net

herl

and

s

Ener

gy f

rom

rene

wab

le s

ourc

es (

%)

2016 2012 2020 Target

Figure 2.3.7 Greenhouse Gas emissions (Kt CO2 equivalent indexed to 1990), Ireland, EU-28, 1990-2015

The EU 2030 targets

envisage a domestic EU

greenhouse gas

reduction target of at

least 40% compared to

1990. Ireland's emissions

levels have been falling

since 2008 on a year-on-

year basis. Since 2012

there has been an

increase in the

greenhouse emissions,

and in 2015 they were

9.2% above the 1990

level.

Rank: n/a

Source: Eurostat

60

70

80

90

100

110

120

130

14019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Emis

sion

s In

dex

(199

0 =1

00)

Ireland EU 28 1990 C02 level

37

Figure 2.3.9 Greenhouse Gas emissions per capita, 2015

The greenhouse

emissions per capita

have been gradually

decreasing in the period

2002-2010 to 14 tonnes

of CO2 equivalent per

capita. Between 2011

and 2014 the

greenhouse emissions

have been stable at 13

t/capita but 2015 saw an

increase to 13.3 t/capita,

a figure above the Euro

area of 9.7.

Euro area rank: 3rd

Source: Eurostat

Figure 2.3.10 Percentage of energy from renewable sources and per capita CO2 emissions, 2015

Ireland’s use of

renewable energy

sources has increased in

the period 2011-2015

but remains well below

the Euro area and the

target of a 16% share of

renewables in gross final

consumption. In terms

of emissions per capita,

Ireland’s absolute

performance has

improved but Ireland

remains significantly

behind leading EU

states.

Euro area rank:

Renewables: 15th

Emissions: 3rd

Source: Eurostat

0

2

4

6

8

10

12

14

Sw

eden

Lat

via

Sw

itze

rlan

d

Fra

nce

Ital

y

Sp

ain

UK

EU

De

nm

ark

Eu

ro a

rea

Po

lan

d

Fin

lan

d

Ge

rma

ny

Ne

ther

lan

ds

Irel

an

d

To

nn

es o

f C

O2

eq

uiv

alen

t p

er c

apit

a

2015 2011

0

2

4

6

8

10

12

14

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Sw

eden

Fin

lan

d

Lat

via

De

nm

ark

Eu

ro a

rea

Ital

y

EU

Sp

ain

Fra

nce

Ge

rma

ny

Po

lan

d

Irel

an

d

UK

Ne

ther

lan

ds

Gre

enh

ou

se g

as e

mis

sio

ns

(To

nn

es o

f C

O2

eq

uiv

alen

t) p

er

cap

ita

En

erg

y fr

om

Ren

ewab

le S

ou

rces

(%

)

Renewables (left axis) Greenhouse gas emissions (right axis)

38

Figure 2.3.11 Municipal waste generated and treatment, 2016

In the five-year period to

2016, the amount of

waste generated in

Ireland declined to 567

kg/capita, a 9.1%

decrease. In terms of

treatment options,

Ireland makes greater

use of recycling and

incineration than the

Euro area. While

performance has

improved, Ireland

generates more waste

per capita than the Euro

area average.

Euro area rank:

Total waste: 15th

Source: Eurostat

0

20

40

60

80

100

120Po

land

Latv

ia

Swed

en

Spai

n

EU

Fin

land U

K

Ita

ly

Fran

ce

Net

her

lan

ds

Irel

and

Ger

man

y

Den

mar

k

Wa

ste

gen

era

ted

(kg

per

ca

pit

a)

Landfilled Incinerated Recycled Composted Untreated

39

Chapter 3

Competitiveness Outputs

40

Competitiveness Outputs

The outputs of competitiveness are represented in the second tier of the competitiveness framework. These

could be seen as the metrics of current competitiveness. The metrics in this tier cover business performance,

costs, productivity and labour supply. These are defined as “competitiveness output” indicators and are not

directly within the control of policymakers. Ireland’s performance in these areas is directly related to the

quality of previous policies instituted at the input level and the ability to build a strong intermediate stage of

competitiveness.

• Business Performance: The performance of the business sector is central to the Council’s definition of

competitiveness. The enterprise sector is the driver of the economy and as such, is critical to income

growth and maintaining high employment levels in Ireland. A strong and vibrant enterprise sector is

also essential to sustaining the government finances and hence expenditure on public services.

Business performance is assessed across headings including trade and investment flows,

entrepreneurship, indigenous enterprise performance, and inward investment.

▪ Exports and Imports as a percentage of GDP were 120 per cent and 88 per cent respectively in 2017.

Trade as a proportion of GDP in Ireland has increased since 2013 and is significantly above Euro area

and OECD averages. Ireland’s share of total global export markets has increased in the last decade

and was 1.3 per cent, as of 2016. Ireland has expanded its share of the world’s commercial services

market, reaching 3 per cent in 2016, up from 2.4 per cent in 2006. Over the same period, Ireland’s

share of global merchandise exports has trended downwards but was 0.8 per cent in 2016, the same

share as 2006.

▪ Ireland’s principal trading partners in terms of goods exports are the US (27.2% share) and UK

(13.4%). The Euro area accounted for 33 per cent of goods exports, with the Belgium, Germany,

Netherlands and France the EU primary markets. While the share accounted for by these trading

partners (84%) is relatively unchanged in a decade, the importance of the US market has increased.

▪ The top 15 commodities account for approximately 90 per cent of total goods exports from Ireland.

The significance of pharmaceuticals and chemical products is clear with these two commodity groups

alone accounting for 45 per cent of exports. The top 100 traders in Ireland account for 80 per cent of

total export value.

▪ The number of newly born enterprises as a proportion of the total number of active enterprises is

increasing. There were 18,100 new enterprise births in 2015, an increase of over 11 per cent on 2014.

The largest increase in births was in the Construction sector. Ireland has a very high proportion of

high growth enterprises (growth in employment by 10% or more).

▪ 86 per cent of the enterprises born in Ireland in 2014 survived in 2015. 3-year and 5-year survival rates

are significantly higher than most EU countries where less than half survive for a five-year period.

▪ Foreign owned enterprises account for 2 per cent of all enterprises, 63 per cent of gross value added

and 22 per cent of all persons engaged. In Industry, they account for 89 per cent of value added and

42 per cent of all persons engaged. Foreign-controlled enterprises outside the EU generated 43 per

cent of the value added in the Irish non-financial business economies in 2014 compared to 18 per cent

in the UK and 11 per cent in the EU.

• Prices and Costs: Cost competitiveness is critical to ensuring that enterprises based in Ireland can

compete successfully in international markets. This section examines the overall cost level and the

rate of change for several key business inputs. Data on both pay and non-pay is included.

41

▪ The Council published its Cost of Doing Business in Ireland report in June 2018 and concluded that

Irish consumer prices in 2017 were 23.7 per cent above the EU average. The Council warns that

increasing business costs will reduce the competitiveness of enterprises based in Ireland and the

attractiveness of Ireland as a location for mobile investment and outlines the areas where upward

cost pressures are evident.

▪ Overall, despite robust growth in employment, labour cost growth has remained modest in recent

years and below the growth experienced in both the UK and the EU. The labour cost index shows

that Irish labour costs have been increasing since 2014, but at a slower rate than the UK and Euro

area. Between 2016 and 2017, hourly labour costs in the total economy expressed in Euro currency

rose by 1.9 per cent both in Ireland and the Euro area. The hourly labour costs expressed in own

currency increased by 2.6 per cent in the UK. The modest labour cost growth masks considerable

divergence at sectoral level and between Ireland and the UK. In Ireland, the sectors with the highest

rates of growth were Utilities (5%) and professional services (3.8%). Growth was negative in mining,

arts and other services. In the UK growth was highest in administrative (4.8%) and transport (4.7%).

▪ The last number of years has witnessed a sustained recovery in the Irish commercial property market

which resulted in sustained growth in commercial capital and rental values. Overall capital value

growth was recorded at 5.2 per cent in Q4 2017 – this comprised of annual increases of 8.4 per cent,

1.3 per cent and 3.2 per cent in Office, Retail and Industrial values respectively. However, while the

capital value index has increased, it remains 38 per cent below 2007 peak value. The take-up of office

space remained strong in 2017, reflecting the growth of existing businesses. Office rental prices in

Ireland in 2017 compare relatively favourably to cities in the UK. However, prices are increasing at a

faster rate, due to increased demand.

▪ Ireland remains heavily dependent on imported energy products which represent 82 per cent of the

gross inland consumption in Ireland. The high dependence on imported fossil fuels makes Ireland’s

energy prices vulnerable to substantial oil price fluctuations. Weighted average electricity prices (in

purchasing power standard) for non-household consumers in the lower consumption bands (below

20,000 MWh) increased in the second half of 2017 but remained below the Euro area. However,

average electricity prices in the high consumption bands (20, 000 to 70,000 MWh and 70,000 to

150,000 MWh) surpassed the Euro area average prices in the second half of 2017. Given Ireland’s

dependence on energy imports from the UK, Brexit could potentially have a significant impact on

Ireland’s energy market. Ireland is relatively cost competitive for telecoms, especially for business

mobile broadband. However, it is 10 per cent (Q3 2017) more expensive in cost for fixed and mobile

broadband than the UK. Concerns persist around the issues of quality (speed) and the regional

availability of high-speed services.

▪ In 2017 Ireland remained an expensive location in which to live and do business with a price profile

which can be described as “high cost and rising”. Irish consumer prices in 2017 were 23.7 per cent

above the European Union average and increased at an annual rate of 0.2 per cent (Figure 3.2.4). In

2017 Irish consumer prices increased by 0.3 per cent (year-on-year) compared with 1.5 per cent for the

Euro area and 2.7 per cent in the UK. Services prices in Ireland have risen continuously since the

beginning of 2012 and the magnitude of the increase has been higher than the Euro area average

during this period also. In 2016 service producer price levels in Ireland were 7.6 per cent higher than in

2010, while prices in the Euro area were 1.4 per cent higher on average, and 4 per cent higher in the

UK. In the year to Q3 2017, business services prices increased by approximately 4 per cent. The

biggest increases in prices in 2017 were recorded in Postal and Courier (8.9%) and Computer services

(5.8%). Motor insurance has moderated in recent months, however, in the period 2014-2016, prices as

measured by the CPI increased by approximately 40 per cent.

42

• Productivity: In the long run, a country’s standard of living is dependent upon productivity. The

indicators in this section examine Ireland’s labour productivity performance in an OECD context, as

well as data from the CSO’s experimental Productivity in Ireland report published in May 2018.

▪ Ireland had the highest output per hour worked among OECD member states in recent years. Output

per hour was $88 in 2017 and $83.1 in 2016 in GDP terms, compared to $51.6 in the UK and $47.1 in

the OECD in 2016. On average over the period 2006-2016, Ireland’s growth rate (4.6%) has been well

above most Member States and the OECD total (0.9%).

▪ In recent years, Ireland’s performance is significantly affected by globalisation activities, which are

reflected in the national accounts. Irish labour productivity growth has been above that in competitor

countries since 2010. However, corporate restructuring, including the relocation of firms with

significant IP assets and aircraft leasing, led to noteworthy increases in labour productivity,

particularly in 2015.

▪ Reflecting significant changes in the economic cycle, the pattern of Irish productivity growth shows

significant volatility. Median total productivity growth over the period was 4.7% peaking at 22% in

2015 with a low of -1.1% in 2012. Significant volatility is seen in Manufacturing, Construction,

Agriculture and Finance sectors.

▪ CSO data shows Irish productivity growth (gross value added per hour worked) averaged 4.5 per cent

in the period to 2000-2016. The contribution of the Foreign sector to labour productivity growth

averaged 10.9 percent and 2.5 per cent for the Domestic and Other sectors. The results are affected

by the significant economic developments in 2015. In 2016 productivity in both the foreign and the

domestic sector was 2.2 per cent. On average over the period 2006-2014, productivity in the foreign

sector (6.2%) has been higher than the Domestic sector average of 2.7 per cent.

▪ Industry and ICT have seen significant rises in productivity over this period, increasing by a factor of

2.7 and 2.4 respectively. A substantial proportion of the growth in Industry was driven by the

globalisation events in 2015. The Distribution, Transport, Retail and Construction sectors show minor

changes in productivity.

▪ Figure 3.3.13 shows that in general, growth in labour productivity over the last decade, and in 2015,

has been driven by increased capital deepening. In the period 2006-2016 Ireland’s capital stock per

employee increased by 99 per cent from €190,000 to €378,000. The CSO reports that the rate of

increase in capital stocks in Ireland in both the Foreign sector and the Domestic and Other sector was

the highest in the EU.

• Employment: Employment is a key determinant of living standards, and growth in employment,

combined with productivity growth, is the main driver of economic growth. This section considers a

range of indicators, measuring key aspects of labour market performance including employment and

unemployment. Some labour market indicators such as participation rates and several other

demographic and migration indicators are examined in the section on endowments (Chapter 6).

▪ Figure 3.4.2 shows the continued improvement in the labour market. Employment is approaching

peak pre-recession levels, illustrated by the over 2.2 million employed in Q1 2018, an increase of 2.9

per cent or 62,100 in the year to Q1 2018. The increase in total employment was represented by an

increase in full-time employment of 72,000 and a decrease in part-time employment of 9,900.

▪ Headline and long-term unemployment are also on a steady downward trajectory. The seasonally

adjusted unemployment rate was 5.1 per cent in June 2018 and the seasonally adjusted number of

persons unemployed was 120,200, a decrease of 34,300 when compared to June 2017. The long-term

unemployment rate decreased from 3.7 per cent to 2.1 per cent over the year to Q1 2018. Youth

43

unemployment (15-24-year-olds) was 11.8 per cent in May 2018, below the Euro area average (16.8

%).

▪ Strong employment growth is observed across sectors and regions. The difference in unemployment

rates across Ireland's eight regions (18%) is the lowest in the Euro area.

▪ The gap between the individual's jobs skills and the demand of the labour market is illustrated by

Figure 3.4.11. With 35 per cent of the workers employed in a different field from the area they

specialised in, and 44 per cent with a qualification mismatch, Ireland’s performance is below the Euro

area 15 (31.2% and 35.8% respectively).

▪ Figure 3.4.12 shows that for a long-term unemployed, one earner married couple with two children

earning 100 per cent of the average wage, the Irish replacement rate (79%) exceeds the OECD median

(58%) and the UK rate (71%). The rate for single persons (49%) also exceeds the OECD (32%) and UK

(37%) rates. The replacement rates are higher for lower-income families.

▪ The overall job vacancy rate remained flat (1.1% in Q4 2017) and significantly below the Euro area

(2%) and the UK (2.6%). There is a divergence in terms of job vacancy rates within the Irish economy

and between Ireland, the Euro area and the UK in 2017. The sectors with the highest job vacancy rates

in Ireland are Professional (2.7%), Financial & insurance (2.6%) and ICT (1.7%), in the Euro area

Administrative & support service (3.8%) and in the UK Accommodation & food services (3.9%).

▪ The robust performance of the economy is also reflected in the number of employment permits

issued. At 11,361, the total number of employment permits issued in 2017 is almost three times higher

compared to 2013 (3,863). The largest number of employment permits was issued in the Service

Industry sector (4,270), while the highest increase in the number of permits was recorded in the

Medical & Nursing sector (almost 10 times the amount between 2013 and 2017).

44

3.1 Business Performance

Figure 3.1.1 Exports and Imports as a percentage of GDP, 201715

Ireland's economy is

very open with elevated

levels of import and

export trade in both

goods and services.

Exports and Imports as a

percentage of GDP were

120% and 88%

respectively in 2017.

Trade as a proportion of

GDP in Ireland has

increased since 2013 and

is significantly above

Euro area and OECD

averages.

OECD rank: 2nd

(exports), 3rd (imports)

Source: OECD

Figure 3.1.2 Export Growth Rate, Ireland, selected economies16, 2007-2017

Figure 3.1.2 shows the

growth rate in Irish

exports over the past

decade. Exports grew by

6.9% in 2017. Except for

2008, growth rates have

been strong before and

after the crisis. The

exceptionally strong rise

in exports in 2014 and

2015 is mainly due to the

globalisation activities

of a very small number

of companies.

OECD rank: 7th

Source: OECD

15 2017 data for Japan, New Zealand, OECD and US is 2016 data 16 UK data for 2017 (5.7%) is reported by the OECD as an estimate. 2017 data for US and OECD not available

0

50

100

150

200

250

Lu

xem

bo

urg

Irel

and

Net

her

lan

ds

Sw

itze

rlan

d

Latv

ia

Den

ma

rk

Po

lan

d

Eu

ro a

rea

Ger

man

y

Sw

eden

Ko

rea

Finl

and

No

rway

Spa

in

Ita

ly

UK

Fran

ce

OE

CD

Ne

w Z

ea

lan

d

Jap

an US

Tra

de

as a

per

cen

tag

e o

f G

DP

Exports 2017 Imports 2017 Exports 2013 Imports 2013

-20

-10

0

10

20

30

40

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

An

nu

al g

row

th (

Per

cen

tag

e C

han

ge)

Ireland UK US Euro area OECD - Average

45

Figure 3.1.4 Irish goods exports and imports, percentage share by trading partner, 2017

Figure 3.1.4 shows the

importance of intra-EU

trade for Ireland. The EU

market accounts for

59% of imports and 49%

of exports. The US and

UK are Ireland’s most

important trading

partners accounting for

27% and 11% of total

exports. The UK is the

most important partner

for imports accounting

for 24% of total imports.

Rank: n/a

Source: CSO

-60 -40 -20 0 20 40 60

US

UK

Belgium

Germany

Switzerland

Euro area

EU

UK

US

France

Germany

China

Euro area

EU

Percentage of Total Exports/Imports

Export Share 2017 Import Share 2017

Figure 3.1.3 Ireland’s share of world trade, 2016

Ireland’s share of total

global export markets

has increased in the last

decade and was 1.3% as

of 2016. Ireland has

expanded its share of

the world’s commercial

services market,

reaching 3% in 2016, up

from 2.4% in 2006. Over

the same period,

Ireland’s share of global

merchandise exports

has trended downwards

but was 0.8% in 2016,

the same share as 2006.

Rank: n/a

Source: WTO

0

0.5

1

1.5

2

2.5

3

3.5

2006

20

07

20

08

2009

20

10

2011

20

12

20

13

20

14

20

15

20

16

Pro

po

rtio

n o

f W

orl

d T

rad

e (%

)

Commercial Services Goods Total

46

Figure 3.1.5 Goods Exports by Trading Partner, Ireland, 2007-2017

Ireland’s principal

trading partners in

terms of goods exports

are the US (27.2% share)

and UK (13.4%). The

Euro area accounted for

33% of goods exports,

with the Belgium,

Germany, Netherlands

and France the EU

primary markets. While

the share accounted for

by these trading

partners (84%) is

relatively unchanged in

a decade, the

importance of the US

market has increased.

Rank: n/a

Source: CSO

Figure 3.1.6 Goods Exports Top 15 Commodities 2017

Figure 3.1.6 shows the

top 15 commodities

which account for

approximately 90% of

total goods exports from

Ireland. The significance

of pharmaceuticals and

chemical products is

clear with these two

commodity groups

alone accounting for

45% of exports.

Rank: n/a

Source: CSO

0 5 10 15 20 25 30

US

Great Britain

Belgium

Germany

Switzerland

Netherlands

France

China

Italy

Spain

Japan

Northern Ireland

Share of total goods exports (%)

2007 2017

47

Figure 3.1.7 Goods Exports by Commodity and Trading Partner, 2016

Figure 3.1.7 shows

Chemicals account for

the largest share of

exported goods to the

US, UK, rest of the EU

and rest of the world.

The UK accounted for

€14.4 billion, (12%) of

total exports, and is the primary destination for

Food exports,

accounting for 28% of

total Food exports.

Rank: n/a

Source: CSO

Figure 3.1.8 Services Trade by Principal Trading Partner, Ireland, 2016

The Euro area is the

most important market

for services exports,

accounting for 28% of

total service exports.

The UK accounts for

16% of total services

exports (down from 23%

in 2007), with the US

accounting for 10.5%.

Japan, China and

Switzerland are the

largest markets outside

of the EU and US.

Rank: n/a

Source: CSO

0

10,000

20,000

30,000

40,000

50,000

60,000

UK Other

EU

US China Rest of

World

Exp

ort

s, €

mill

ion

Miscellaneous

manufactured

Machinery and transport

Manufactured goods

Chemicals and relatedproducts

Animal and vegetable oils,

fats and waxes

Mineral fuels, lubricants

Crude materials, inedible,

except fuels

Beverages and tobacco

Food and live animals

0 5 10 15 20 25 30

Euro areaUK

United StatesGermany

FranceItaly

JapanNetherlands

ChinaSpain

SwitzerlandOceania and Polar Regions (2)

LuxembourgAustraliaSwedenBelgium

Share of Services Trade (%)

48

Figure 3.1.9 Services Trade by Principal Category, Ireland, 2016

Figure 3.1.9 shows the

degree of concentration

in Irish services exports.

The significance of

computer services

exports is extremely

high accounting for 46%

of all services exports.

Financial and insurance

activities account for

15% combined.

Rank: n/a

Source: CSO

Figure 3.1.10 Value of exports by enterprise concentration, 2015

The share of total trade

accounted for by a small

number of traders is

high in Ireland relative

to many EU Member

States. Across the EU,

the top five traders

accounted for 15.1% of

total exports (in value

terms) compared to

29.5% in Ireland. The

top 100 traders in

Ireland account for 80%

of total export value.

