In response to the increase in inflation to 5%, the organisation said that unless remedial action is taken to address the “chronic” cost environment, many businesses will review their business options with the threat of increased redundancies in the months ahead.

ISME Chief Executive, Mark Fielding, said: “The cost environment in which business operates has often been highlighted among the main concerns of companies in this country. The association is disappointed therefore that the Minister for Finance did not use the opportunity in the recent budget to tackle the cost environment which is doing untold damage to businesses the length and breadth of the country.”

“In fact, by increasing excise duties on cigarettes and increasing health costs by 10%, the minister may have exacerbated the situation, leading to increased inflationary pressures in the months ahead,” he added.

He said that strong inflationary pressures will continue to be embedded in the economy unless the Government insists on wage restraint and expenditure control in the public sector.

“While the Government is committed to increasing public expenditure by 8.2%, down from 12.5% in the previous year, the association remains to be convinced that this target will be met, based on past performance.  It is also essential that the demands of the Trade Union movement are resisted when the upcoming talks on a new National Agreement commence in January and that wage increases are brought in line with our main competitors.”

Mr Fielding warned that any further increases in wage rates similar to the last number of years, well in excess of European counterparts, will have disastrous consequences in terms of jobs and company closures.

“We are seeing plenty of evidence of companies cutting back and reassessing their Irish operations, with the cost environment and in particular wages the main concerns. It is absolutely essential therefore that the headline rate of inflation be  reduced dramatically in the next number of months and that this is reflected in reduced wage demands.”

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