EU rank: 2nd

Source: Eurostat

0

25

50

75

100

Lu

xem

bo

urg

Irel

an

d

Fin

lan

d

Ge

rma

ny

UK

Sw

eden

Fra

nce

De

nm

ark

EU

Sp

ain

Lat

via

Ne

ther

lan

ds

Po

lan

d

Ital

y

(% o

f to

tal e

xpo

rts

acco

un

ted

fo

r b

y th

e to

p X

en

terp

rise

s)

Top 5 Top 6-20 Top 21-100

49

Figure 3.1.11 Share of foreign-controlled enterprises, non-financial business economy, 2014

The number of foreign-

owned enterprises as a

proportion of all

enterprises in Ireland is

1.6%, above the UK and

EU rates (both 1.2%).

The proportion of total

value added generated

(53%) is the second

highest level in the EU,

behind Hungary.

Foreign-owned

enterprises accounted

for 25% of employment,

above the EU average

(15%) and the UK (19%)

EU rank: value added:

2nd

Source: Eurostat

Figure 3.1.12 Share of foreign-controlled enterprises in total value added, Extra and Intra EU, non-financial

business economy, 2014

Foreign-controlled

enterprises outside the

EU generated 43% of

the value added in the

Irish non-financial

business economies in

2014 compared to 18%

in the UK and 11% in the

EU. A high proportion of

extra EU foreign-

controlled enterprises in

Ireland and the UK are

ultimately controlled by

units from the US.

EU-27 rank: Extra-EU

1st, intra-EU 23rd

Source: Eurostat

0

10

20

30

40

50

60

Irel

an

d

Lu

xem

bo

urg

Po

lan

d

Lat

via

UK

Ne

ther

lan

ds

Sw

eden EU

Ge

rma

ny

Fin

lan

d

De

nm

ark

Sp

ain

Fra

nce

Ital

y

(% o

f to

tal)

Number of enterprises Value added Persons employed

0

10

20

30

40

50

60

Irel

and

Luxe

mbo

urg

Pol

and

Lat

via

UK

Net

her

land

s

Sw

eden EU

Por

tuga

l

Ger

man

y

Fin

lan

d

Den

ma

rk

Sp

ain

Fra

nce

Ita

ly

Sh

are

of

valu

e ad

ded

(%

)

Extra-EU Intra-EU

50

Figure 3.1.13 Share of foreign owned in gross value added, employment and enterprise population, 2015

Figure 3.1.13 underlines

the importance of

inward investment to

the Irish economy,

particularly in industry17.

While foreign-owned

enterprises account for

2% of all enterprises

they account for 63% of

gross value added and

22% of all persons

engaged. In Industry,

they account for 89% of

value added and 42% of

all persons engaged.

Rank: n/a

Source: CSO

17 Industry covers NACE Rev.2 (05-39) of which Manufacturing (10-33), Construction (41-43), Distribution (45-47) and Services covers NACE Rev. 2 H to N

(excluding K) and R92, R93, S95, S96.

18 Data for 2015 not available for Denmark

0 20 40 60 80 100

All sectors

Construction

Distribution

Services (excl. Financials)

Industry

Proportion of Total (%)

Enteprises Persons Engaged GVA

Figure 3.1.14 Enterprise births as a percentage of active enterprises, 2015

The number of newly

born enterprises as a

proportion of the total

number of active

enterprises increased in

Ireland in 2015

compared with 2014

from 6.8% to 7.2%. In

the EU18 birth rates

ranged from 5.1% in

Greece to 18.5% in

Lithuania. The rate in

the UK (14.7%) was

above the EU average

(10%).

EU rank: 23rd

Source: Eurostat

0

2

4

6

8

10

12

14

16

18

20

Latv

ia

UK

Po

lan

d

EU

Net

her

land

s

Fra

nce

Lu

xe

mb

ou

rg

Spa

in

Ital

y

Irel

and

Sw

ed

en

Ger

man

y

Sw

itze

rlan

d

Fin

lan

d

De

nm

ark

En

terp

rise

bir

th r

ate

(%)

2015 2014

51

Figure 3.1.15 Enterprise births by sector of activity, Ireland 2008-2015

There were 18,100 new

enterprise births in 2015,

an increase of over 11%

on 2014. The largest

increase in births was in

the Construction sector

which increased by 19%

to 4,226. This is the

highest number of births

recorded for the

Construction sector in

the period 2008 to 2015.

The Financial Service

sector experienced the

highest percentage

increase (30.1%)

between 2014 and 2015.

Rank: n/a

Source: CSO

Figure 3.1.16 Enterprise Survival rate 2015

Looking at enterprises

one-year survival rate

85.8 % of the enterprises

born in Ireland in 2014

survived in 2015. The EU

average rate was 83%

and 92% in the UK. In

Ireland 83% survived five

years and 87% 3 years.

These rates are

significantly higher than

most EU countries

where less than half

survive for a five-year

period.

EU rank: 1-year rate

10th, 3-year, 2nd, 5-year

2nd

Source: Eurostat

0

500

1000

1500

2000

2500

3000

3500

4000

4500

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

En

terp

rise

bir

ths(

nu

mb

er)

Construction Professional, scientific and technical

Wholesale and retail trade, motor repair Accommodation and food services

ICT Administrative and support services

Manufacturing Transportation and storage

Financial and insurance

30

40

50

60

70

80

90

100

Sw

eden

Net

her

land

s

UK

Luxe

mbo

urg

Irel

and

Pol

and

Fin

lan

d

EU

Lat

via

Fra

nce

Ital

y

Sp

ain

Ger

man

y

Su

rviv

al R

ate

(%)

1 Year 3 Years 5 Years

52

Figure 3.1.17 Share of high growth enterprises measured in employment, 2015

High-growth enterprises

(growth in employment

by 10% or more) play a

key role in economic

growth and jobs.

Considerable variation

exists across the EU. The

shares range from 14.8

% in Ireland 10.8% EU

average and 9.8% in the

UK. High-growth

enterprises in Ireland

were predominantly in

manufacturing and

retail.

EU rank: 1st

Source: Eurostat

0

2

4

6

8

10

12

14

16Ir

ela

nd

Lat

via

Sw

eden

Sp

ain

UK

Ge

rma

ny

Ne

ther

lan

ds

Po

lan

d

Fin

lan

d

EU

Lu

xem

bo

urg

Fra

nce

Ital

y

De

nm

ark

Sw

itze

rlan

d

Hig

h g

row

th e

nte

rpri

ses

as a

sh

are

of

acti

ve

ente

rpri

ses

wit

h a

t le

ast

10 e

mp

loye

es (

%)

2015 2014

53

3.2 Prices and Costs

Figure 3.2.1 Harmonised Index of Consumer Prices (HICP), Rate of Change, 2017

At 0.3% consumer price

inflation in Ireland as

measured by the HICP

was the lowest in the EU

in 2017. Core inflation

has grown at a very

subdued rate in recent

years. Irish inflation has

been ≤ 0.5% over the

last five years. Euro area

and UK inflation rates

have also been relatively

low by historic

standards.

EU rank: 1st (lowest)

Source: Eurostat

Figure 3.2.2 HICP, average inflation rate, Ireland, UK, Euro area, 2007-2017

Figure 3.2.2 shows the

trend in inflation in

Ireland, the Euro area,

and the UK. In 2017

Irish consumer prices

increased by 0.3% (yoy)

compared with 1.5% for

the Euro area and 2.7%

in the UK. Irish inflation

has tended to be below

the Euro area average

since 2008.

EU rank: 1st (lowest)

Source: Eurostat

0

0.5

1

1.5

2

2.5

3

3.5

Irel

an

d

Sw

itze

rlan

d

Fin

lan

d

De

nm

ark

Fra

nc

e

Ita

ly

Net

her

land

s

Eu

ro a

rea

Pol

and

Ger

ma

ny

US

Sw

ed

en

Sp

ain

Luxe

mbo

urg

UK

La

tvia

An

nu

al a

vera

ge

rate

of

chan

ge

(%)

2017 2013

-3

-2

-1

0

1

2

3

4

5

20

07

20

08

2009

20

10

2011

20

12

20

13

20

14

20

15

20

16

20

17

An

nu

al a

vera

ge

rate

of

chan

ge

(%)

Ireland UK Euro area

54

Figure 3.2.3 Comparative price levels of final consumption by private households including indirect taxes, 2016

In 2016 Ireland had the

4th highest prices levels

in the EU in 2016, after

Denmark, Sweden and

Luxembourg. Irish price

levels were 23.7% above

the EU level, with prices

in the UK 21.6% higher.

Between 2007- 2009

price levels in Ireland

were 25% above the EU

average. Price levels in

Ireland fell in 2010 to

18% above the EU

average and then

increased in the years to

2016.

EU rank: 4th highest

Source: Eurostat

Figure 3.2.4: Consumer price levels, 2016 and inflation rate of change, 2017

Figure 3.2.4 shows both

changes in prices

(inflation) and the price

level. Ireland’s current

price profile could be

described as “high cost,

rising slowly” while the

UK is “high cost, rising

quickly”. Price levels in

Ireland were 23.7 per

cent above the EU 28

average in 2016 and

increasing by 0.2% in

November 2017; the UK

was 21.6 per cent above

the EU average and

increasing by 2.6%.

EU rank: price level 4th

highest

Source: Eurostat

0

20

40

60

80

100

120

140

160

180

Sw

itze

rla

nd

Den

mar

k

Sw

eden

Luxe

mb

our

g

Ire

lan

d

UK

US

Net

her

land

s

Jap

an

Fra

nce

Ger

man

y

Eur

o ar

ea

Ita

ly

Sp

ain

La

tvia

Po

lan

d

Co

mp

arat

ive

Pri

ce I

nd

ex

(EU

28

= 1

00

)

2016 2012 EU 28 =100

EU 28

Euro area

Denmark

Germany

Ireland

Spain

FranceItaly

Latvia

Luxembourg

Netherlands

Poland

Finland

Sweden

UK

Switzerland

US

0.0

0.5

1.0

1.5

2.0

2.5

3.0

40 60 80 100 120 140 160 180

HIC

P 1

2 m

on

th M

ovi

ng

Ave

rag

e P

erce

nta

ge

Ch

ang

e (2

017

)

Comparative price levels of final consumption by private households including indirect taxes, 2016 (EU28 = 100)

55

Figure 3.2.5 Comparison of Service producer prices, 2016

Figure 3.2.5 compares

Service Producer Prices

levels in Ireland relative

to other European

countries. Following a

period of decline during

the recession, an

upward trend has been

evident since 2011.

Service producer price

levels in Ireland are 7.6%

higher than in 2010.

Prices in the Euro area

are 1.4% higher on

average and 4% higher

in the UK.

EU rank: 3rd

Source: Eurostat

Figure 3.2.6 Total economy hourly labour costs19, 2017

Total hourly labour costs

(denominated in euro) in

the EU ranged from €4.1

in Bulgaria to €42.5 in

Denmark. At €31 per

hour, Ireland's hourly

rate remained the 8th

highest in the Euro area,

2% and 20% higher than

the Euro area (€30.3)

and the UK (€25.7).

Euro area rank: 8th

Source: Eurostat

19 Eurostat total economy data refers to enterprises with 10 or more employees and excludes agriculture and public administration

85 90 95 100 105 110 115

Denmark

Spain

Italy

Luxembourg

France

Latvia

Euro area

Finland

Netherlands

UK

Poland

Sweden

Germany

Ireland

Index (2010 =100)

0

5

10

15

20

25

30

35

40

45

Den

mar

k

Sw

eden

Luxe

mb

ourg

Fran

ce

Net

herl

and

s

Ger

man

y

Finl

and

Irel

and

Eu

ro a

rea

Ital

y

EU

UK

Spa

in

Po

lan

d

Latv

ia

Tota

l Ho

urly

Lab

our

Co

sts

(€)

Wages & Salaries Labour costs other than wages and salaries

56

20 When comparing labour cost estimates over time, levels expressed in national currency should be used to eliminate the influence of exchange rate

movements.

Figure 3.2.7 Hourly Labour Costs, Business Economy, Detailed NACE sectors, 2017

Considering labour costs

at sectoral level, in 2017

hourly labour costs were

highest in Utilities (€55)

and lowest in

Accommodation and

Food (€16). Ireland (€46)

was behind the UK

(€46.2) in financial

services. In

manufacturing (IE € 31.6

and UK €24.6) and ICT

(€43.8 and €34.3) Ireland

is above UK levels.

Rank: n/a

Source: Eurostat

Figure 3.2.8 Growth in Hourly Labour Costs 201720

Between 2016 and 2017,

hourly labour costs in

the whole economy

expressed in € rose by

1.9% both in Ireland and

the Euro area. The

largest increases were

recorded in the Baltic

Member States.

Expressed in national

currency, hourly labour

costs increased in the

UK (+2.6%) (-4.1% in €).

Rank: n/a

Source: Eurostat

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Bu

sine

ss E

cono

my

Min

ing

an

d q

ua

rry

ing

Man

ufa

ctur

ing

Ele

ctri

city

, gas

, ste

am

and

air

con

dit

ion

ing

Wat

er s

upp

ly; s

ewer

age,

was

tem

an

age

me

nt

Co

nst

ruct

ion

Wh

ole

sale

, re

tail

tra

de

, mo

tor

rep

air

Tra

nsp

ort

atio

n an

d s

tora

ge

Acc

om

mo

dati

on

and

foo

d

ICT

Fin

anci

al a

nd

insu

ran

ce

Pro

fess

ion

al, s

cien

tifi

c an

d te

chni

cal

Ad

min

istr

ativ

e an

d s

upp

ort

Art

s, e

nte

rtai

nm

ent

and

rec

reat

ion

Tota

l lab

our

co

sts

(€ p

er h

our

)

Ireland UK Euro area

-5

-3

-1

1

3

5

7

9

11

Lat

via

Po

lan

d

Ge

rma

ny

UK

Lu

xem

bo

urg

Ne

ther

lan

ds

EU

28

Sw

eden

Irel

an

d

Eu

ro a

rea

19

De

nm

ark

Fra

nce

Ital

y

Sp

ain

Fin

lan

d

Ch

ang

e in

ho

url

y la

bo

ur

cost

s (%

)

In national currency In euro

57

Figure 3.2.10 Growth in labour costs21, by economic sector, annual percentage change, 2017

The rate of labour cost

growth varies by sector.

In 2017 the highest

annual increase in

Ireland was recorded in

Financial & Insurance

(4.9%) and Professional

& Technical (3.8%).

Growth was lowest in

Construction (0.6%). In

the Euro area, the

strongest growth was in

Professional &Technical,

and in the UK in

Financial & Insurance.

Rank: n/a

Source: Eurostat

21 Labour cost for LCI (compensation of employees plus taxes minus subsidies)

0

1

2

3

4

5

6

7

8

9

Fin

anci

al&

Insu

ran

ce

Pro

fess

iona

l&Te

chni

cal

Who

lesa

le, r

etai

l, m

otor

Bus

ines

s Ec

ono

my

Acc

om

od

atio

n&

Foo

d

Adm

inis

trat

ive&

supp

ort

Publ

ic a

dmin

istr

atio

n

ICT

Man

ufa

ctur

ing

Tran

spo

rtat

ion

&st

ora

ge

Co

nst

ruct

ion

Per

cen

tage

ch

an

ge o

n p

revi

ou

s p

erio

d

Ireland UK EU28 Euro area

Figure 3.2.9 Labour costs index, 2011-2017

Expressing growth in an

index form, where 2012

labour costs are 100, the

graph shows that Irish

nominal labour costs

have been increasing

since 2014 but

cumulatively have

increased by less than

the EU, Euro area and

UK labour costs.

Rank: n/a

Source: Eurostat

95

97

99

101

103

105

107

109

111

2011 2012 2013 2014 2015 2016 2017

Lab

ou

r co

st in

dex

(2

012

-10

0)

EU28 Euro area Ireland UK

58

22 Until 2016, the domain of non-household consumers was defined as industrial consumers, consequently reporting authorities could include other non-

household consumers.

Figure 3.2.11 Non-household electricity prices, low consumption bands (excluding VAT and other recoverable

taxes and levies)22, S2 2017

The price of electricity

for non-household

consumers in the three

low bands were below

the Euro area in 2017 but

the gap has narrowed in

the second half of 2017.

The UK prices in the <20

MWh, and between 20

and 500 MWh bands,

were below the Irish

prices throughout the

period examined.

Rank: n/a

Source: Eurostat

Figure 3.2.12 Non-household electricity prices high consumption bands (excluding VAT and other recoverable

taxes and levies), S2 2017

The price of electricity

for non-household

consumers in the high

bands (20,000 to 70,000

MWh and 70,000 to

150,000 MWh) increased

in the second half of

2017 and surpassed the

Euro area average

prices. The UK prices in

all high bands were

above the Irish prices

since 2014.

Rank: n/a

Source: Eurostat

0.10

0.12

0.14

0.16

0.18

0.20

0.22

2013S1 2013S2 2014S1 2014S2 2015S1 2015S2 2016S1 2016S2 2017S1 2017S2

Kilo

wat

t h

ou

r (P

PS

)

Euro area < 20 MWh Ireland < 20 MWh UK < 20 MWh

Euro area 20 MWh to 500 MWh Ireland 20 MWh to 500 MWh UK 20 MWh to 500 MWh

Euro area 500 to 2000 MWh Ireland 500 to 2000 MWh UK 500 to 2000 MWh

0.06

0.07

0.08

0.09

0.10

0.11

0.12

2013S1 2013S2 2014S1 2014S2 2015S1 2015S2 2016S1 2016S2 2017S1 2017S2

Kil

ow

att

ho

ur

(PP

S)

Euro area 2 000 to 20 000MWh Ireland 2 000 to 20 000MWh UK 2 000 to 20 000MWh

Euro area 20 000 to 70 000MWh Ireland 20 000 to 70 000MWh UK 20 000 to 70 000MWh

Euro area 70 000 to 150 000MWh Ireland 70 000 to 150 000MWh UK 70 000 to 150 000MWh

59

Figure 3.2.14 Cost of renting a prime office unit, € per square metre per year, Q4 201723

Office rental prices in

Ireland in 2017 compare

favourably to cities in

the UK. In 2017,

Cushman and Wakefield

report the cost per SqM

per year in Dublin City

(€619) and Suburbs

(€324), Limerick and

Cork (€325) and Galway

(€295). UK costs range

from €1333 in the West

End, €406 in

Manchester, and €303 in

Cardiff.

Rank: n/a

Source: Cushman and Wakefield, Office Snapshot Reports

23 Figures for both Dublin (D2/D$) and Cork are from Q2 2016.

0

200

400

600

800

1000

1200

1400

1600

Gal

way

Car

diff

Du

blin

Su

bu

rbs

Co

rk

Lim

eric

k

Gla

sgo

w

Bri

sto

l

Bir

min

gham

Man

ches

ter

Edi

nbu

rgh

Du

blin

2/4

Lond

on C

ity

Lond

on W

est E

nd

€ p

er S

q.M

per

Yr

2017 2016 2013

Figure 3.2.13 Quarterly change in capital values in Ireland, Q1 2015-Q4 2017

The figure shows change

in capital values for a

range of commercial

property classes. Since

Q1 2015, values across

all categories have

consistently increased.

Overall capital value

growth was recorded at

5.2% in Q4 2017 – this

comprised of annual

increases of 8.4%, 1.3%

and 3.2% in Office,

Retail and Industrial

values respectively.

Rank: n/a

Source: Jones Lang LaSalle, Irish Property Index

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0

200

400

600

800

1,000

1,200

1,400

1,600

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Ove

rall

Cap

ital V

alue

Inde

x

Cap

ital V

alue

Inde

x

Office Capital Retail Capital Industrial Capital Overall (Right Axis)

60

Figure 3.2.15 Out-of-pocket childcare costs for a two-earner couple family,2015

Net Irish childcare costs

for parents with two

children and combined

income at 167% of AW

as a percentage of

income are amongst the

highest in the OECD.

While Irish childcare

benefit/rebates (11.2%)

are above the UK, Euro

area and OECD

averages, high fees (50%

of average wages)

means the out-of-

pocket costs for Irish

childcare are relatively

high.

OECD 31 rank: 29th

Source: OECD

Figure 3.2.16 Residential Property Index, Average Annual Percentage Change, 2017

On average in 2017 the

rate of increase in house

prices was highest in the

West (16%) and lowest

in Fingal (6.6%).

National prices

increased by 10.8%. On

a national basis

apartments increased by

11% with prices

increasing by 9% in

Dublin.

Rank: n/a

Source: CSO

-60

-40

-20

0

20

40

60

80

Sw

itze

rlan

d *

UK

Ne

the

rla

nd

s

Lu

xem

bo

urg

New

Zea

lan

d

Irel

and

Japa

n *

US

OE

CD

Ave

rag

e

Po

lan

d *

Sp

ain

Eur

o a

rea

Ave

rag

e

EU

Ave

rag

e

Fra

nce

Lat

via

Fin

lan

d *

Ko

rea

Den

mar

k

Ger

man

y *

Sw

eden

Ch

ildca

re re

late

d c

ost

s an

d b

enef

its

(%o

f ave

rag

e w

age)

Childcare fee Childcare benefit/rebates Tax reduction

Changes in other benefits Net cost Net cost, % of family net income

0 2 4 6 8 10 12 14 16 18

West - houses

South-East excluding South Tipperary -…

Midland - houses

South-West - houses

Mid-East including Louth - houses

South Dublin - houses

National - apartments

National - all residential properties

Dublin City - houses

Border excluding Louth - houses

National - houses

Dublin - apartments

Mid-West including South Tipperary -…

Dublin - all residential properties

Dublin - houses

Dún Laoghaire-Rathdown - houses

Fingal - houses

Percentage Change

61

Figure 3.2.17 Residential Tenancies Board National Rental Index, Ireland 2007- 2018

The PRTB Index for

house rents stood at 107

in 2018 Q4, 7 index

points higher than the

peak in 2007 Q4. The

Index for apartment

rents stood at 119 in

2018 Q1, 11 index points

higher than the 2007 Q4

peak. Rents for houses

grew by 6.2% annually,

while apartment rents

increased by 7.5%

annually.

Rank: n/a

Source: RTB

60

70

80

90

100

110

120

130

20

07Q

3

20

08Q

1

20

08Q

3

20

09Q

1

20

09Q

3

20

10Q1

20

10Q3

20

11Q1

20

11Q3

20

12Q1

20

12Q3

20

13Q1

20

13Q3

20

14Q

1

20

14Q

3

20

15Q1

20

15Q3

20

16Q

1

20

16Q

3

20

17Q1

20

17Q3

20

18Q1

Ind

ex (

Q3

20

07=

100

)

National Houses Apartments

62

3.3 Productivity

24 2017 data for UK and OECD is 2016 data

Figure 3.3.1 GDP per hour worked, USD, constant prices, 2010 PPPs, 201724

Ireland’s output per

hour worked in GDP

terms was $88 in 2017,

the highest output

among OECD member

states. Ouput per hour

worked was $51.6 in the

UK and $47.1 in the

OECD. In recent years,

Ireland’s performance is

significantly affected by

globalisation activities

which are reflected in

the national accounts.

OECD rank: 1st

Source: OECD

Figure 3.3.2 GDP per hour worked, USD, constant prices, Index, 2006-2016

Figure 3.3.2 shows the

trend in GDP per hour

worked, in index form.

Irish labour productivity

growth has been above

that in competitor

countries since 2010.

However, corporate

restructuring, including

the relocation of firms

with significant IP assets

and aircraft leasing, led

to noteworthy increases

in labour productivity,

particularly in 2015.

OECD rank: 1st

Source: OECD

0

10

20

30

40

50

60

70

80

90

100

Irel

an

d

Lu

xem

bo

urg

De

nm

ark

US

Ne

ther

lan

ds

Fra

nce

Ge

rma

ny

Sw

itze

rlan

d

Sw

eden

Fin

lan

d

UK

Ital

y

Sp

ain

OE

CD

Jap

an

Ne

w Z

eal

an

d

Isra

el

Ko

rea

Po

lan

d

Lat

via

US

$, c

on

stan

t p

rice

s, 2

010

PP

Ps

2017 2011 2006

60

70

80

90

100

110

120

130

140

150

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Ind

ex (

20

10 =

100

)

Ireland UK US OECD

63

25 2017 Data for Israel, Japan, Poland, New Zealand, Switzerland, US and the OECD total is 2016 data

Figure 3.3.3 GDP per hour worked, constant prices, annual growth percentage change, 201725

Source : OECD

Figure 3.3.4 Labour Productivity growth before and after the crisis (GDP per hour worked), 2016

Source : OECD

Large disparities exist

among OECD Member

States in terms of

productivity growth

rates. In 2017 Ireland’s

growth was 5.8 %, which

significantly exceeds the

UK (0.8%) and the OECD

total. On average over

the period 2006-2016,

Ireland’s growth rate

(4.6%) has been well

above most Member

States and the OECD

(0.9%).

OECD rank: 1st

In most OECD countries,

labour productivity has

grown at about half the

rate of the pre-crisis

period. Conversely, in

Ireland labour

productivity in the post-

crisis period has grown

at over double the rate

of the pre-crisis period.

The EU and UK labour

productivity growth

rates are still well below

the pre-crisis period.

OECD rank : post-crisis

period: 1st

-2

-1

0

1

2

3

4

5

6

7

Irel

an

d

Lat

via

Ko

rea

Po

lan

d

Fin

lan

d

Sp

ain

Ne

ther

lan

ds

Sw

eden

Ge

rma

ny

De

nm

ark

UK

Eu

ro a

rea

Ital

y

OE

CD

Jap

an

Isra

el

US

Ne

w Z

eal

an

d

Fra

nce

Sw

itze

rlan

d

Lu

xem

bo

urg

An

nu

al g

row

th/c

han

ge

(%)

2017 Average 2006-2016

-1

0

1

2

3

4

5

6

7

8

9

Ire

lan

d

La

tvia

Po

lan

d

Ko

rea

Isra

el

Ge

rma

ny

Sp

ain

EU

Sw

ed

en

Eu

roa

rea

De

nm

ark

Jap

an

Fra

nc

e

OE

CD

Au

str

ia

Ne

w Z

ea

lan

d

Ne

the

rla

nd

s

Fin

lan

d

US

Lu

xe

mb

ou

rg

UK

Sw

itz

erl

an

d

Ita

ly

Pe

rce

nta

ge

C

ha

ng

e a

t a

nn

ua

l ra

te

2010-2016 2001-2007

64

26 2016 data for Ireland is 2015 data

Figure 3.3.5 GNI and GDP per hour worked ( current prices), 201626

In most countries,

labour productivity

measures based on GDP

and GNI are similar.

However, in Ireland

there is a notable

difference, reflecting the

significant effects of the

impact of multinational

companies on Ireland’s

GDP. While significantly

lower compared to the

GDP measure, the GNI

per hour worked in

Ireland was still higher

than the EU and UK.

OECD rank: n/a

Source : OECD

Figure 3.3.6 Average annual growth in gross value added per hour worked, constant prices, 2006-2016

Productivity growth

across economic sectors

has tended to be higher

in Ireland compared to

the UK and Euro area.

The differential between

Ireland and the UK and

Euro area is highest in

manufacturing and ICT.

The Wholesale retail,

accommodation food

services, transportation

and storage is the only

sector where Irish

growth (1%) is close to

the UK (0.6%) and Euro

area averages (0.5%).

OECD rank: n/a

Source: OECD

-60

-40

-20

0

20

40

60

80

100

Irel

an

d

luxe

mb

ou

rg US

De

nm

ark

Ge

rma

ny

Sw

itze

rlan

d

Ne

ther

lan

ds

Fra

nce

Au

stri

a

Sw

eden

Eu

roar

ea

Fin

lan

d

Ital

y

EU

UK

Sp

ain

Jap

an

Ne

w Z

eal

an

d

Isra

el

Ko

rea

Po

lan

d

Lat

via

Per

cen

tag

e d

iffe

ren

ce f

rom

OE

CD

(OE

CD

=0

)

GNI per hour worked GDP per hour worked

-2

0

2

4

6

8

10

12

14

To

tal

Ma

nu

fact

uri

ng

Co

nst

ruct

ion

Wh

ole

sale

re

tail

tra

de

acc

om

mo

dat

ion

fo

od

serv

ice

s, t

ran

spo

rta

tio

n a

nd

sto

rag

e

ICT

Pro

fess

ion

al,

sc

ien

tifi

c a

nd

tech

nic

al a

ctiv

itie

s,A

dm

inis

tra

tive

an

d s

up

po

rtse

rvic

e a

ctiv

itie

s

Ag

ricu

ltu

re

Fin

an

cia

l an

d In

sura

nce

An

nu

al

gro

wth

/ch

an

ge

(%

)

Ireland UK Euro area

65

Figure 3.3.8 Contributions to labour productivity growth of business sector services, 2006-2016

In Ireland, the relative

contribution of

manufacturing (1.3%) and

ICT (1%) to business

sector productivity

growth is particularly

strong. The Professional

Services (0.6%) and

construction sectors

(0.4%) made positive

contributions to

productivity growth. The

Trade, Hotels and

Transport sector

contribution to growth is

relatively low.

OECD rank: n/a

Source: OECD

Figure 3.3.7 Median growth in gross value added per hour worked, constant prices, Ireland, 2006-2016

Reflecting significant

changes in the economic

cycle, the pattern of Irish

productivity growth

shows significant

volatility. Median total

productivity growth over

the period was 4.7%,

peaking at 22% in 2015

with a low of -1.1% in

2012. The spike in

manufacturing in 2015

(87%) is due to activities

of multinationals.

Significant volatility is

seen in Construction,

Agriculture and Finance

sectors.

OECD rank: n/a

Source: OECD

2015

2015

2017

2015

2011 2015 20142011

20122013

2011

2009 2012 2008

20122012

-40

-20

0

20

40

60

80

100

Tot

al

Ma

nu

fact

urin

g

Con

stru

ctio

n

Who

lesa

le r

etai

l tra

de

acco

mm

od

atio

n f

oo

dse

rvic

es, t

rans

port

atio

n a

nd…

ICT

Pro

fess

ion

al, s

cien

tifi

c an

dte

chn

ical

act

ivit

ies,

Adm

inis

trat

ive

and

supp

ort

…

Ag

ricu

ltu

re

Fina

ncia

l an

d In

sura

nce

An

nu

al g

row

th/c

han

ge

(%)

Median Max Min

-1.5 -0.5 0.5 1.5 2.5 3.5 4.5

Ireland

Poland

Israel

Latvia

Sweden

Spain

Germany

Euro area

Denmark

Netherlands

France

UK

Finland

Luxembourg

Italy

Contribution to productivity growth (%)

Manufacturing

ICT

Professional, scientific and technical activities, Administrative and support service activities

Wholesale retail trade accommodation food services, transportation and storage

Financial and insurance activities

Construction

Mining and utilities

66

Figure 3.3.10 Labour productivity, Domestic and Other and Foreign sectors28, 2006-2016

In 2016 productivity

growth in both the

foreign and the

domestic sector was

2.2%. On average over

the period 2006-2014,

productivity growth in

the foreign sector was

6.2% and in the

Domestic sector -2.7%.

Foreign labour

productivity grew by

over 23% in 2011, and

78% in 2015, due largely

to significant increases

in GVA.

Rank: n/a

Source: CSO

27 CSO, Productivity in Ireland 2016. Results are considered experimental by the CSO. 28 The Foreign Sector is defined by the CSO as sectors dominated by foreign MNEs include the following: Chemicals and Chemical Products (NACE 20),

Software and Communications (NACE 58-63), Reproduction of recorded media, Pharmaceutical products, Electrical equipment and Medical supplies (NACE

18.2, 21, 26, 27, and 32.5). The Domestic and Other Sector refers to all sectors not categorised as Foreign sector.

-10

0

10

20

30

40

50

60

70

80

90

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Per

cen

tag

e ch

ang

e

Total Domestic Foreign owned

Figure 3.3.9 Labour Productivity growth, Ireland, 2006-2016

CSO data shows

productivity growth

falling in the period

preceding 2008, with

GVA growth declining

faster than hours

worked. During the

period 2009-2011, due

to recovering GVA and

falling labour hours,

labour productivity

improved. GVA growth

substantially exceeded

labour growth in 2014

and 2016, which

explains increased

labour productivity.

Rank: n/a

Source: CSO27

-10

-5

0

5

10

15

20

25

30

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Per

cen

tag

e ch

ang

eLabourProductivity

Gross ValueAdded

Hours worked

67

Figure 3.3.12 Multifactor Productivity (MFP) growth before and after the crisis29

Source: OECD

Multifactor Productivity

(MFP) growth varied

considerably among the

OECD countries over the

past two decades.

Ireland recorded MFP

growth rate of 1.75 % in

the period 2010-2016, a

slight improvement on

pre-crisis years (1.19 %).

Rank : n/a

29 2016 data for Ireland is 2014. 2015 data for Sweden, Japan, New Zealand, Spain and Italy, Start year 1996 for Austria

Figure 3.3.11 Irish Labour productivity Index, (Base 2000=100) by Economic Sector, 2006-2016

Industry and ICT have

seen significant rises in

productivity over this

period, increasing by a

factor of 2.7 and 2.4

respectively. A

substantial proportion of

the growth in Industry

occurred between 2014

and 2016, driven by the

globalisation events in

2015. Distribution,

Transport, Retail and

Construction sectors

have seen relatively

minor changes.

Rank: n/a

Source: CSO

0

50

100

150

200

250

300

350

400

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Ind

ex (

20

00

=10

0)

Total Industry

ICT Professional services

Agriculture Distribution, transport, hotels and restaurants

Construction

-1

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

4

Irel

an

d

Ko

rea

Ge

rma

ny

Jap

an

Au

stra

lia

Sw

eden

Can

ad

a

De

nm

ark

Ne

w Z

eal

an

d

Fra

nce

Ne

ther

lan

ds

US

Au

stri

a

Fin

lan

d

UK

Sw

itze

rlan

d

Sp

ain

Ital

y

Be

lgiu

m

An

nu

al p

erce

nta

ge

po

int

chan

ge

2010-2016 2001-2007

68

Figure 3.3.13 Contribution of Multifactor Productivity30 and Capital Deepening31, 2006-2016

Figure 3.3.13 shows that

in general, growth in

labour productivity over

the last decade, and in

2015, has been driven by

increased capital

deepening. The declines

in labour productivity in

2005, 2008 and 2012

have also been

associated with

increased capital

deepening being offset

by declines in MFP.

Rank: n/a

Source: CSO

Figure 3.3.14 Capital Stock per employee, 2006-2016

Capital stock refers to

the amount of capital in

the economy. Over the

period 2006-2016,

Ireland’s capital stock

per employee increased

by 99% from €190,000

to €378,000. The CSO

reports that the rate of

increase in capital stocks

in Ireland in both the

Foreign sector and the

Domestic and Other

sector was the highest in

the EU.

Rank: n/a

Source: CSO

30 MFP reflects the overall efficiency with which labour and capital inputs are used together in the production process. Changes in MFP reflect the effects of

changes in management practices, brand names, organisational change, general knowledge, network effects, spillovers from production factors, adjustment

costs, economies of scale, the effects of imperfect competition and measurement errors.

31 Capital deepening is growth in the capital intensity of labour (the amount of capital available per hour worked).

-20

-10

0

10

20

30

402

00

6

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Per

cen

tag

e ch

ang

e

Capital Deepening MFI Labour Productivity

150

200

250

300

350

400

2006

20

07

20

08

2009

20

10

2011

20

12

20

13

20

14

20

15

20

16

€ (0

00

's)

Capital Stock per employee

69

3.4 Employment

Figure 3.4.1 Employment rate and progress to EU2020 employment target, 2017

One of the targets of the

Europe 2020 strategy is

to have an employment

rate of at least 75 % for

persons aged 20-64 in

the EU by 2020. This

objective has been

translated into national

targets. 9 EU Member

States had reached or

exceeded their national

target in 2017. Ireland’s

2020 target is 69%. In

2017 the Irish rate was

73% up from 65.5% in

2013.

EU rank: 15th

Source: Eurostat

Figure 3.4.2 Employment, unemployment & long-term unemployment (000’s), Q1 2013 – Q1 2018

Figure 3.4.2 shows the

continued improvement

in the labour market. In

Q1 2018, over 2.2 million

were employed, an

increase of 2.9% in the

year to Q1 2018.

Headline and long-term

unemployment are also

on a steady downward

trajectory.

Rank: n/a

Source: CSO

50

55

60

65

70

75

80

85

Sw

ede

n

Ger

man

y

UK

Ne

ther

lan

ds

De

nm

ark

Lat

via

Fin

lan

d

Irel

and

EU

Lu

xem

bo

urg

Fra

nce

Po

lan

d

Sp

ain

Ital

y

Em

plo

ymen

t ra

te p

op

ula

tio

n 2

0-6

4 (

%)

2017 2013 2020 target

0

50

100

150

200

250

300

350

0

500

1000

1500

2000

2500

20

13Q

1

20

13Q

2

20

13Q

3

20

13Q

4

20

14Q

1

20

14Q

2

20

14Q

3

20

14Q

4

20

15Q

1

20

15Q

2

20

15Q

3

20

15Q

4

20

16Q

1

20

16Q

2

20

16Q

3

20

16Q

4

20

17Q

1

20

17Q

2

20

17Q

3

20

17Q

4

20

18Q

1

Per

son

s in

Em

plo

ymen

t (0

00

's)

In Employment (Full-Time) In Employment (Part-Time)

70

Figure 3.4.3 Employment growth rate, 2017

Ireland continues to

experience strong

employment growth. In

2017 the employment

growth rate was 2.8%,

above the Euro area rate

of 1.5% and the UK rate

of 1.1%. Other EU

countries also recorded

strong employment

growth, the highest

growth rates in the Euro

area being observed in

Slovenia, 4.8% and

Luxembourg, 4.3%.

EU rank: 6th

Source: Eurostat

Figure 3.4.4 Employment rate by gender, Ireland, UK, EU, 2008-2017

The female employment

rate in Ireland fell in the

period 2008-2012, but is

now above the 2008

level. In 2017 the female

employment rate in

Ireland was 62.4%,

below the EU average

(62.5%) and UK (69.7%).

The male employment

rate in 2017 was 73% in

2017, 4 percentage

points below the 2008

level, (EU 73%) and

below the UK rate 78%.

EU rank: Female

employment 14th

Source: Eurostat

-3.5

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5Ir

ela

nd

Sp

ain

Sw

eden

Ne

ther

lan

ds

Eu

ro a

rea

Eu

ro a

rea

Po

lan

d

Ital

y

Fra

nce UK

Fin

lan

d

Ge

rma

ny

Lat

via

An

nu

al c

han

ge

in e

mp

loym

ent

(%)

2017/2016 2013/2012

50

55

60

65

70

75

80

85

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Em

plo

ymen

t ra

te (

%)

Ireland (M) Ireland (F) UK (M) UK (F) EU (M) EU (F)

71

Figure 3.4.5 Change in employment in Ireland by sector and gender, Q1 2013-Q1 2018

All key economic sectors

have experienced

growth in employment

between Q1 2013 and

Q1 2018. The highest

percentage growth was

recorded in the

Construction (57.2%)

and Administrative

Accommodation & Food

sectors (42.5%), while

Finance & insurance

(3.3%) and Agriculture

(6.4%) experienced the

lowest growth between

the two periods.

Rank: n/a

Source: CSO

Figure 3.4.6 Self-employed persons, employers and those without employees, 2017

The proportion of self-

employed in Ireland

(13.3%) is close to the

Euro area average

(13.6%) and UK (14%).

The proportion of self-

employed persons’

employers (4.2%) is

above the UK level

(2.2%). Own-account

workers account for

9.1% of employment in

Ireland, the same as the

Euro area average with

11.8% in the UK.

EU rank: 11th (self-

employed & own

account workers)

Source: Eurostat

0

10

20

30

40

50

60

70

80

-10

0

10

20

30

40

50

60

70

Con

stru

ctio

n (F

)

Acc

om

mo

dat

ion

& f

oo

d (

I)

Ind

ustr

y (B

to E

)

Pro

fess

iona

l (M

)

Ed

uca

tio

n (P

)

ICT

(J)

Pub

lic a

dmin

istr

atio

n (O

)

Wh

ole

sale

& r

eta

il (

G)

Adm

inis

trat

ive

(N)

Tra

nsp

ort

ati

on

& s

tora

ge

(H

)

Ag

ricu

ltu

re,

fore

stry

& f

ish

ing

(A)

Fina

nce

& in

sura

nce

(K,L

)

Per

cen

tag

e ch

ang

e in

em

plo

ymen

t

Ch

ang

e in

em

plo

ymen

t (0

00

)

Change in male employment (left axis) Change in female employment (left axis) Percentage change (right axis)

0

5

10

15

20

25

Ital

y

Pol

and

Spa

in

Ne

the

rla

nd

s

UK

Eur

o ar

ea

Irel

an

d

Latv

ia

Fin

lan

d

Sw

itze

rla

nd

Fra

nce

Ger

man

y

Lu

xe

mb

ou

rg

Sw

eden

Den

mar

k

Per

cen

t o

f to

tal e

mp

loym

ent

Self-employed persons with employees (employers)

Self-employed persons without employees (own-account workers)

72

Figure 3.4.7 Unemployment rate (seasonally adjusted, standardised rate)32

This indicator measures

the number of

unemployed people as a

percentage of the labour

force. Ireland's

unemployment rate has

declined substantially

and in Q4 2017 was

6.4%, much lower

compared to its highest

point of 15.9% in Q1

2012. The UK labour

market has proven more

resilient over the same

period.

Rank: n/a

Source: OECD

Figure 3.4.8 Labour force participation, persons aged 15 and over, Q1 2013 – Q1 2018

Participation rates in

Ireland have remained

relatively stable

between 2013 and 2018.

In Q1 2018, the

participation rate was

61.5%. The male

participation rate was

68.2% compared with a

female participation rate

of 55.1%.

Rank: n/a

Source: CSO

32 Harmonised unemployment rates define the unemployed as people of working age who are without work, are available for work, and have taken specific steps to find work.

2

4

6

8

10

12

14

16

18

20

12-Q

1

20

12-Q

2

20

12-Q

3

20

12-Q

4

20

13-Q

1

20

13-Q

2

20

13-Q

3

20

13-Q

4

20

14-Q

1

20

14-Q

2

20

14-Q

3

20

14-Q

4

20

15-Q

1

20

15-Q

2

20

15-Q

3

20

15-Q

4

20

16-Q

1

20

16-Q

2

20

16-Q

3

20

16-Q

4

20

17-Q

1

20

17-Q

2

20

17-Q

3

20

17-Q

4

Har

mo

nis

ed U

nem

plo

ymen

t (%

)

Ireland EU28 OECD Euro area UK

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20

13Q

1

20

13Q

2

20

13Q

3

20

13Q

4

20

14Q

1

20

14Q

2

20

14Q

3

20

14Q

4

20

15Q

1

20

15Q

2

20

15Q

3

20

15Q

4

20

16Q

1

20

16Q

2

20

16Q

3

20

16Q

4

20

17Q

1

20

17Q

2

20

17Q

3

20

17Q

4

20

18Q

1

Per

cen

tag

e o

f p

op

ula

tio

n a

ged

15

year

s an

d o

ver

In employment Unemployed Not in labour force

73

Figure 3.4.9 Dispersion of regional unemployment rates by NUTS 3 regions (%), 2016

The lower the dispersion

rate the greater the level

of cohesion between

regions. The difference

in unemployment rates

across Ireland's eight

regions (18%) is the

lowest in the Euro area.

Euro area-14 rank: 1st

Source: Eurostat

Figure 3.4.10 Youth unemployment rate, 2017

Unemployment

amongst those aged 15-

24 years, as a

percentage of the active

population has been on

a downward trajectory

in Ireland since 2014. In

2017, the youth

unemployment rate was

14.5% of the active

population, below the

Euro area average of

18.8%.

Euro area rank: 8th

Source: Eurostat

0

10

20

30

40

50

60

70

80

Sw

ed

en

Irel

and

Net

her

lan

ds

Fin

lan

d

Fra

nce

Spa

in

Eur

o ar

ea 1

4

Po

land

Lat

via

UK

Ital

y

EU

Un

emp

loym

ent

dis

per

sio

n r

ate

(%)

2016 2012

0

10

20

30

40

50

60

Ge

rma

ny

Ne

ther

lan

ds

De

nm

ark

UK

Irel

an

d

Po

lan

d

EU

Lat

via

Sw

eden

Eu

ro a

rea

Fin

lan

d

Fra

nce

Sp

ain

Per

cen

tag

e o

f ac

tive

po

pu

lati

on

2017 2013

74

Figure 3.4.11 Proportion of workers with skills mismatches, 2015

Figure 3.4.11 shows the

gap between the

individual’s jobs skills

and the demand of the

labour market. With

35% of the workers

employed in a different

field from the area they

specialised in, and 44%

with a qualification

mismatch (31%

underqualified and 13%

overqualified) Ireland

performs worse than the

Euro area 15.

Euro area-15 rank

mismatches:

Field of study: 12th

Qualification: 14th

Source: OECD

Figure 3.4.12 Net replacement rates for long-term unemployed, 2015

For a long-term

unemployed, one earner

married couple with two

children earning 100% of

the average wage, the

Irish replacement rate

(79%) exceeds the OECD

median (58%) and the

UK rate (71%). The rate

for single persons (49%)

also exceeds the OECD

(32%) and UK (37%)

rates. Rates are higher

for lower income

families.

OECD rank: Married:

33rd , Single 30th

Source: OECD

0

5

10

15

20

25

30

35

40

45

50

La

tvia

De

nm

ark

Fra

nc

e

Eu

ro a

rea

15

Sw

itze

rla

nd

Sw

ed

en

Ge

rma

ny

Ita

ly

Ne

the

rla

nd

s

UK

Sp

ain

Ire

lan

d

Pe

rce

nta

ge

o

f w

ork

ers

wit

h s

kil

ls m

ism

atc

h

Qualification mismatch Field-of-study mismatch

Underqualification Overqualification

0

10

20

30

40

50

60

70

80

90

Ita

ly

Sp

ain

US

Ko

rea

Fra

nc

e

OE

CD

Po

lan

d

Ge

rma

ny

Sw

ed

en

Sw

itze

rla

nd

De

nm

ark

UK

Ne

the

rla

nd

s

Jap

an

Fin

lan

d

Ire

lan

d

Re

pla

ce

me

nt

rate

(%

)

One-earner married couple, 2 children (2015) Single person (2015)

One-earner married couple, 2 children (2011)

75

Figure 3.4.13 Job vacancy rate, Q4 2017

Over the last two years,

Irish job vacancy levels

(whole economy) have

been flat at around 1%.

The Irish job vacancy

rate reached 1.1% in Q4

2017 but remains

significantly below the

rates in the Euro area

(2%) and the UK (2.6%)

over the corresponding

period.

Euro area rank: 4th

Source: Eurostat

Figure 3.4.14 Job vacancy rate by sector, 2017

In terms of job vacancy

rates at sectoral level,

there is a considerable

divergence within the

Irish economy and

between Ireland and the

UK in 2017. The sectors

with the highest job

vacancy rates are

Professional (2.7%),

Financial & insurance

(2.6%) and ICT (1.7%).

In the Euro area, the

highest rates are in

Administrative &

support service (3.8%),

in the UK

Accommodation & food

services (3.9%).

Rank: n/a

Source: Eurostat

0

1

2

3

20

15Q

1

20

15Q

2

20

15Q

3

20

15Q

4

20

16Q

1

20

16Q

2

20

16Q

3

20

16Q

4

20

17Q

1

20

17Q

2

20

17Q

3

20

17Q

4

Job

Vac

ancy

rat

e (%

)

EU Euro area Ireland UK

0

0.5

1

1.5

2

2.5

3

3.5

4

Man

ufac

turi

ng

Ele

ctri

city

, ga

s, s

tea

m

Co

nst

ruct

ion

Wh

ole

sale

& r

eta

il tr

ad

e

Tra

nsp

ort

ati

on

&S

tora

ge

Acc

om

mo

dat

ion

&fo

od

ser

vice IC

T

Fin

anci

al&

Insu

ran

ce

Pro

fess

ion

al,

scie

nti

fic

an

d t

ech

nic

al

Ad

min

istr

ati

ve&

sup

po

rt s

erv

ice

Pu

blic

ad

min

istr

atio

n&

de

fen

ce

Ed

uca

tio

n

He

alth

Art

s, e

nte

rta

inm

ent&

re

cre

atio

n

Job

vac

ancy

rat

e (%

)

Ireland Euro area UK

76

Figure 3.4.16 Jobs at risk of automation33, 2017

8% of Irish jobs are

estimated at high risk of

automation compared

to 9% and 10% in the UK

and OECD respectively.

A larger share of jobs

(22%), however, is

estimated to have a

lower risk of automation

(50-70%) but a

significant risk of seeing

the majority of the tasks

they entail changed by

technology.

OECD Rank: 10th

Source: OECD

33 The OECD have estimated the proportion of jobs at risk of automation by analysing the task content of individual jobs using the OECD Adult Skills Survey.

Jobs at high risk of automation are those with a probability of being automated of at least 70%. See OECD Employment Outlook 2017.

0

5

10

15

20

25

30

35

40

45

50

Kor

ea

Finl

and

Japa

n

Fran

ce

Irel

and

Den

mar

k

Spai

n

US

OEC

D UK

New

Zea

land

Net

herl

and

s

Pol

and

Ger

man

y

Ital

y

Jobs

at

risk

of a

utom

atio

n (%

)

Jobs at high risk of automation Jobs at risk of significant change

Figure 3.4.15 Number of employment permits issued by sector, 2017

At 11,361, the total

number of employment

permits issued in 2017 is

almost three times the

2013 level. The largest

number of employment

permits in 2017 was

issued in the Service

Industry sector (4,270),

while the highest

increase in the number

of permits issued was

recorded in the Medical

& Nursing sector (4,217

permits in 2017

compared to 483 in

2013).

Rank: n/a

Source: DBEI

0

2000

4000

6000

8000

10000

12000

2013 2017

Em

plo

ymen

t P

erm

its

To

tal I

ssu

ed (

nu

mb

er)

Service Industry Medical & Nursing Industry Catering Agriculture & Fisheries Education

77

Chapter 4

Competitiveness Inputs

78

Competitiveness Inputs

The third tier of the pyramid focuses on “competitiveness policy inputs”. Four categories of inputs are

examined – the business environment, physical infrastructure, clusters and firm sophistication and knowledge

and talent. These represent the drivers of current and future competitiveness.

• Business Environment: The business environment indicators examine the conditions within which

enterprise must operate. Benchmarked themes include the cost and availability of credit and the

taxation system.

▪ The supply and demand for credit has improved significantly since the height of the crisis. The ECB

Survey on Access to Finance of Enterprises (SAFE) indicates that access to finance was the most

important concern for 8 per cent of Irish SMEs, compared to 19 per cent of SMEs in 2013. Bank loans

remain the relevant form of external financing for 55 per cent of Irish SMEs (compared to 48% at EU

level). In 2017, some 21 per cent of the Irish firms surveyed applied for bank credit.

▪ The 2017 European Investment Bank survey34 suggests that while bank loans remain the main source

of external finance for investment activities (41%), their share fell compared to 2016 (57%); the share

of bank loans is also below the EU average of 56 per cent. Leasing has become more prominent as a

form of external finance and in 2017 it accounted for 36 percent of the overall external finance.

However, all other types of finance, including equity, bonds and grants represent less than 10 per cent

of the external finance used indicating that diversifying the lending market remains a challenge.

Figure 4.1.4 shows that although private equity investment as proportion of GDP increased in Ireland

in the period 2013-2016, at 0.18 per cent of GDP in 2016, it is below the UK (0.64%) and the best EU

performers. The intensity of total Venture Capital (VC) investment is above the OECD 30 average

(0.05%), with the greater portion of VC attributed to early stage investments, 0.06 per cent compared

to 0.02 per cent of later stage venture capital (Figure 4.1.3).

▪ Figure 4.1.6 shows that although the proportion of non-performing loans (this includes all lending) in

Ireland has decreased from 25 per cent to 14 per cent in the period 2012-2016, Ireland’s performance

remains below the Euro area average of 4.1 per cent and the OECD33 of 2.9 per cent in 2016.

▪ The cost of credit, while falling, continues to remain relatively high. The concentrated lending market

coupled with higher credit risk premiums in Ireland are some of the factors for higher interest rates

compared to the Euro area. Central Bank analysis shows the Irish SME lending market is highly

concentrated with the three main lenders accounting for approximately 80 per cent of market share.

The divergence between the interest rates is particularly noticeable in relation to new loans of up to

€250,000 where the interest rate is more than the double the Euro area average (Figure 4.1.7).

▪ Maintaining a growth and entrepreneurship-friendly taxation system, whilst simultaneously

broadening the tax base, is critical to maintaining existing levels of employment and creating new

jobs. A broader stable tax base is also crucial in achieving sustainability of the public finances. In terms

of tax base, income tax remains the Government’s largest tax stream (€20.5bn in 2017). The rise in

income tax receipts illustrates the improvement in the labour market - over the period 2012-2017

income tax receipts recorded an increase of 34 per cent. Corporation tax receipts increased by 99 per

cent over the same period. Ireland’s exposure related to the concentration of corporation tax receipts

among a very small cohort of firms remains a serious risk in terms of the long-term sustainability of

the public finances. In 2016 revenues from immovable properties in Ireland (1.3% of GDP) were below

the Euro area-16 average (1.8% of GDP) and the UK (4.1% of GDP).

34 EIB Investment Survey, Ireland Overview, 2017

79

▪ Ireland’s corporation tax rate remains internationally competitive and is the third lowest in the OECD

at 12.5 per cent. However, while Ireland’s rate has remained consistent over recent years, many

economies have reduced their rates (e.g. the UK and in 2018, the US). Ireland’s headline Capital Gains

Tax (33%) is the third highest in the OECD and above the UK tax rate of 28 per cent.

▪ OECD data shows (Figures 4.1.9 and 4.1.10) that in terms of income tax and social security

contributions for married couples and individuals as a percentage of total labour costs, Ireland is more

competitive than the Euro area. Marginal rates of income tax in Ireland for married couples and

individuals earning below the average wage are lower than the rates in the UK, Euro area and OECD.

The rates for individuals earning the average wage and above are less competitive. However, the

OECD’s calculations of the average wage for Ireland do not appear to include the cohort of

supervisory or managerial workers, while part-time workers are included on a non-adjusted basis. If

the average wage is calculated in line with the methodology used for most OECD countries, Ireland’s

average wage will be approximately €45,000 instead of €36,000, which will have an impact on the

level of average income tax and marginal rates of income tax, bringing them closer to the OECD

average figures.35

• Physical Infrastructure: The availability of competitively priced world-class infrastructure (e.g.

energy; telecoms; transport - road, public transport, airport, seaports; waste and water) and related

services is critical to support competitiveness. Well-developed infrastructure can increase mobility of

workers and goods reduce traffic congestion and increase productivity. As well as the immediate

impact on labour mobility, for instance, physical infrastructure also plays a key role in determining

quality of life and the attractiveness of place (a key factor in terms of attracting high skilled,

internationally mobile workers).

▪ Government investment as percentage of GDP remains below pre-crisis levels in Ireland and across

the OECD. In 2015, average investment spending across OECD countries amounted to 3.2 per cent of

GDP. The equivalent figure for Ireland was the second lowest in the OECD at 1.7 per cent.

Expenditure increased to 1.9 per cent in 2016 but remains low. Over the medium term, capital

investment levels are projected to increase but at present remain low relative to pre-crisis levels.

Developing the Irish infrastructure base is a fundamental challenge to enhancing competitiveness.

▪ Perceptions regarding the overall quality of infrastructure in the economy remain low in Ireland.

Ireland’s score in international competitiveness rankings fell over the past five years to 2015 and in

2017 remains below the EU average (4.9). Ireland is ranked 51st in the world with the UK 27th. In an

EU context Ireland is ranked 21st with the UK 12th.

▪ A key issue is balancing the developmental trajectory of Dublin and regional cities with other parts of

the country. With more people (and consequently more skills) concentrating in cities, urban areas are

increasingly becoming the driving forces of national economies. The spatial distribution of economic

activity in Ireland is not unusual for a very small country and Ireland cannot be competitive without

Dublin being competitive. It is critical that, in bringing forward the accelerated development of a

“next tier” of cities as key engines of economic performance, the competitiveness of Dublin is not

damaged by diverting expenditure away from investing in the critical infrastructure needed to avoid a

deterioration in quality of life and a rapid rise in the cost of living. Ireland needs to use the National

Planning Framework as the primary vehicle to ensure that, with scarce resources, a rigorous and

35 See http://economic-incentives.blogspot.ie/2018/05/why-is-irish-average-wage-in-oecd.html

80

transparent evaluation system is used to allocate funds across government departments so as they

are invested with the greatest return.

• Clusters and Firm Sophistication: Firm sophistication concerns two elements that are intricately

linked: the quality of a country’s overall business networks, and the quality of individual firms’

operations and strategies. Clusters are diverse and varied in terms of development; some originate

out of the third level sector or Government research centres, others are loose networks of SMEs, and

some orbit around anchor firms. Despite Ireland’s small size it has many cities and towns that have

proven ability to attract FDI and develop new enterprises.

▪ The European Commission’s Cluster Mapping tool indicates that Ireland has a relatively high degree

of specialisation and cluster presence in biopharma, digital, medical devices and business services

sectors. The European Commission’s Regional Ecosystem Scoreboard shows both the Southern and

Eastern and Border, Midland and Western regions have relative strengths in Tertiary education and

SME innovation and weaknesses in Lifelong learning and R&D expenditure.

▪ Competitiveness and productivity is driven by firms using knowledge intensive production processes.

Figure 4.3.3 shows the relative sophistication of business processes as perceived by national

executives. In international competitiveness rankings Ireland is ranked 14th in the world and 7th in the

Euro area and scores above the Euro area average.

▪ Ireland is a strong innovation follower with performance improving over time but behind the UK and

the best innovation leaders. 46 per cent of SMEs in Ireland are reported as having introduced a

product or process innovation in 2016. This is the second highest in the EU (Belgium 48%) and above

the EU average (31%) and the UK (33%). Ireland’s performance has increased from 36 per cent in 2015

and since 2011 (41%).

▪ Knowledge and Talent: The availability of knowledge, talent and skills are one of the main

differentiators in growth performance between countries. The global war for talent has never been

more intense. Ireland’s education system has long represented a competitive advantage in this

regard. This section examines the quality of formal education system at all levels.

▪ Competitive economies require sufficient and effective investment in knowledge-based capital,

especially by firms; the presence of high-quality scientific research institutions; extensive

collaboration in research between universities and industry. There is considerable heterogeneity in

R&D expenditure as a percentage of GDP in the EU. In 2016, Irish expenditure on R&D accounted for

1.18 per cent of GDP, below the EU average (2.03%) and UK (1.69%). Business expenditure on R&D

(BERD) accounted for 0.8 per cent, with public expenditure accounting for 0.3 per cent. R&D

investment has increased in recent years but GNP/GDP levels have increased at a faster rate. In 2016,

Gross Expenditure on R&D increased to €3,243m and is at its highest level in the period 2007-2016.

Estimated as a share of government budget appropriations or outlays on R&D, expenditure in Ireland

was 0.97 per cent in 2016, behind the UK (1.25%) and the EU average of 1.37 per cent.

▪ In an international context, the IMD’s Competitiveness Yearbook 2018 ranks Ireland 5th for attracting

and retaining talent. Ireland’s other strengths are in relation to the availability of financial skills (7th)

and the ability to attract foreign talent (8th). Relative weaknesses include the pupil-teacher ratio in

secondary education (43rd) and language skills (46th).

▪ Ireland is currently ranked 6th in the Digital Economy and Society Index 2018. While scoring top

rankings in the indicators relating to STEM graduates, the use of online trading by SMEs and Open

Data, in Ireland more than 50 per cent of the adult population is lacking at least basic digital skills and

6 per cent of rural households still do not have access to even basic fixed broadband. Ireland also fell

behind other EU countries with regard to the number of people actively using the internet.

81

▪ The proportion of the working age population with tertiary (third level) education in Ireland is 42.8 per

cent, above the Euro area average of 33.1 per cent and the OECD average of 35.5 per cent. Figure

4.4.4 shows the proportion of the active population aged 15-74 who are scientists in Ireland in 2016,at

8.9 per cent it is above the Euro area average 6.4 per cent but below the UK level of 10.5 per cent. In

Ireland and across most OECD countries, the largest share of graduates (24%), in tertiary education

programmes, complete degrees in business, administration and law. The share of students in Ireland

graduating from the fields of natural sciences, maths, statistics (8%), engineering, manufacturing and

construction, (10%) and ICT (6%) combined is 24 per cent. As a percentage of total third level

graduates, Ireland produced more Science, maths & statistics and ICT graduates than the Euro area.

However, the proportion of engineering, manufacturing and construction graduates is 3.6 per cent

below the Euro area average.

▪ Ireland surpasses both the Euro area and OECD average attainment for secondary education

participation. With 6.1 per cent classified as early school leavers, Ireland's retention rates in

secondary education are above the Euro area average of 11 per cent. There is a significant inverse

correlation between educational attainment and age in Ireland, while 52.6 per cent of the 25-34

cohort have third level education, in the 55-64 cohort the proportion is 28.7 per cent. Ireland performs

better than the Euro area in all age groups in terms of attainment of third level education.

▪ The percentage of people aged 25-64 in receipt of education and training (both formal and non-

formal) in Ireland has increased from 7.5 per cent to 8.9 per cent in the period 2013-2017. Despite the

increase, Ireland's performance remains below the Euro area average.

82

4.1 Business Environment

Figure 4.1.1 Ease of Doing Business Ranking, 2017/2018

The World Bank’s Ease

of Doing Business report

assesses regulations

affecting SMEs

throughout their life

cycle. Ireland improved

its ranking in 2017 and is

now ranked 17th in the

world. New Zealand is

1st, with Denmark the

highest in the EU at 3rd,

and the UK 7th of 190

economies. Ireland is

ranked 4th in the Euro

area.

OECD rank: 10th

Source: World Bank

Figure 4.1.2 Outstanding credit to SMEs sector, 2013 - 2017

Using Q1 2013 as the

base, the outstanding

amount of credit lent to

the SME in the sectors

examined shrunk over

the 5-year period. The

highest percentage

decline was observed in

the Construction sector,

where the outstanding

loans in Q4 2017 were

30% of the loans in Q4

2013.

Rank: n/a

Source: Central Bank of Ireland

0

10

20

30

40

50

60

70

Ne

w Z

eal

an

d

De

nm

ark

Ko

rea

Ho

ng

Ko

ng

SA

R,

Ch

ina

US

UK

Sw

eden

Fin

lan

d

Irel

an

d

Lat

via

Ge

rma

ny

Po

lan

d

Sp

ain

Fra

nce

Ne

ther

lan

ds

Sw

itze

rlan

d

Jap

an

Ital

y

Isra

el

Lu

xem

bo

urg

Ran

k o

ut

of

190

co

un

trie

s

1

20%

40%

60%

80%

100%

120%

Mar

-13

May

-13

Jul-

13

Se

p-1

3

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Se

p-1

4

No

v-1

4

Jan

-15

Mar

-15

May

-15

Jul-

15

Se

p-1

5

No

v-1

5

Jan

-16

Mar

-16

May

-16

Jul-

16

Se

p-1

6

No

v-1

6

Jan

-17

Mar

-17

May

-17

Jul-

17

Se

p-1

7

No

v-1

7

Gro

wth

in N

ew L

end

ing

(Q

1 2

013

=10

0)

Manufacturing Primary Industries Total

Construction Transportation and Storage Information and Communication

83

Figure 4.1.3 Venture capital investment as a % of GDP36, 2016

The intensity of total

Venture Capital (VC)

investment as a

percentage of GDP in

Ireland (0.08%) is above

the OECD 30 average

(0.05%). The greater

portion of VC in Ireland

is attributed to early

stage investments,

0.06% compared to

0.02% of later stage

venture capital.

OECD rank: 5th

Source: OECD

Figure 4.1.4 Private equity investment (as a % of GDP), 2016

Private equity

investment as

proportion of GDP

increased in Ireland in

the period 2013-2016, as

it did across most of

benchmarked countries.

At 0.18% of GDP in

2016, it is below the UK

(0.64%) and the best EU

performers.

Rank: EU-21: 11th

Source: Invest Europe

36 Data for New Zealand and South Korea is based on total venture capital investment, data for Israel and Japan is from 2014.

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

US

A

Ko

rea

Irel

an

d

Fin

lan

d

OE

CD

30

Ne

w Z

eal

an

d

Lat

via

Sw

itze

rlan

d

De

nm

ark

Sw

eden

Jap

an UK

Sp

ain

Fra

nce

Ge

rma

ny

Ne

ther

lan

ds

Ital

y

Ven

ture

Cap

ital

In

vest

men

t (%

of

GD

P)

Seed/start-up/early stage Later stage venture

0.00

0.20

0.40

0.60

0.80

1.00

Fra

nce UK

Sw

eden

De

nm

ark

Ne

ther

lan

ds

Fin

lan

d

Eu

ro a

rea

-11

Ital

y

Sw

itze

rlan

d

Sp

ain

Irel

an

d

Ge

rma

ny

Pri

vate

eq

uit

y in

vest

men

t (%

of

GD

P)

2016 2013

84

Figure 4.1.5 Demand and success in accessing credit, 2017

In 2017, some 21% of the

Irish firms surveyed

applied for bank credit.

12% of these applicants

were successful in

receiving the total

amount requested. The

Euro area average

success rate is 16%,

while the UK rate is

12.7%.

Euro area rank: Demand (15th),

Success (15th)

Source: ECB SAFE

Figure 4.1.6 Ratio of non-performing loans to total gross loans, 2016

Although the proportion

of non-performing loans

(this includes all lending)

in Ireland has decreased

from 25% to 14% in the

period 2012-2016,

Ireland’s performance

remains below the Euro

area average of 4.1%

and the OECD33 of 2.9%

in 2016.

OECD rank: 31st

Source: World Bank

0%

5%

10%

15%

20%

25%

30%

35%

40%F

ran

ce

Ital

y

Sp

ain

Ge

rma

ny

Fin

lan

d

Eu

ro a

rea

De

nm

ark

Sw

eden

Po

lan

d

UK

Lat

via

Irel

an

d

Ne

ther

lan

ds

Su

cces

s in

Acc

essi

ng

Cre

dit

Success rate Demand

-4

1

6

11

16

21

26

Sw

itze

rlan

d

UK

Sw

eden

US

A

Jap

an

Ge

rma

ny

Ne

ther

lan

ds

OE

CD

33

De

nm

ark

Fra

nce

Lat

via

Po

lan

d

Eu

ro a

rea

Sp

ain

Irel

an

d

Ital

y

No

n-P

erfo

rmin

g L

oan

s (%

of

To

tal

Lo

ans)

2016 2012

85

Figure 4.1.7 Interest rates for non-financial corporations by loan size (new business), 2012 - 2018

Irish loans have been

more volatile over the

period examined and

interest rates in Ireland

for all three categories

of loans are higher than

the Euro area rates. The

divergence is

particularly noticeable

for loans of up to €0.25

million, where Ireland's

interest rates are double

the Euro area rates.

Rank: n/a

Source: ECB

Figure 4.1.8 Corporation tax rates (%), 2008-2017

Ireland’s corporation tax

rate remains

internationally

competitive and is the

third lowest in the OECD

at 12.5%. While Ireland’s

rate has remained

consistent over recent

years, many of Ireland’s

competitors have

reduced their rates (e.g.

the UK and in 2018, the

US37).

OECD rank: 3rd

Source: OECD

37 The Tax Cuts and Jobs Act of 2017 reduced US corporate tax rates to one flat rate of 21% tax rate on corporate income from January 1 2018.

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2012

Jan

2012

Ap

r

2012

Jul

2012

Oct

2013

Jan

20

13A

pr

20

13Ju

l

2013

Oct

2014

Jan

20

14

Ap

r

20

14Ju

l

2014

Oct

2015

Jan

2015

Apr

2015

Jul

2015

Oct

2016

Jan

2016

Apr

2016

Jul

2016

Oct

2017

Jan

2017

Ap

r

20

17Ju

l

2017

Oct

2018

Jan

Ireland ≤ €0.25m Ireland > €0.25 ≤ €1m Ireland> €1m

Euro area ≤ €0.25m Euro area > €0.25 ≤ €1m Euro area > €1m

0

5

10

15

20

25

30

35

40

Sw

itze

rlan

d

Irel

and

Can

ada

Latv

ia

Ger

man

y

Pol

and

UK

Fin

lan

d

Luxe

mbo

urg

US

*

Den

mar

k

Ko

rea

Sw

ed

en

Jap

an

Ital

y

Isra

el

Net

her

land

s

Spa

in

New

Zea

land

Fra

nce

Co

rpo

rate

In

com

e T

ax R

ate

(%)

2017 2013 2008

86

Figure 4.1.9 Income tax plus employee contributions minus cash benefits (% of gross wage earnings), single,

100% & 167% AW38), 2017

The income tax and

employee contributions

as a % of labour cost for

an individual earning the

average wage in Ireland

is 19.4%, below the Euro

area 16 (28.9%) and

OECD (25.5%). The

corresponding figure for

an individual earning

above the average wage

is below the Euro area

but above the OECD.

OECD rank:

Single, o ch, 100%: 8th,

Single, 0 ch, 167%: 17th

Source: OECD

Figure 4.1.10 Income tax plus employee contributions minus cash benefits (% of gross wage earnings), married

couples with 2 children, 100% & 167% AW), 2017

Ireland is competitive in

terms of income tax and

social security

contributions for

married couples as a %

of total labour costs. For

a married couple with 2

children on a combined

income of 100% or 167%

of the average wage, the

figure is below the

OECD and Euro area.

OECD rank:

100% AW: 3rd, 167%: 4th

Source: OECD

38 The OECD’s calculations of the average wage for Ireland do not appear to include the cohort of supervisory or managerial workers, while part-time

workers are included on a non-adjusted basis. If the average wage is calculated in line with the methodology used for most OECD countries, Ireland’s average

wage will be approximately €45,000 instead of €36,000, which will have an impact on the level of average income tax: See http://economic-

incentives.blogspot.ie/2018/05/why-is-irish-average-wage-in-oecd.html

0

5

10

15

20

25

30

35

40

45

50

Ko

rea

Sw

itze

rla

nd

New

Zea

land

Ire

lan

d

Sp

ain

Jap

an UK

Sw

eden

Pol

and

OEC

D

US

Eu

ro a

rea

16

Fra

nc

e

Lat

via

Fin

lan

d

Net

her

lan

ds

Ital

y

Den

mar

k

Ger

man

y

% o

f la

bo

ur

cost

s

Single 100% AW Single 167% AW

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Pol

and

Irel

an

d

Sw

itze

rlan

d

New

Zea

land

Ko

rea

Spa

in

OEC

D

US

Eur

o ar

ea

Jap

an

Lat

via

UK

Fra

nc

e

Sw

eden

Ital

y

Ger

man

y

Net

her

land

s

Fin

lan

d

Den

mar

k

% o

f la

bo

ur

cost

s

Married 100% AW Married 167% AW

87

Figure 4.1.12 Average tax wedge (%), 2017

Ireland’s tax wedge

levels are low compared

to the Euro area and

OECD at average wages

for individuals (Ireland-

27.2%, OECD-35.9%,

Euro area-42.4%) and at

all wage levels for

married couples. At

higher incomes the

wedge for individuals is

above the UK wedge.

OECD rank: Single, o ch,

100%: 29th, Married, 2

ch, 100%:32

Source: OECD

0

5

10

15

20

25

30

35

40

45

50

Single, 100% avg

earnings (0 child)

Single, 167% avg

earnings (0 child)

Married, 100% avg

earnings (2 children)

Married, 133% avg

earnings (2 children)

Married, 167% avg

earnings (2 children)

Ave

rag

e ta

x w

edg

e (%

)

Euro area 16 Ireland UK OECD

Figure 4.1.11 Marginal rate of income tax plus employee contributions (% of gross wage earnings), 2017

Marginal rates of

income tax in Ireland for

married couples and

individuals earning

below the average wage

are lower than the rates

in the UK, Euro area and

OECD. The rates for

individuals earning the

average wage and above

are less competitive.

OECD rank:

Single, o ch, 100%: 32nd

Married, 2 ch, 100%: 10th

OECD rank:

Source: OECD

0

10

20

30

40

50

60

Single

67% Avg

earning (0

child)

Single

100% Avg

earning (0

child)

Single

167% Avg

earning (0

child)

Married

100% Avg

earning (2

children)

Married

133% Avg

earning (2

children)

Married

167% Avg

earning (2

children)

Mar

gin

al t

ax r

ate

(%)

Euro area-16 Ireland UK OECD

88

Figure 4.1.13 Tax rate on low wage earners (Unemployment trap39), 2015

Figure 4.1.13 shows the

implicit tax rate of

taking up employment.

The tax rate on low

wage earners has been

on a downward

trajectory in Ireland

since 2009 and in 2015 it

was 71.8%, below the

tax rate in the Euro area

average of 76.5%, but

above the UK rate of

61.7%.

Euro area rank: 13th

Source: Eurostat

39 The unemployment trap measures the percentage of gross earnings lost to taxes when a person becomes employed. This occurs through the loss of

unemployment benefits combined with higher tax and social security contributions.

0

10

20

30

40

50

60

70

80

90

100

Jap

an UK

Sw

eden U

S

Irel

an

d

Ge

rma

ny

EU

Fin

lan

d

Fra

nce

Eu

ro a

rea

Ital

y

Sp

ain

Po

lan

d

Ne

ther

lan

ds

Lat

via

De

nm

ark

Imp

licit

tax

rat

e o

n re

turn

ing

to

wo

rk (

%)

2015 2011

Figure 4.1.14 Capital Gains Tax, 2015

Benchmarking Capital

Gains Taxes across the

OECD shows that in

2015 Ireland had the

third highest headline

CGT in the OECD (33%),

a fall of 5 places since

2011. The OECD average

rate was 18.4% in 2015.

The equivalent rate in

the UK is 28%.

OECD-34 rank: 32nd

Source: Deloitte/Tax Foundation

0

5

10

15

20

25

30

35

40

45

Net

her

land

s

New

Zea

land

Sw

itze

rlan

d

Hu

ng

ary

OE

CD

Ger

man

y

Sp

ain

UK

US

Sw

eden

Finl

and

Ire

lan

d

Fran

ce

Den

mar

k

Cap

ital

Gai

ns

Tax

(%

)

2015 2011

89

Figure 4.1.15 Standard Value Added Tax (%), 2017

The standard VAT rates

varied between 15% and

25% across the EU in the

period 2013-2017.

Ireland's VAT rate of

23% is above the Euro

area average of 20.8%

and among the highest

in the EU. The lowest

standard VAT rate was

recorded in Germany

(19%).

Euro area rank: 3rd

Source: Eurostat

15

17

19

21

23

25

27

Ge

rma

ny

UK

Fra

nce

Eu

ro a

rea

Sp

ain

Lat

via

Ne

ther

lan

ds

EU

-28

Ital

y

Po

lan

d

Irel

an

d

Fin

lan

d

De

nm

ark

Sw

eden

Sta

nd

ard

VA

T r

ate

(%)

2017 2013

90

4.2 Physical Infrastructure

Figure 4.2.1 Gross fixed capital formation as a percentage of GDP, current prices, 2017

In 2017, gross fixed

capital formation as a

share of GDP was 4th

highest in Ireland at

23.4% compared to

20.6% in the Euro area.

GFC in Ireland is

dominated by

intellectual property

which accounts for 42%

of the total. At 10%, the

proportion of

investment in dwellings

is half the UK and Euro

area levels and remains

well below pre-crisis

levels.

Rank: n/a

Source: Eurostat

Figure 4.2.2 Government investment as percentage of GDP, 2007, 2009, 2015 and 2016

Government investment

as % of GDP remains

below pre-crisis levels in

Ireland and across the

OECD. In 2015, average

investment spending

across OECD amounted

to 3.2% of GDP. The

equivalent figure for

Ireland was the second

lowest in the OECD at

1.7%. Expenditure

increased to 1.9% in

2016 but remains low.

OECD rank: 33rd

Source: OECD

0

10

20

30

40

50

60

70

80

90

100

Ireland UK Euro area

Per

cen

tag

e o

f to

tal G

FC

Dwellings Other buildings and structures

Transport equipment ICT equipment

Other machinery and equipment Intellectual property products

0

1

2

3

4

5

6

7

8

Ko

rea

Lat

via

Sw

ed

en

Po

lan

d

Ne

w Z

eal

and

Ch

ina

Jap

an

Fin

lan

d

Lu

xem

bo

urg

Fra

nce

Den

mar

k

Ne

ther

lan

ds

OE

CD

US

Sw

itze

rlan

d

UK

Sp

ain

Ital

y

Ger

man

y

Ire

lan

d

% o

f G

DP

2015 2007 2009 2016

91

Figure 4.2.3 Trend in Capital Expenditure, Ireland, 1997-2016

Figure 4.2.3 shows the

long-term trend in

capital expenditure. In

2009, the rate of

spending growth

dropped sharply at the

onset of the economic

and fiscal crisis. In the

late 90’s and early

2000’s expenditure grew

strongly. In the

following years, as part

of the fiscal

consolidation effort,

total voted spending

was reduced annually.

Rank: n/a

Source: Department of Public Expenditure and Reform

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,00019

97

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Capital Expenditure

Figure 4.2.4 General government expenditure on Transport, 2006-2016

Figure 4.2.4 shows the

trend in transport

expenditure expressed

as a percentage of total

general government

expenditure. The Irish

share was above or

equal to equivalent

levels in the UK and

Euro area in the period

2006-2012. It peaked at

7.3% in 2008 and

declined to 3.7% in 2013.

At 4.2% the Irish share

was equal to the UK and

above the Euro area

average (3.7%) in 2016.

EU rank: 18th

Source: Eurostat

0

1

2

3

4

5

6

7

8

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Per

cen

tag

e o

f T

ota

l Go

vern

men

t E

xpen

dit

ure

Ireland Euro area UK

92

Figure 4.2.6 Perception of Infrastructure Quality, Ireland, EU41, UK, 2017/2018

Perceptions of the

quality of the Irish

transport infrastructure

by respondents to the

Executive survey of the

World Economic Forum

tend to be lower for Irish

respondents than the

UK and the EU average.

Ireland performs best

on-air transport

infrastructure (14th in

the EU) but ranks

relatively poorly on rail

and roads 19th and 17th

in the EU respectively.

OECD rank: 27th

Source: OECD

40 Participants in the WEF survey are asked How do you assess the general state of infrastructure (e.g., transport, communications, and energy) in your

country? [1 = extremely underdeveloped—among the worst in the world; 7 = extensive and efficient—among the best in the world]

41 EU excludes Malta and Cyprus in rail and Austria, Czech Republic, Hungary, Luxembourg, Romania, and Slovakia in Ports.

1

2

3

4

5

6

7

Overall Rail Roads Ports Air Transport Electrictysupply

Po

or

Qu

alit

y

S

cale

1-7

H

igh

Qu

alit

y=

Ireland UK EU 28

Figure 4.2.5 Perception of Infrastructure Quality40, 2017/2018

Perceptions regarding

the overall quality of

infrastructure in the

economy remain low in

Ireland. Ireland’s score

fell over the past 5 years

to 2015 and in 2017 (4.4)

remains below the EU

average (4.9). Ireland is

ranked 51st in the world

with the UK 27th. In an

EU context Ireland is

ranked 21st with the UK

12th.

OECD rank: 27th

Source: WEF

1

2

3

4

5

6

7S

wit

zerl

and

Sin

gap

ore

Ne

ther

lan

ds

Jap

an

Fin

lan

d

Fra

nce US

De

nm

ark

Ger

man

y

Ko

rea

Sw

ede

n

Lu

xem

bo

urg

Sp

ain

Can

ada

UK

EU

28

ave

rag

e

Isra

el

Ne

w Z

eala

nd

Ch

ina

Irel

and

Ital

y

Lat

via

Po

lan

d

Bra

zil

Po

or

Qu

alit

y

S

cale

1-7

H

igh

Qu

alit

y

2017/2018 2013/2014

93

Figure 4.2.8 Enterprises considering the speed of their fixed internet connection to be sufficient, by enterprise

size, 2017

In Ireland the share of

enterprises that

considered the speed of

their fixed internet

connection to be

sufficient in 2017 was

84% the same as in the

UK and the EU-28

average. 83% of Irish

SMEs and 94% of large

enterprises considered

their broadband speed

sufficient.

EU rank: 20th

Source: Eurostat

42 All enterprises, without financial sector (10 persons employed or more)

70

75

80

85

90

95

100

Latv

ia

Sw

ed

en

Net

her

land

s

Po

lan

d

Den

mar

k

Luxe

mbo

urg

Finl

and

Spa

in

Irel

and

EU

Ital

y

UK

Fra

nc

e

Ger

man

y

(% o

f en

terp

rise

s u

sin

g a

fixe

d b

road

ban

d

conn

ecti

on)

Total (SMEs and large) SMEs Large enterprises

Figure 4.2.7 Enterprises42 with broadband access by maximum contracted download speed of fixed internet

connection, 2017

Figure 4.2.7 shows the

share of Irish enterprises

using the fastest

internet connections

was 18% in 2017. In

2017, 30% of Irish

enterprises had an

internet connection

speed that was in the

range of ≥ 30 Mb/s but <

100 Mb/s. This was

greater than UK and

Euro area average and

up from 17% in 2014.

24% had a connection in

the range of ≥ 10 Mb/s

but < 30 Mb/s.

EU rank: (at least 30: 5th

at least 100: 12th)

Source: Eurostat

0

5

10

15

20

25

30

35

40

45

Den

mar

k

Sw

eden

Finl

and

Net

her

land

s

Spa

in

Luxe

mb

our

g

Latv

ia

Irel

and

EU

Ger

man

y

Po

lan

d

UK

Fran

ce

Ital

y

Per

cen

tag

e o

f en

tere

pri

ses

at least 100 Mb/s at least 30 Mb/s but less than 100 Mb/s

at least 10 Mb/s but less than 30 Mb/s at least 2 Mb/s but less than 10 Mb/s

94

43 The World Bank uses six key dimensions to benchmark countries' logistics/ freight forwarding performance in index form. The data used in the ranking

comes from a survey of logistics professionals who are asked questions about the foreign countries in which they operate. The components analysed

International LPI are based on recent theoretical and empirical research and on the practical experience of logistics professionals involved in international

freight forwarding. The six dimensions considered are: 1) Efficiency of the clearance process (i.e., speed, simplicity and predictability of formalities) by border

control agencies, including customs; 2) Quality of trade and transport related infrastructure (e.g., ports, railroads, roads, information technology); 3) Ease of

arranging competitively priced shipments; 4) Competence and quality of logistics services (e.g., transport operators, customs brokers); 5) Ability to track and

trace consignments;6) Timeliness of shipments in reaching destination within the scheduled or expected delivery time.

Figure 4.2.9 Logistics Performance Index43 (LPI) Score, 2016

The most recent data on

logistics (for 2016) ranks

Ireland’s performance

18th in the world.

Germany is first, with

the UK, 8th overall.

Ireland’s best ranking

(11th) is on ease of

arranging competitively

priced shipments.

Relative to the UK,

Ireland is less

competitive on

timeliness of delivery,

efficiency of customs

clearance and

infrastructure.

rank: n/a

Source: World Bank

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

LP

I Sco

re

Ireland UK Germany High income OECD

95

4.3 Clusters and Firm Sophistication

Figure 4.3.1 Regional Ecosystem Scoreboard (RES), Median Country Scores, 2016

The RES presents a

composite index to rate

the quality of the

regional entrepreneurial

and innovation

ecosystem that support

clusters. Both the

Southern and Eastern

and Border, Midland and

Western regions have

relative strengths in

Tertiary education and

SME innovation and

weaknesses in Lifelong

learning and R&D

expenditure.

OECD rank: n/a

Source: European Commission

Figure 4.3.2 Perceived State of Cluster Development44, 2017/2018

Figure 4.3.2 presents

WEF data provided

based on personal

assessment of managers

in surveyed companies

about cluster

development in their

country. In Ireland the

weighted average score

in 2017/18 was 4.8,

above the Euro area

average score of 4.3 but

below the UK (5.4).

OECD rank: 8th

Source: WEF

44 The WEF survey asks, “In your country, how widespread are well-developed and deep clusters (geographic concentrations of firms, suppliers, producers of

related products and services, and specialized institutions in a particular field)?” [1 = non-existent; 7 = widespread in many fields]

0

20

40

60

80

100

120

140

160

180

200

Sw

itze

rlan

d Z

üric

h

Sw

eden

Sto

ckho

lm

Den

mar

k H

ove

dst

aden

Sou

th E

ast E

ngla

nd

Ger

man

y O

ber

bay

ern

Lond

on

Fin

lan

d E

telä

-Su

om

i

Net

her

lan

ds

Utr

ech

t

Fran

ce Îl

e de

Fra

nce

Sco

tlan

d

Wal

es

Aus

tria

Süd

öst

erre

ich

Ire

lan

d S

&E

No

rthe

rn Ir

elan

d

Irel

and

BM

W

EU

28

Spa

in P

aís

Vas

co

Ita

ly F

riu

li-V

en

ezi

a G

iulia

Pol

and

Maz

ow

ieck

ie

Reg

iona

l Inn

ovat

ion

Sco

re-

(Sca

le E

U in

20

11 =

100

)

2017 2013

1

2

3

4

5

6

7

US

Ge

rma

ny

Ne

ther

lan

ds

UK

Ital

y

Jap

an

Sw

itze

rlan

d

Lu

xem

bo

urg

Sw

eden

Fin

lan

d

Irel

an

d

Fra

nce

De

nm

ark

Ch

ina

Ko

rea

Sp

ain

Eu

ro a

rea

ave

rag

e

Bra

zil

Ne

w Z

eal

an

d

Po

lan

d

No

n-e

xist

ent

(1)

W

ell

Dev

elo

ped

(7)

2017/2018 2013/2014

96

Figure 4.3.4 European Digital Economy and Society Index Innovation Scoreboard46, Overall ranking, 2017

The EU shows Ireland as

a strong innovation

follower with

performance improving

over time but behind the

UK and the best

innovation leaders. In

2017, all Member States

improved in the DESI.

Ireland progressed the

most (close to 5 points

as opposed to an EU

average of 3.2).

EU rank: 6th

Source: European Commission

45 The WEF survey asks, “In your country, how sophisticated are production processes?” [1 = not at all—production uses labour-intensive processes; 7 =

highly—production uses latest technologies] 46 The Digital Economy and Society Index (DESI) is a composite index that summarises relevant indicators on Europe’s digital performance and tracks the

evolution of EU member states in digital competitiveness.

01020304050607080

De

nm

ark

Sw

ede

n

Fin

lan

d

Ne

ther

lan

ds

Lu

xem

bo

urg

Irel

and

UK

Sp

ain

Ger

man

y

EU

Fra

nce

Lat

via

Po

lan

d

Ital

y

Co

mp

osi

te In

dex

(w

eig

hte

d s

core

)

Connectivity Human Capital

Use of Internet Integration of Digital Technology

Digital Public Services

Figure 4.3.3 Perceived State of Enterprise Business Sophistication45, 2017/2018

Competitiveness and

productivity is driven by

firms using knowledge

intensive production

processes. Figure 4.3.3

shows the relative

sophistication of

business processes as

perceived by national

executives. Ireland is

ranked 14th in the world

and 7th in the Euro area

and scores above the

Euro area average. The

UK is ranked 12th in the

world. Ireland's rank has

fallen compared to 2013.

OECD rank: 14th

Source: WEF

1

2

3

4

5

6

7S

wit

zerl

and

Jap

an

Ne

the

rla

nd

s

Sw

eden

Fin

lan

d

US

Ger

man

y

Lu

xe

mb

ou

rg UK

Den

mar

k

Eur

o ar

ea a

vera

ge

Ire

lan

d

Fra

nc

e

Ital

y

New

Zea

lan

d

Sp

ain

Chi

na

Po

lan

d

Lat

via

Bra

zil

Lab

ou

r In

ten

sive

Sca

le 1

-7 K

now

ledg

e in

tens

ive

2017/2018 2013/14

97

Figure 4.3.5 SMEs introducing product or process innovations (percentage of SMEs), 2015

46% of SMEs in Ireland

are reported as having

introduced a product or

process innovation in

2015. This is the second

highest in the EU

(Belgium 48%) and

above the EU average

(31%) and the UK (33%).

Ireland’s performance

has increased from 36%

in 2015 and since 2011

(41%).

EU rank: 2nd

Source: European Commission

Figure 4.3.6 SMEs introducing marketing or organisational innovations (percentage of SMEs), 2015

Figure 4.3.6 shows the

proportion of SMEs in

Ireland who introduced

a marketing or

organisational

innovation is high

(52.5%). The UK is 45%.

with the EU average

35%. Previous iterations

of the Community

Innovation Survey

suggest the proportion

of SMEs engaging in

marketing innovations

in Ireland is greater than

organisational

innovation.

EU rank: 2nd

Source: European Commission

0

10

20

30

40

50

60

Sw

itze

rlan

d

Irel

and

Fin

lan

d

Net

her

land

s

Ger

man

y

Sw

ed

en

Luxe

mbo

urg

Fra

nce

Den

ma

rk

Ital

y

UK EU

Spa

in

Pol

and

La

tvia

Per

cen

tag

e o

f al

l SM

Es

2015 2011

0

10

20

30

40

50

60

70

Sw

itze

rlan

d

Luxe

mbo

urg

Irel

an

d

Ger

man

y

UK

Fra

nc

e

Den

mar

k

Fin

land

Sw

ed

en

EU

Ital

y

Net

her

land

s

Spa

in

Latv

ia

Pol

and

Per

cen

tag

e o

f al

l SM

Es

2015 2011

98

Figure 4.3.8 Enterprises' total turnover from e-commerce, 2017

E-sales accounted for

33% of the total

turnover generated by

Irish enterprises in 2016,

which was the highest

share recorded in the

EU. The EU and UK rates

were both 18%. Overall,

the share of e-sales in

total turnover has been

increasing for Irish SMEs

and remains the highest

in the EU47. The share of

turnover for Irish SMEs

was 23% compared with

9% in the UK.

EU rank: 1st

Source: Eurostat

47 SME data not available for Finland and Luxembourg

0

5

10

15

20

25

30

35

Irel

and

Den

mar

k

Ge

rma

ny

Fin

lan

d

Fra

nc

e

Sw

eden EU UK

Spa

in

Net

her

land

s

Pol

and

Luxe

mbo

urg

Ita

ly

La

tvia

Per

cen

tag

e o

f tu

rno

ver

All enterprises SMEs (10-249 persons employed)

Figure 4.3.7 Sales of new-to-market and new-to-firm innovations as percentage of turnover, 2015

Figure 4.3.7 shows sales

as a percentage of

turnover attributed to

new/ significantly

improved products, and

includes both products

which are only new to

the firm and products

which are also new to

the market. Ireland

ranks 3rd in the EU with

sales estimated at 18.1%

compared to the EU

average of 13.4%. The

relevant figure for the

UK is 20.8%.

EU rank: 3rd

Source: European Commission

0

5

10

15

20

25

UK

Sw

itze

rlan

d

Irel

an

d

Spa

in

Fra

nce

EU

Ger

man

y

Net

her

land

s

Ital

y

Fin

land

Den

mar

k

Sw

eden

Luxe

mbo

urg

Pol

and

Latv

ia

Sal

es a

s a

per

cen

tag

e o

f tu

rno

ver

2015 2011

99

Figure 4.3.9 Enterprises with web sales, by place of sale, 2016

In 2016 the highest

proportions of

enterprises with web

sales to other EU

Member States

countries were recorded

in Ireland (13%). In 2016,

Ireland also recorded the

highest share of

enterprises declaring

that they made web

sales outside of the EU,

this proportion was 11%.

Ireland was the only EU

Member State with a

share that was in

double-digits.

EU rank: 1st

Source: Eurostat

0

5

10

15

20

25

30Ir

elan

d

Sw

eden

Net

her

la…

Den

mar

k

Fin

lan

d

Ger

man

y

UK

EU

Spa

in

Fra

nce

Ital

y

Luxe

mb…

Lat

via

Pol

and

(% o

f en

terp

rise

s)

Home country Other EU Member States Rest of the world

100

4.4 Knowledge and Talent

Figure 4.4.1 R&D expenditure (GERD48) as a percentage of GDP, 2016

There is considerable

heterogeneity in R&D

expenditure as a

percentage of GDP in

the EU. In 2016, Irish

expenditure on R&D

accounted for 1.18% of

GDP, below the EU

average (2.03%) and UK

(1.69%). Business

expenditure on R&D

accounted for 0.8%,

with public expenditure

accounting for 0.3%.

EU rank: 18th

Source: Eurostat

Figure 4.4.2 Expenditure on R&D by sector, Ireland, 2007-2016

Figure 4.4.2 shows R&D

investment has

increased over this

period but GNP/GDP

levels have increased at

a faster rate. In 2016,

Gross Expenditure on

R&D increased to

€3,243m and is at its

highest level in the 11

years of this time-series

and represents a 47%

increase over 2006

(€2,214m). The highest

expenditure on R&D

continues to be in the

business sector.

EU rank: 18th

Source: Eurostat

48 Gross Expenditure on Research and Development (GERD) is the sum of R&D expenditure in the business, higher education and government sectors.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Sw

eden

Ge

rma

ny

De

nm

ark

Fin

lan

d

Fra

nce

Eu

ro a

rea

Ne

ther

lan

ds

EU UK

Ital

y

Lu

xem

bo

urg

Sp

ain

Irel

an

d

Po

lan

d

Lat

via

Per

cen

tag

e o

f G

DP

2016 2012

0

500

1,000

1,500

2,000

2,500

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Mill

ion

eu

ro

Business enterprise sector Higher education sector

Government sector

101

Figure 4.4.4 Scientists and engineers as a percentage of the active population aged 15-74, 2016

Figure 4.4.4 shows the

proportion of the active

population aged 15-74

who are scientists in

Ireland in 2016 was

8.9%. This is above the

Euro area average 6.4%

but below the UK level

10.5%. The Irish rate is

down marginally since

2012 (9%) but has been

above 8% since 2011.

EU rank: 7th

Source: Eurostat

49 Data on Government Budget Appropriations or Outlays on Research and Development (GBAORD) refer to budget provisions, not to actual expenditure, i.e.

GBAORD measures government support for R&D using data collected from budgets. The GBAORD indicator should be seen as a complement to indicators

based on surveys of R&D performers, which are considered to be a more accurate but less timely way of measuring R&D activities. In this chart, total

GBAORD is expressed as a percentage of total general government expenditure

0

2

4

6

8

10

12

Sw

ed

en

UK

Fin

lan

d

Sw

itze

rlan

d

Den

mar

k

Ne

ther

lan

ds

Ire

lan

d

Lu

xem

bo

urg

Ger

man

y

Po

lan

d

Eu

ro a

rea

Fra

nce

Sp

ain

Lat

via

Ital

y

Per

cen

tag

e o

f ac

tive

po

pu

lati

on

(ag

ed 1

5-74

)

2016 2012

Figure 4.4.3 Share of government49 budget appropriations or outlays on research and development, 2016

Estimated as a share of

government budget

appropriations or

outlays on research and

development,

expenditure in Ireland

was 0.97% in 2016,

behind the UK (1.25%)

and the EU average of

1.37%. Expenditure fell

to 0.76% in 2010. In

2008, it stood at 1.19%

and was 1.02% in 2012.

EU rank: 18th

Source: Eurostat

0

0.5

1

1.5

2

2.5G

erm

an

y

De

nm

ark

Ne

ther

lan

ds

Sw

eden

Fin

lan

d

Lu

xem

bo

urg

EU

Sp

ain

UK

Fra

nce

Ital

y

Irel

an

d

Lat

via

Po

lan

d

% o

f to

tal g

ener

al g

ove

rnm

ent

exp

end

itu

re

2016 2012 2008

102

50 * 2016 data for France, New Zealand, Poland, US, UK and OECD refers to 2015

Figure 4.4.5 Researchers per thousand employees, 2016

Researchers are

professionals engaged in

the creation of new

knowledge, products,

processes and systems.

In Ireland, there were

12.8 researchers per

1000 employees

compared to 9.1 in the

UK and 8.2 in the

OECD50. The number of

researchers in Ireland is

up from 8.7 in 2012.

OECD rank: 5th

Source: OECD

Figure 4.4.6 Graduates by Field of Study, 2015

In Ireland and across

most OECD countries,

the largest share of

graduates (24%) in

tertiary education

programmes complete

degrees in business,

administration and law.

The share of students in

Ireland graduating from

the fields of natural

sciences, maths,

statistics (8%),

engineering,

manufacturing and

construction, (10%) and

ICT (6%) combined is

24%.

OECD rank: n/a

Source: OECD

0

2

4

6

8

10

12

14

16

18D

enm

ark

Sw

ed

en

Fin

lan

d

Ko

rea

Ire

lan

d

Fra

nce

Jap

an

Ne

ther

lan

ds

Ger

man

y

UK

US

Sw

itze

rlan

d

OE

CD

Ne

w Z

eal

and

Sp

ain

Lu

xem

bo

urg

Po

lan

d

Ital

y

Lat

via

Ch

ina

To

tal,

Per

1 0

00

em

plo

yed

2016* 2012

24

22

20

24

17

13

17

15

13

15

20

10

10

9

7

14

8

13

7

6

8

10

7

10

7

12

12

10

6

4

4

4

5

0

7

5

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Ireland

UK

US

OECD average

Business, administration and law Health and welfareArts and humanities Engineering, manufacturing and constructionNatural sciences, mathematics and statistics EducationSocial sciences, journalism and information Information and communication technologies

103

Figure 4.4.7 STEM graduates (% of total third level graduates), 2015

As a percentage of total

third level graduates,

Ireland produced more

Science, maths &

statistics and ICT

graduates than the Euro

area. However, the

proportion of

engineering,

manufacturing and

construction graduates

is 3.6% below the Euro

area average.

Euro area rank:

Science & Maths: 3rd,

ICT: 3rd, Engineering:

15th

Source: Eurostat

Figure 4.4.8 Educational attainment of population aged 25-64 by highest level of education (%), 201651

The proportion of the

working age population

with tertiary education

in Ireland is 42.8%,

above the Euro area

average of 33.1% and

the OECD average of

35.5%. The proportion

with just pre-primary,

primary or lower

secondary education is

marginally below the

Euro area and OECD

figures.

OECD rank:

Upper secondary (26th),

Tertiary (11th)

Source: OECD

51 2016 data for Ireland refers to 2015

0

5

10

15

20

25

30

35

40

Ge

rma

ny

Fin

lan

d

UK

Sw

eden

Sp

ain

Fra

nce

Irel

an

d

Eu

ro a

rea

18

Ital

y

Po

lan

d

Lat

via

De

nm

ark

Ne

ther

lan

ds

% o

f to

tal t

hir

d le

vel

gra

du

ates

Science, maths&statistics ICT Engineering, manufacturing and construction

0%

20%

40%

60%

80%

100%

Po

lan

d

US

Lat

via

Fin

lan

d

Sw

itze

rlan

d

Ko

rea

Ge

rma

ny

Sw

eden

De

nm

ark

UK

Irel

an

d

Fra

nce

OE

CD

Eu

ro a

rea

-16

Ne

ther

lan

ds

Ne

w Z

eal

an

d

Ital

y

Sp

ain

Jap

an

% o

f P

op

ula

tio

n a

ged

25-

64

Pre-Primary, Primary and Lower Secondary Upper Secondary and Non-Tertiary Tertiary

104

Figure 4.4.9 Annual expenditure on education institutions, per student ($ US PPP), 2014

Ireland spends more per

student at secondary

level than the OECD or

Euro area average but

less at both primary and

tertiary level. The gap

between Ireland and the

UK and US expenditure

is particularly wide at

tertiary level.

OECD rank:

Primary (20th)

Secondary (16th)

Tertiary (18th)

Source: OECD

Figure 4.4.10 Breakdown of tertiary educational expenditure, 2014

Tertiary education in

Ireland and the Euro

area is primarily funded

by the public sector. In

2014, 74% of the

expenditure on tertiary

education in Ireland was

funded by public sources

and 26% by private

sources. The breakdown

for the Euro area is 78%

and 22% respectively.

OECD rank:

Public 18th, Private 16th

Source: OECD

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Ireland Euro Area 16 OECD United Kingdom United States

US

$ P

PP

per

Stu

den

t p

er A

nn

um

Primary Secondary Tertiary

0%

20%

40%

60%

80%

100%

UK US Ireland Euro Area OECD

Per

cen

tag

e o

f E

xpen

dit

ure

Public Private

105

Figure 4.4.11 Average annual hours of tuition by subject at primary education, 2017

In 2016, Irish primary

school students received

less hours of tuition in

science and reading,

writing and literature as

a percentage of total

tuition hours than the

average student across

the OECD and the Euro

area 13. Irish primary

school students received

marginally more hours

of tuition in maths than

the OECD and Euro area

average student.

OECD rank:

Maths hours: 15th,

Science hours: 26th

Source: OECD

Figure 4.4.12 Percentage of population aged 25-64 that has at least upper secondary education52, 2016

Some 80% of 25-64-

year-olds had attained

at least upper secondary

education in Ireland in

2016 compared with

91% of 25-34-year-old

cohort. Ireland

surpasses both the Euro

area and OECD average

attainment for both age

cohorts.

OECD rank:

25-34 olds: 10th

25-64-year olds: 20th

Source: OECD

52 2016 data for Ireland refers to 2015 for 25-34 olds

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Poland

Ireland

Denmark

Latvia

Korea

Spain

Finland

Japan

OECD

Euro Area 13

Norway

Germany

France

% of Total Tuition Hours

Reading, writing and literature Mathematics Natural sciences Other

0

20

40

60

80

100

Po

lan

d

US

Lat

via

Fin

lan

d

Sw

itze

rlan

d

Ko

rea

Ge

rma

ny

Sw

eden

De

nm

ark

Irel

an

d

Fra

nce

OE

CD

Eu

roa

are

a 16

Ne

ther

lan

ds

Ne

w Z

eal

an

d

UK

Ital

y

Sp

ain

Per

cen

tag

e o

f th

e P

op

ula

tio

n

25-64 year-olds 25-34 year-olds

106

Figure 4.4.13 Early school leavers as a percentage of population aged 18-24, 2017

Figure 4.4.13 measures

the percentage of the

population aged

between 18 and 24 who

have attained at most

lower secondary

education. Ireland's

performance has been

improving since 2009.

With 6.1% of this age

cohort classified as early

school leavers, Ireland's

retention rates in

secondary education are

above the Euro area

average of 11%.

Euro area rank: 3rd

Source: OECD

Figure 4.4.14 Average annual hours of tuition by subject, lower secondary education, 2017

Ireland's Lower

Secondary Education

dedicates less time to

maths tuition (11.9) than

the Euro area 15 (13.7) as

proportion of the total

tuition time. The Irish

figure is in line with the

OECD average for the

same subject. Irish

students receive less

tuition time on reading,

writing and literature

than both the Euro area

and OECD countries.

Euro area rank:

Maths: 15th

Source: OECD

0

5

10

15

20

25

Sw

itze

rlan

d

Po

lan

d

Irel

an

d

Ne

ther

lan

ds

Sw

eden

Fin

lan

d

De

nm

ark

Fra

nce

Lat

via

Ge

rma

ny

EU

Eu

ro a

rea

Ital

y

Sp

ain

Per

cen

tag

e o

f P

op

ula

tio

n A

ged

18

-24

2017 2013

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Ireland

Finland

Japan

Germany

Korea

Poland

OECD

Latvia

Euro area 15

Spain

France

Denmark

Italy

% of Total Tuition Time

Reading, writing and literature Mathematics Other

107

Figure 4.4.15 Population by age cohort that has at least third level education, 2015

There is a significant

inverse correlation

between educational

attainment and age in

Ireland, while 52.6% of

the 25-34 cohort have

third level education, in

the 55-64 cohort the

proportion is 28.7%.

Ireland performs better

than the Euro area in all

age groups.

Euro area rank:

25-34yrs: 3rd

35-44 yrs.: 1st

45-54yrs: 2nd

55-64yrs: 5th

Source: Eurostat

Figure 4.4.16 Lifelong learning (as a percentage of population aged 25-64), 2017

The percentage of

people aged 25-64 in

receipt of education and

training (both formal

and non-formal) in

Ireland has increased

from 7.5% to 8.9% in the

period 2013-2017.

Despite the increase,

Ireland's performance

remains below the Euro

area average and below

the target set by the

European Agenda for

Adult Learning of 15% to

be achieved by 2020.

Euro area rank: 11th

Source: Eurostat

0

10

20

30

40

50

60

Irel

and

Sw

ed

en

UK

Ne

the

rla

nd

s

Den

mar

k

Fra

nc

e

Fin

lan

d

Eu

ro a

rea

Ger

ma

ny

Per

cen

tag

e o

f th

e p

op

ula

tio

n

25 to 34 35-44 45-54 55-64

0

5

10

15

20

25

30

35

Sw

itze

rlan

d

Sw

eden

Fin

lan

d

De

nm

ark

Ne

ther

lan

ds

Fra

nce UK

Eu

ro a

rea

EU

Sp

ain

Irel

an

d

Ge

rma

ny

Ital

y

Lat

via

Po

lan

d

Per

cen

tag

e o

th

e P

op

ula

tio

n A

ged

25-

64

2017 2013

108

Figure 4.4.17 International students (as a percentage of all students in third level education)53, 2016

The proportion of

international students in

the total number of

students in tertiary

education in Ireland has

increased from 6.5% to

8.2% between 2013 and

2016. Ireland's

performance is below

the Euro area (10.4%)

and the UK (18.5%) in

attracting international

students in tertiary

education.

Euro area-18 rank: 8th

Source: Eurostat

Figure 4.4.18 Population having at least basic digital skills (as a percentage of individuals aged 16-74), 2018

In Ireland only 48% of

the population report as

having at least basic

digital skills, one of the

lowest levels in the

entire EU and the

second last in the Euro

area. Ireland also fell

significantly behind

other EU countries

regarding the number of

people actively using the

internet (Ireland 79 %,

Euro area average 82%).

Euro area-18 rank:

Individuals with at least

basic digital skills (17th)

Source: Digital Economy and Society Index

53 2016 data for the UK refers to 2015

0

2

4

6

8

10

12

14

16

18

20U

K

Sw

itze

rlan

d

Den

mar

k

Eu

ro a

rea

Fran

ce

Ire

lan

d

Ger

man

y

Finl

and

Latv

ia

Sw

eden

Po

lan

d

Sp

ain

Inte

rnat

ion

al s

tud

ents

as

% o

f al

l st

ud

ents

in t

erti

ary

edu

cati

on

2016 2013

30

40

50

60

70

80

90

100

Ne

the

rla

nd

s

Sw

eden

Fin

lan

d

De

nm

ark UK

Ger

ma

ny

Eur

o ar

ea 1

8

EU

Fran

ce

Sp

ain

Lat

via

Irel

and

Po

lan

d

% o

f in

div

idu

als

aged

16

-74

Individuals who have at least basic digital skills Internet users

109

Figure 4.4.19 Proportion of households with broadband coverage and 4G coverage, 2018

Ireland has improved its

performance in the

overall Connectivity

dimension, currently

ranking 11th among EU

countries (compared to

15th in 2015). However,

in terms of fixed

broadband coverage

(96.6% of the

households) and 4G

coverage (92.1%),

Ireland is behind the

Euro area (97.3% and

92.9% respectively.

Euro area rank:

Fixed broadband

coverage: 14th

Source: Eurostat

80

82

84

86

88

90

92

94

96

98

100

Ne

ther

lan

ds

Fra

nce UK

De

nm

ark

Ital

y

Sw

eden

Ge

rma

ny

EU

Eu

ro a

rea

Fin

lan

d

Irel

an

d

Sp

ain

Lat

via

Po

lan

d

% o

f h

ou

seh

old

s

Fixed broadband coverage 4G Coverage

110

Chapter 5

Essential Conditions

111

Essential Conditions A range of factors which are either beyond the immediate reach of policy makers (such as demographic

effects) or which are determined by institutional effectiveness or other exogenous factors (e.g. the global

economic climate) but which have a significant impact upon relative competitiveness are considered in this

chapter.

• Institutions: The quality of institutions has a strong bearing on competitiveness and growth and the

ease of doing business. Institutions influence investment decisions and play a key role in the ways in

which societies distribute the benefits and bear the costs of development strategies and policies.

While difficult to benchmark internationally, indicators in this section address government and

public-sector effectiveness and ease of tax compliance.

▪ The World Bank’s Ease of Doing Business report assess regulations affecting SMEs throughout their

life cycle. Ireland improved its ranking in 2017 and is now ranked 17th in the world and 4th in the Euro

area. Ireland ranks highly for ease of paying taxes, starting a business and protecting minority

investors. Performance in time/cost of contract enforcement, trading across borders and getting

electricity lags. Relative to the UK, the biggest deficiencies are Ireland’s scores in enforcing contracts,

getting electricity and trading across borders. Ireland’s lead in registering a property and starting a

business is slim.

▪ World Bank research suggests that perceptions regarding the quality of public services and regulatory

effectiveness are above the OECD average but behind the UK.

▪ Ireland is ranked in the top ten in terms of perceptions of judicial independence, protection of

minority shareholders, strength of investor protection and property rights. Ireland's performance is

above the OECD average.

▪ Ireland's trade in services is relatively open. This is measured by the Services Trade Restrictiveness

Index which helps identify which policy measures restrict trade across 19 major services sectors.

Ireland's index is lower than the OECD average in all sectors, indicating less restrictiveness in service

trade.

• Macroeconomic sustainability: Macroeconomic environment plays a vital role in determining the

sustainability of the economic growth. This pillar evaluates the stability of this environment. A range

of indicators are monitored under this heading, including the components of growth, government

finances (debt, deficit) and overall debt to income ratio.

▪ Following strong economic growth of 5.1 per cent in 2016 and 7.8 per cent in 2017, the European

Commission projects economic growth of 5.7 per cent and the Department of Finance 5.6 per cent in

2018. However, the Modified Gross National Income (GNI*), which more accurately reflects the

underlying state of the Irish economy as it excludes the impact of multinationals’ activities, was more

than 30 per cent lower (€189.2 billion) than the Gross Domestic Product (€275.6 billion) in 2016.

▪ Both EU and Euro area economies also continued their upward trend from recent years growing by

2.4 per cent in 2017 and predicted to grow by 2.3 per cent in 2018. In terms of Ireland’s main trading

partners outside of the Euro area, the UK economy grew moderately (0.1 %) year on year in 2017,

whereas the US economy expanded by 0.8 per cent.

▪ Preliminary national accounts data suggests that export was the key driver of economic growth in

Ireland in 2017. While exports of both goods and services performed well, imports contracted

112

significantly in 2017 (-6.2%), resulting in current account surplus for the year. Exports increased year-

-on-year from just over 103 per cent of GDP in 2011, to 124 per cent in 2015, before decreasing to 121

per cent in 2016 as shown in Fig 5.2.6. Ireland had the second highest level of exports as a percentage

of GDP in the OECD after Luxembourg. Year-on-year, consumption spending was subdued (1.9%

growth) and there was a significant drop in investment (-22%); the latter largely due to low level of

investment in intangible assets as well as the significant decline in aircraft purchase.

▪ Strong public finances are imperative to a country’s competitiveness. As shown in Figure 5.2.3, in

recent years, debt as a percentage of GDP has continued to decline reflecting the country’s continued

robust economic performance. It stood at 68 per cent in 2017 and is expected to decline to 66 per cent

this year. The debt-to-GNI*54 ratio, a better measure of sustainability in Ireland, remains very high

(100.1 per cent) but is predicted to fall in the period 2018-2021. Measured per capita, Ireland’s debt is

the highest in the EU at over €42,000 per person. In 2007, as we entered into the economic crisis, it

was less than €11,000. Additionally, earlier estimates of achieving structural deficit of 0.5 per cent, as

outlined in the government’s (MTO)55, by 2018 have been revised and the Department of Finance now

predicts it to be achieved around 2021. The government deficit stood at 0.3 percent of the GDP in

2017, in line with the threshold (3 percent of GDP) set out in the Stability and Growth Pact. It is

predicted to fall to 0.2 per cent this year and to 0.1 per cent in 2019.The euro area deficit stood at 0.9

per cent with nine countries recording surpluses.

▪ Irish sovereign bonds are continuing to trade in line with core European sovereign yields reflecting the

strong market confidence in the Irish economy. The yield on a 10-year Irish government bond was

trading at just over 0.5 per cent in 2017, well below Greece, Spain and Portugal.

▪ Irish government revenue represented 25.7 per cent of GDP in 2017, a fall of almost 2 per cent on 2016

(27.5%). Similarly, expenditure as percentage of GDP also fell from 28 per cent in 2016 to 26.1 per

cent in 2017. Fig 5.2.7 shows that, ” Social Protection” continues to account for the major share of

government spending across the EU, followed by “Health”, “General Public Services”, and

“Education”.

▪ In terms of Irish households, Figure 5.2.13 shows Irish households debt as a proportion of income fell

by more than 60 per cent during the period 2011-2016. However, Irish households are still the fourth

most indebted households in the EU.

• Endowments: The productivity-based view of competitiveness emphasises the importance of

endowments - that is natural resources, geographic location, demographics and size as key

dimensions in determining national competitive performance. Every country has a range of natural

endowments pre-determined by geography (e.g. natural resources). While such factors cannot easily

be impacted by policy, it is important to be cognisant of their impact on competitiveness. Factors

such as demographic trends (i.e. population growth), labour force participation, migration and

population density are examined here.

▪ In 2017, Ireland continued to have the youngest population in the Euro area. The CSO forecasts that

the young population in Ireland will increase until 2021 before falling slightly in 2026. However,

OECD population projections indicate the rising age profile of the population across the OECD

countries. Ireland’s population increased by 4.2per cent in the period 2012-2017 and recorded the

fourth highest percentage increase in population in the EU. In the period 2011-2016, Ireland’s birth

rate declined by around 3 per cent, however, Figure 5.3.2 shows the Irish rate is still considerably high

compare to the birth rate in other EU countries.

54GNI* - Modified Gross National Income

55 MTO- Medium Term (Budgetary) objective

113

▪ The Irish median age increased from 35.5 to 36.9 during the period 2013-2017 but remained well

below the EU median age of 42.8. The combination of positive net migration and natural increase in

the population resulted in an overall increase in the population of 52,900 bringing the total population

estimate to 4.79 million in April 2017.

▪ In Ireland the dependency ratio rose from 19.2 to 21.2 during the period 2000-2015 and is expected to

rise further to 27.3 by 2025. Ireland has the 7th lowest old age dependency ratio in OECD and 2nd

lowest in Europe. As the dependency ratio increases, important debates on the range of policies like

retirement age, immigration, size of pension, healthcare expenditure and labour force growth

become more urgent. In line with the population growth during the period 2012-2017, Ireland’s labour

force also grew by almost 5 percent during the same period.

▪ Emigration of skilled and qualified people is detrimental to any country’s social and economic

development. CSO figures shows that more people left Ireland than came into the country during the

period 2010-2014. A reversal of that trend is observed with net migration figures being positive for

three consecutive years since then.

▪ Ireland is one of the most sparsely populated countries in the world, especially in an EU context. In

the period 2006-2016, population density in Ireland has gone up from 62.5 persons per km2, to 69.3

persons per km2. The census figures also reveal the significant increase in population density in the

urban areas, with a density average of 2,008 people per km2 in urban areas in 2016, compared to 1,736

in 2011. In rural areas in 2016 the average density was 27 people per km2.

114

5.1 Institutions

Figure 5.1.1 Ease of Doing Business Ranking, 2017/2018

The World Bank’s Ease

of Doing Business report

assesses regulations

affecting SMEs

throughout their life

cycle. Ireland improved

its ranking in 2017 and is

now ranked 17th in the

world. New Zealand is

1st, with Denmark the

highest in the EU at 3rd

and the UK 7th of 190

economies. Ireland is

ranked 4th in the Euro

area.

OECD rank: 10th

Source: World Bank

Figure 5.1.2 Ease of Doing Business Ranking by Theme, Ireland, Denmark, New Zealand, UK, 2017/2018

Figure 5.1.2 shows

Ireland's performance

across the themes

examined by the World

Bank. It shows variation

in performance across

themes even in the best

performing economies.

Ireland ranks highly for

ease of paying taxes,

starting a business and

protecting minority

investors. Performance

in time/cost of contract

enforcement, trading

across borders and

getting electricity lags.

OECD rank: n/a

Source: World Bank

0

10

20

30

40

50

60

70

Ne

w Z

eal

an

d

De

nm

ark

Ko

rea

Ho

ng

Ko

ng

SA

R,

Ch

ina

US

UK

Sw

eden

Fin

lan

d

Irel

an

d

Lat

via

Ge

rma

ny

Po

lan

d

Sp

ain

Fra

nce

Ne

ther

lan

ds

Sw

itze

rlan

d

Jap

an

Ital

y

Isra

el

Lu

xem

bo

urg

Ran

k o

ut

of

190

co

un

trie

s

1

17

8

3035

40 42

104

47

98

17

1

10

19

28

37

46

55

64

73

82

91

100

Eas

e of

Do

ing

Bus

ines

s R

ank

Sta

rtin

g a

Bus

ines

s

Dea

ling

wit

h C

onst

ruct

ion

Per

mit

s

Get

ting

Ele

ctri

city

Reg

iste

ring

Pro

per

ty

Get

ting

Cre

dit

Pro

tect

ing

Min

orit

y In

vest

ors

Pay

ing

Tax

es

Tra

ding

acr

oss

Bor

ders

En

forc

ing

Co

ntr

acts

Res

olvi

ng

Inso

lven

cy

Ran

k o

ut

of

190

co

un

trie

s

New Zealand UK Ireland Denmark

115

Figure 5.1.3 Ease of Doing Business, Distance to the Frontier, Ireland and the UK, 2017/2018

An economy’s rank is

based on its distance to

frontier (best) score,

which measures how far

an economy is from the

best performance.

Figure 5.1.3 shows

relative to the UK, the

biggest deficiencies are

Ireland’s scores in

enforcing contracts,

getting electricity and

trading across borders.

Ireland’s lead in

registering a property

and starting a business is

slim.

OECD rank: n/a

Source: World Bank

Figure 5.1.4 Perception of Government effectiveness56, 2016

Figure 5.1.4 ranks scores

in perceptions of the

quality of public

services, the quality and

independence of the

civil service, the quality

of policy formulation

and implementation.

Ireland is 19th in the

OECD and scores

88/100, above the OECD

average (85), but behind

the UK (92).

OECD rank: 19th

Source: World Bank

56 The Worldwide Governance Indicators (WGI) are a research dataset summarizing the views on the quality of governance provided by many enterprise,

citizen and expert survey respondents in industrial and developing countries. These data are gathered from several survey institutes, think tanks, non-

governmental organizations, international organizations, and private sector firms.

+7.76

+1.78

+1.33

0-1.24 -3.4

-5

-6.51-9.07

-12.36

40

50

60

70

80

90

100P

ayin

g T

axes

Reg

iste

ring

Pro

per

ty

Sta

rtin

g a

bu

sin

ess

Pro

tec

tin

g M

ino

rity

Inv

est

ors

Res

olvi

ng

Inso

lven

cy

Dea

ling

wit

h C

onst

ruct

ion

Per

mit

s

Get

ting

Cre

dit

Tra

din

g A

cro

ss B

ord

ers

Get

ting

Ele

ctri

city

Enf

orci

ng

Co

ntra

cts

Dis

tanc

e to

Fro

ntie

r S

core

0-1

00 (

100

is b

est)

Ireland UK

50

55

60

65

70

75

80

85

90

95

100

Sin

ga

po

re

Sw

itze

rla

nd

Den

mar

k

New

Zea

lan

d

Fin

lan

d

Net

her

lan

ds

Jap

an

Sw

eden

Ge

rma

ny

Lu

xe

mb

ou

rg UK

US

Fran

ce

Isra

el

Ire

lan

d

OE

CD

ave

rag

e

Sp

ain

Ko

rea

La

tvia

Po

lan

d

Ita

ly

Ch

ina

Per

cen

tile

Sco

re R

ank,

(0

-10

0)

2016 2012

116

Figure 5.1.6 Services Trade Restrictiveness Index (STRI), 2017

The STR Index

quantifies restrictions on

foreign entry,

restrictions to

movement of people,

barriers to competition

and regulatory

transparency. Figure

5.1.6 shows Ireland’s

score on the STRI in 22

sectors relative to the

UK and OECD average.

Ireland has a lower score

than the average in all

22 sectors.

OECD rank: n/a

Source: OECD

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Insu

ran

ce

Tel

ecom

Sou

nd

reco

rdin

g

Dis

trib

uti

on

Com

mer

cial

ban

king

Co

uri

er

Mot

ion

pic

ture

s

Logi

stic

s cu

stom

s b

roke

rage

Lo

gis

tics

fre

igh

t fo

rwa

rdin

g

Eng

inee

ring

Co

nst

ruct

ion

Lo

gis

tics

sto

rag

e

Com

put

er

Rai

l fre

igh

t tr

ansp

ort

Logi

stic

s ca

rgo-

han

dlin

g

Bro

adca

stin

g

Ro

ad f

reig

ht

tra

nsp

ort

Mar

itim

e tr

ansp

ort

Arc

hite

ctur

e

Acc

ou

nti

ng

Leg

al

Air

tra

nsp

ort

Ind

ex (

0 o

pen

-1

clo

sed

)

Ireland UK OECD average

Figure 5.1.5 Perception of Regulatory Effectiveness, 2016

Figure 5.1.5 ranks scores

in perceptions of the

ability of the

government to

formulate and

implement sound

policies and regulations

that permit and

promote private sector

development. Ireland’s

score (94.71/100) has

improved since 2012 and

was 9th highest in the

OECD in 2016. The UK

was 7th with a score of

95.19.

OECD rank: 9th

Source: World Bank

40

50

60

70

80

90

100

Sin

gapo

re

New

Zea

land

Net

her

land

s

Sw

itze

rlan

d

Sw

eden

Finl

and

Ger

man

y

UK

Ire

lan

d

Luxe

mbo

urg

Den

mar

k

US

Jap

an

Isra

el

OEC

D a

vera

ge

Ko

rea

La

tvia

Fran

ce

Sp

ain

Po

lan

d

Ital

y

Chi

na

Per

cen

tile

Sco

re R

ank

(0-1

00

)

2016 2012

117

5.2 Macroeconomic Sustainability

Figure 5.2.1 Components of Irish economic growth, 2007-2017

Net exports continue to

be the main contributor

to Irish economic growth

since the recession,

except in 2016 when it

dropped significantly.

Contribution of

consumption and

government spending

has recovered since the

recession, but remain

modest. Investment

remained positive until

the dramatic drop in

2017.

Rank: n/a

Source: CSO

Figure 5.2.2 Gross Domestic Product and Gross National Income GNI*, Ireland 2007-2016

Source: Department of Finance

GDP at current market

prices decreased from

€197 billion in 2007 to

€167.6 in 2011. It has

increased every year

since and stood at

€275.6 billion in 2016.

Modified GNI (GNI*) at

current prices fell from

€168.6 billion in 2007 to

€131.3 billion in 2011,

before increasing over

the next 5 years to stand

at €189.2 billion in 2016.

GNI* as a percentage of

GDP decreased from

85% in 2007 to 68% in

2016.

Rank: n/a

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

20

07

2008

20

09

2010

20

11

2012

2013

2014

2015

2016

2017

Per

cen

tag

e o

f G

DP

gro

wth

Consumption Investment Government Net Exports

100

120

140

160

180

200

220

240

260

280

300

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

bill

ion

€

Gross Domestic Product (GDP) Modified Gross National Income (GNI*)

118

Figure 5.2.4 Government Debt to National Income Ratio, Ireland 2010-2017

General government

consolidated gross debt

as a percentage of GDP

in Ireland peaked at 24%

in 2012. The debt to

modified GNI (GNI*)

ratio in Ireland followed

a similar pattern and

rose steeply from 28% in

2007 to 157.8% in 2012,

before falling to 106% in

2016. The sharp fall in

the debt to GDP ratio in

2015 is due to the

unprecedented increase

in GDP.

Rank: n/a

Source: Department of Finance

0

20

40

60

80

100

120

140

160

180

2010 2011 2012 2013 2014 2015 2016 2017

Deb

t R

elat

ive

to In

com

e (%

)

General Government Debt-to-GDP General Government Debt-to-GNI*

Figure 5.2.3 General government gross debt, 2017

Driven by cost of

capitalisation of

financial institutions as

well as the Exchequer

running large deficits,

Ireland’s debt increased

significantly in the early

part of this decade

peaking at 119.5% in the

period 2012-2013.

However, the figure has

come down significantly

and stood at 68% in

2017. It is below the UK

87.7% and the Euro area

86.7%.

Euro area rank: 10th

Source: Eurostat

0

20

40

60

80

100

120

140D

en

ma

rk

Lat

via

Sw

ed

en

Pol

and

Ne

the

rla

nd

s

Finl

and

Ger

ma

ny

Irel

and

EU

Eu

ro a

rea

UK

Fra

nce

Spa

in

Ital

y

Per

cen

tag

e o

f G

DP

2017 2011

119

Figure 5.2.5 Government Consolidated Gross Debt per capita, 2007-2017

In 2007 , as we entered

into the economic crisis,

the Government

consolidated gross debt

per capita was €10,863.

At €42,073, in 2017

Ireland’s gross debt per

capita was the highest in

the EU.

EU rank: 1st

Source: NCC calculations based on Eurostat data

Figure 5.2.6 Balance of Payments Current Account as percentage of GDP 3-year average

The Balance of payment

current account

provides information

about the transactions

of a country with the

rest of the world.

Ireland's current account

has moved from deficit

in 2012 to surplus in

2017. The figure is

significantly above EU

average and has jumped

from 13th in 2012 to 1st

in 2017 in the ranking.

Euro area rank: 1st

Source: Eurostat

€0

€5,000

€10,000

€15,000

€20,000

€25,000

€30,000

€35,000

€40,000

€45,000Ir

elan

d

Be

lgiu

m

Ital

y

Fran

ce

Au

stri

a

UK

Gre

ece

Eur

o A

rea

Ge

rma

ny

Finl

and

Sp

ain EU

Ne

ther

lan

ds

Sw

eden

De

nm

ark

Po

lan

d

Lat

via

Go

vern

men

t d

ebt

per

cap

ita

2017 2007

-6

-4

-2

0

2

4

6

8

10

Ne

ther

lan

ds

Irel

an

d

Ge

rma

ny

De

nm

ark

Sw

eden

Eu

ro-a

rea

Ital

y

EU

Sp

ain

Lat

via

Fin

lan

d

Po

lan

d

Fra

nce UK

% o

f G

DP

3 y

ear

aver

age

2017 2012

120

Figure 5.2.7 Exports of goods and services as a percentage of GDP,201757

The Irish economy is

very open with elevated

levels of trade in both

goods and services.

Exports as a percentage

of GDP has increased

from just over 103% in

2011, to 124% in2015,

before sliding down to

121% in 2016. Ireland

has the second highest

level of exports as a

percentage of GDP in

the OECD after

Luxembourg.

OECD rank: 2nd

Source: OECD

Figure 5.2.8 Total general government expenditure by area, 2016

In 2016, the share of

social protection

expenditure in total

expenditure was 36.4%

in Ireland compared to

42.1% in the Euro area.

“Health” accounted for

19.2% of total

expenditure in Ireland,

the highest share in the

EU. Education

accounted for 12.1%,

compared to 9.7% in the

Euro area.

Rank: n/a

Source: Eurostat

57 Data for 2016 & 2017 for France and Spain are estimates

0

20

40

60

80

100

120

140

Irel

an

d

Ne

ther

lan

ds

Sw

itze

rlan

d

Lat

via

De

nm

ark

Po

lan

d

Ge

rma

ny

Eu

ro-a

rea

Sw

eden

So

uth

Ko

rea

Fin

lan

d

Sp

ain

Ital

y

Fra

nce UK

OE

CD

Ne

w Z

eal

an

d

Ch

ina

Jap

an US

Per

cen

tag

e o

f G

DP

2016 2011

0

10

20

30

40

50

60

70

80

90

100

EU

28

Eu

ro a

rea

De

nm

ark

Ge

rma

ny

Irel

an

d

Sp

ain

Fra

nce

Ital

y

Lat

via

Lu

xem

bo

urg

Ne

ther

lan

ds

Po

lan

d

Fin

lan

d

Sw

eden U

K

Sw

itze

rlan

d

Per

cen

tag

e o

f T

ota

l

Social protection Health

Education General public services

Economic affairs Environment protection

Housing and community amenities Recreation, culture and religion

Defence Public order and safety

121

Figure 5.2.9 Tax revenue in Ireland by category, 2017

Overall, Irish tax

revenues have increased

by €14.5bn (36.7%) in

the period 2012-2017. At

€20.5bn in 2017, Income

tax remains the

Government's largest

tax stream (40% of total

tax revenue).

Corporation tax revenue

has increased by 99% in

the period 2012-2017

and represents 15.7% of

total tax revenue.

Rank: n/a

Source: Department of Finance

Figure 5.2.10 Income from property taxes58, 2016

At 1.3% of GDP, revenue

from immovable

property in Ireland in

2016 was below the

Euro area-16 average of

1.8% and the OECD-33

average of 1.9%. The UK

is the best performer in

the OECD with revenue

generated from

immovable property

accounting for 4.1% of

GDP.

OECD-33 rank: 14th

Source: OECD

58 Tax on property is defined as recurrent and non-recurrent taxes on the use, ownership or transfer of property. These include taxes on immovable property

or net wealth, taxes on the change of ownership of property through inheritance or gift and taxes on financial and capital transactions. Empirical work by the

OECD suggests a tax and economic growth hierarchy with recurrent taxes on immovable property being the least distortive tax instrument, followed by

consumption taxes and other property taxes as well as environmentally-related taxes, personal income taxes and corporate income taxes.

€0

€4,000

€8,000

€12,000

€16,000

€20,000

Inco

me

Ta

x

VA

T

Co

rpo

rati

on

Tax

Exc

ise

Du

ty

CG

T

Lo

cal P

rop

ert

y T

ax

CA

T

Cu

sto

ms

Mill

ion

s (€

)

2017 2012

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Lat

via

Sw

eden

Ge

rma

ny

Irel

an

d

Po

lan

d

Fin

lan

d

Ne

ther

lan

ds

De

nm

ark

Sw

itze

rlan

d

OE

CD

-33

Ne

w Z

eal

an

d

Jap

an

Sp

ain US

Ital

y

Ko

rea

Fra

nce UK

Tax

Rev

enu

e as

a %

of

GD

P

2016 2011

122

Figure 5.2.11 Social security contributions (% GDP), 2016

Social security is

comprised of employee

and employer

contributions, self-

employed, non-

employed contributions

and some “unallocable”

contributions. Social

security contributions in

Ireland generate

significantly less

revenue as % of GDP

(3.9%), compared to the

OECD-33 (9.3%).

OECD-33 rank: 28th

Source: OECD

Figure 5.2.12 Balance of payments, current account (€ millions), 2017

The balance of

payments current

account is a measure of

Ireland's financial flows

with the rest of the

world. Ireland’s current

account was in deficit in

the 2nd quarter of 2017

of (-€872m). This is

largely related to a fall in

general trade relative to

Q1. For the year 2017,

the current account

surplus is €37,090m, an

increase of €27,897m on

2016.

Rank: n/a

Source: CSO

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00N

ew

Ze

ala

nd

De

nm

ark

Irel

an

d

US

UK

Sw

itze

rlan

d

So

uth

Ko

rea

Lat

via

OE

CD

-33

Sw

eden

Sp

ain

Po

lan

d

Fin

lan

d

Ital

y

Ge

rma

ny

Ne

ther

lan

ds

Co

ntr

ibu

tio

ns

(% o

f G

DP

)

2016 2012

-€10,000

-€5,000

€0

€5,000

€10,000

€15,000

€20,000

€25,000

€30,000

€35,000

€40,000

2011 2012 2013 2014 2015 2016 2017

Mill

ion

s (€

)

Current Account Balane

123

Figure 5.2.13 Gross debt to income ratio of households,201659

Between 2011 and 2016,

Irish households

reduced their debt as a

proportion of disposable

income by more than

60% – the largest

reduction in the EU.

Aggregate household

indebtedness has

declined in Ireland in

recent years in nominal

terms, but remains

above Euro area

average.

Euro-17 rank: 14th

Source: Eurostat

Figure 5.2.14 General government revenue, expenditure and deficit, 2017

In 2017, Irish

Government revenue

represents 25.7% of

GDP, a decline from

33.9% recorded in 2012.

Expenditure also

decreased from 41.9% in

2012 to26.1% of GDP in

2016. Ireland's deficit

level is on a steady

downward trend in

recent years with -0.4%

of GDP in 2017.

Euro area rank:

Deficit: 9th

Source: Eurostat

59 EU- 24 Data for Greece, Croatia, Hungary, Malta & Romania not available Euro area-17- Data for Greece, Malta not available Figures for France, Cyprus,

Netherland, Portugal for 2016 are provisional

0

50

100

150

200

250

300L

atvi

a

Po

lan

d

Ital

y

Ge

rma

ny

Fra

nce

Eu

ro a

rea

-17

Sp

ain EU

Fin

lan

d

UK

Irel

an

d

Sw

eden

Ne

ther

lan

ds

De

nm

ark

Gro

ss d

ebt

to in

com

e (%

)

2016 2011

-10

0

10

20

30

40

50

60

Ge

rma

ny

Sw

eden

Ne

ther

lan

ds

De

nm

ark

Irel

an

d

Lat

via

Fin

lan

d

EU

Eu

ro-a

rea

Po

lan

d

UK

Ital

y

Fra

nce

Sp

ain

Per

cen

tag

e o

f G

DP

Total Income Total Expenditure Net lending / borrowing

124

Figure 5.2.15 General government deficit/surplus (as percentage of GDP),2017

The chart shows that the

general government

deficit has fallen

significantly since 2012

(0.8% of the GDP). The

trend has continued

with another 2% fall

between 2016 (0.5%) to

2017(0.3%). Eight states

in the Euro area

recorded surpluses while

overall Euro area deficit

stands at 0.9%.

Euro area rank: 9th

Source: Eurostat

Figure 5.2.16 Ten – year government bonds (Interest Rates),2011-201860

The Irish sovereign bond

yield has come down

significantly in recent

years since the peak of

July 2011 (12.45%). 10-

year government bonds

yields are continuing to

trade in line with core

European sovereign

yields reflecting the

strong market

confidence in Ireland.

Rank: n/a

Source: ECB

60 The gap in the series for Greece on July 2015 is due to the lack of data owing to the market closure.

-12

-10

-8

-6

-4

-2

0

2

Ge

rma

ny

Sw

eden

Ne

ther

lan

ds

De

nm

ark

Irel

an

d

Lat

via

Fin

lan

d

Eu

ro-a

rea

EU

Po

lan

d

UK

Ital

y

Fra

nce

Sp

ain

Gen

eral

go

vern

men

t d

efic

it/s

urp

lus(

%G

DP

)

2017 2012

0%

5%

10%

15%

20%

25%

30%

20

11

-Ja

n

20

11

-Ap

r

20

11

-Ju

l

20

11

-Oc

t

20

12

-Ja

n

20

12

-Ap

r

20

12

-Ju

l

20

12

-Oct

20

13

-Ja

n

20

13

-Ap

r

20

13

-Ju

l

20

13

-Oc

t

20

14

-Ja

n

20

14

-Ap

r

20

14

-Ju

l

20

14

-Oc

t

20

15

-Ja

n

20

15

-Ap

r

20

15

-Ju

l

20

15

-Oc

t

20

16

-Ja

n

20

16

-Ap

r

20

16

-Ju

l

20

16

-Oc

t

20

17-

Jan

20

17-

Ap

r

20

17-

ul

20

17-

Oct

20

18

-Ja

n

Inte

rest

Ra

te

Germany Spain France Greece Ireland Portugal

125

Figure 5.2.17 Non-Financial Corporation Debt- to- GDP ratio, 2011-2017

Ireland has one of the

highest indebted NFC

sectors in Europe in

terms of debt -to-GDP

ratio but relatively less

indebted in terms of the

size of balance sheet.

This is due to the large

and increasing activities

of multinationals in

Ireland. In 2017, the

debt-to-GDP ratio of

Ireland's NFCs was

247.76 % and the Euro

area average was

(106.73%).

rank: n/a

Source: ECB

0

50

100

150

200

250

300

350

2011Q4 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 2017Q3

Deb

t-to

-gd

p r

atio

(N

FC

)

Ireland Euro area 19

126

5.3 Endowments

Figure 5.3.1 Median Population age, 2017

Due to ageing and

changes in family

formation, the median

age of the Irish and EU

population has steadily

increased in the last

decades. In 2017 Ireland

continues to have the

youngest population in

the EU (median age

36.9). The median age of

the EU population was

42.8.

Euro area rank: 1st

Source: Eurostat

Figure 5.3.2 Crude Birth Rate, 2016 61

The crude birth rate is the

ratio of the number of live

births during the year to

the average population in

that year. Ireland has

consistently topped the

EU rankings. The birth

rate in 2016 is 13.4,

considerably higher than

the birth rate in EU area-

19 (9.7). However,

Ireland's birth rate has

decreased in the period

2011-2016.

Euro area rank: 1st

Source: Eurostat

61 Data for EU-28, EU-19, France and Germany are provisional. Data for UK is estimated

30

32

34

36

38

40

42

44

46

48

50

Irel

an

d

UK

Po

lan

d

Sw

eden

Fra

nce

De

nm

ark

Sw

itze

rlan

d

Ne

ther

lan

ds

Fin

lan

d

EU

Lat

via

Sp

ain

Eu

ro-a

rea

Ge

rma

ny

Ital

y

Ag

e(Y

ears

)

2017 2013

0

2

4

6

8

10

12

14

16

18

Irel

an

d

Sw

eden U

K

Fra

nce

Lat

via

De

nm

ark

Sw

itze

rlan

d

EU

Po

lan

d

Ne

ther

lan

ds

Eu

ro-

are

a

Fin

lan

d

Ge

rma

ny

Sp

ain

Ital

y

Cru

de

bir

th r

ate

per

10

00

per

son

s

2016 2006 2011

127

Figure 5.3.3 Old age dependency ratio, 2015

The age dependency

ratio shows the ratio of

persons older than 64 to

the working-age

population. At 21.2%,

Ireland has the 7th

lowest ratio in the

OECD, and the 2nd

lowest in Europe.

Ireland's dependency

ratio is increasing

steadily but is still

expected to be below

the OECD average in

2025

OECD rank: 7th

Source: OECD

Figure 5.3.4 Net Migration (000s), 2001-201762

Total emigration from

Ireland continues to

decline and the

preliminary estimate for

2017 is 64,800. The

number of immigrants

increased to 84,600

resulting in total net

inward migration of

19,800. This is the third

year in a row Ireland

recorded a positive net

migration with significant

jump in the last two years.

Rank: n/a

Source: CSO

62 Data for 2017 is preliminary

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Bra

zil

Ch

ina

So

uth

Ko

rea

Ire

lan

d

Po

lan

d

US

Ne

w Z

ea

lan

d

OE

CD

Hu

ng

ary

Sw

itz

erl

an

d

Sp

ain

Ne

the

rla

nd

s

UK

De

nm

ark

Fra

nc

e

Sw

ed

en

Ge

rma

ny

Fin

lan

d

Ita

ly

Jap

an

Ra

tio

of

old

er

de

pe

nd

en

ts-t

o-t

he

w

ork

ing

ag

e p

op

ula

tio

n(%

)

2015 2000 2025

-150

-100

-50

0

50

100

150

200

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Mig

rati

on

(0

00

s)

Immigrants Emigrants Net migration

128

Figure 5.3.5 Net Migration 15 years and over by educational attainment, 2012-201763

Figure 5.3.5 shows the

estimated net migration

by educational

attainment. There is a

significant positive trend

with more people with

third level qualification

coming into Ireland

(48,600) than leaving

the country (24,900)

during the period 2012-

2017. The net migration

figure for 2017 was

19,200 an increase of

over 3000 from 2016.

Rank: n/a

Source: CSO

Figure 5.3.6 Population and labour force growth, 2012 - 201764

In the period 2012-2017,

Ireland’s population

increased at slower rate

(4.2%) than preceding 5-

year period (5.7%). In 2017

Ireland was fourth in the

euro area in terms of

increase in population.

Ireland’s labour force

growth has increased from

5.2% in 2007-2012, to 4.9%

in 2012-2017.

Euro area rank:

Population: 4th

Labour Force: 4th

Source: Eurostat and CSO

63Data for 2017 is preliminary. 64 Labour force is defined as the population ≥15 years of age

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

2012 2013 2014 2015 2016 2017

Net

Mig

rati

on

(0

00

's)

Higher secondary and below Post leaving cert Third level Not stated

-8

-6

-4

-2

0

2

4

6

8

Sw

itz

erl

an

d

Sw

ed

en

Ire

lan

d

Ge

rma

ny

Fra

nc

e

UK

De

nm

ark

Ita

ly

EU

Eu

ro-a

rea

Ne

the

rla

nd

s

Fin

lan

d

Po

lan

d

Sp

ain

La

tvia

Pe

rce

nta

ge

C

ha

ng

e

Percentage change population Percentage change labour force

129

Figure 5.3.8 Population density, 2006 - 201666

In 2016 Ireland’s

population density was

69.3 persons per km2, up

from 62.5 persons in

2006. Ireland ‘s

population density is

relatively low compared

to UK (270.5) and the EU

(117.5). There is a

significant divergence in

population density

across regions in Ireland.

EU-28 rank: 22nd

Source: Eurostat

65 Data for France for the period 2008-2013 for male and female is not available 66 Data for EU 28 is estimated

0

100

200

300

400

500

600

Ne

ther

lan

ds

UK

Ge

rma

ny

Sw

itze

rlan

d

Ital

y

De

nm

ark

Po

lan

d

EU

Sp

ain

Irel

an

d

Lat

via

Sw

eden

Fin

lan

d

Per

son

per

sq

uar

e km

2016 2006

Figure 5.3.7 Labour Force Activity Rate65, 2008-2017

In 2017, the total labour

force activity rate was

72.6%, slightly below the

Euro area average (73.1%).

While the female rate

(66.6%) in 2017 is slightly

higher than in 2008 (66%), it

is still below the Euro area

average (67.7%). However,

the male rate is still above

the Euro area average

(78.5%) even though it has

come down significantly

during the same period

(83.6%-78.8%).

Euro area rank: Total 12th,

Male 8th, Females 13th

Source: Eurostat

50

55

60

65

70

75

80

85

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Ac

tiv

ity

ra

te -

% o

f to

tal

po

pu

lati

on

ag

ed

15

-64

Euro- area male Euro area total Euro area Female Ireland Male Ireland Total Ireland Female

130

Annex 1 Methodology

The Council uses a “competitiveness pyramid” to illustrate the several factors (essential conditions, policy

inputs and outputs), which combine to determine overall competitiveness and sustainable growth. Under this

framework, competitiveness is not an end but as a means of achieving improvements in living standards and

quality of life.

▪ At the top of the pyramid is sustainable growth in living standards – the fruits of competitiveness

success.

▪ Below this are the key policy outputs for achieving competitiveness, including business performance

(such as trade and investment), costs, productivity, and employment. These can be seen as representing

the metrics of current competitiveness.

▪ Below this in the third tier are the policy inputs covering three pillars of future competitiveness, namely

the business environment (taxation, regulation, and finance), physical infrastructure, clusters and firm

sophistication, and knowledge and talent.

▪ Finally, at the base of the pyramid are the essential conditions for competitiveness, these foundations are

based on institutions, macroeconomic sustainability, and endowments.

The 2018 Competitiveness Scorecard is set out in four main sections - sustainable growth (Chapter 2),

competitiveness outputs (Chapter 3), competitiveness inputs (Chapter 4) and essential conditions for

competitiveness (Chapter 5) – these correspond to the layers of the NCC’s competitiveness framework.

This report uses internationally comparable data, with the OECD, the EU, the UN, IMF and the WTO as the

sources. Indicators from specialist international competitiveness bodies (e.g. from the World Bank’s Doing

Business report, the World Economic Forum’s Global Competitiveness Report and the Institute for

131

Management Development’s World Competitiveness Yearbook) are also used. Where further depth is of

benefit, national sources such as the Central Bank and the CSO are used.

Subject to data availability, Ireland’s performance is benchmarked over time against 19 other countries.

Countries have been chosen to provide a mix of Euro area members (Finland, France, Germany, Italy, the

Netherlands and Spain), other non-Euro area European countries (Denmark, Sweden, Switzerland and the

UK), and newer EU member states (Latvia and Poland). Seven non-European countries which are global

leaders or are of a comparable size to Ireland are also included where data is available. These countries include

Brazil, China, Japan, South Korea, New Zealand, Singapore, and the US. This allows for comparison between

Ireland and many of its closest trading partners and competitors. Ireland is also compared to a relevant peer

group average – either the OECD, EU or the Euro area average67. Given the importance of the UK as a trading

partner and the potential implications of Brexit on the economy, Ireland’s performance relative to the UK is

also highlighted.

Measuring and benchmarking competitiveness performance relative to third countries highlights Ireland’s

strengths in several areas but is also intended to identify potential threats and elaborate on weaknesses and to

determine corrective actions. Benchmarking competitiveness is useful - it informs the policymaking process

and raises awareness of the importance of national competitiveness to Ireland’s wellbeing. We have

endeavoured to collect data from high-quality, internationally respected sources, and where necessary,

caveats on data are set out. Performance is generally considered over a five year or annual basis. In some

instances, a longer time frame is used, particularly considering changes in the economic cycle pre- and post-

recession. Nonetheless, there are limitations to comparative analysis:

▪ The most recent and up-to-date data is used. While every effort is made to ensure the timeliness of the

data, there is a natural lag in collating comparable official statistics across countries. As much of this data

is collected on an annual basis, there may be a time lag in capturing recent changes in cost levels.

▪ Competitiveness indices and rankings can seek to measure a vast range of issues. Generally, these indices

are based on weighting systems. The relevance and importance of the individual metrics included will vary

across countries. There are also factors that are difficult to benchmark (e.g. the benefit of being in the

GMT time zone or of speaking English fluently);

▪ Given the different historical contexts and economic, political and social goals of various countries, and

their differing physical geographies and resource endowments, it is not realistic or even desirable for any

country to seek to outperform other countries on all cost measures.

▪ There are no generic strategies to achieve an optimum level of cost competitiveness; as countries face

trade-offs and may be at different points in the economic cycle.

▪ Where possible, Irish cost levels are compared to a relevant peer group average (e.g. the OECD, EU and

Euro area average). Given the importance of the UK as a trading partner and the potential implications of

Brexit on the economy, the UK’s performance is also benchmarked. It is also worth noting that individual

cost metrics have strengths and weaknesses (i.e. in terms of definitions used, in how the data is collected

etc.). When analysing the individual metrics, it is important, therefore, to consider all the data as the

analysis of the individual metrics combine to tell a coherent story about Ireland’s current competitiveness

performance.

67 OECD rankings and averages are based on a maximum of 32 countries. Turkey and Mexico are not included in the analysis, in part due to how their size and

income levels affect averages and in part due to data availability.

The OECD-32 countries are as follows: Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,

Hungary, Iceland, Ireland, Israel, Italy, Japan, South Korea, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, Spain,

Sweden, Switzerland, UK and the US.

National Competitiveness Council c/o Department of Business, Enterprise and Innovation 23 Kildare Street, Dublin 2, D02 TD30 Tel: 01 6312121 Email: info@competitiveness.ie Web: www.competitiveness.ie