Irish Construction Sector monitors fastest rise in a decade

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The Ulster Bank construction purchasing managers’ index (PMI), which monitors the health of the sector,  rose from 61.5 in September to 64.9 last month with commercial activity expanding at a strong pace from 62.7 to 66.8 and the civil engineering facet of the index rising from 45.1 to 50.6. This was the second highest reading since the survey began in June 2000, only behind the reading seen in November 2004.

The index examines three areas of construction – civil engineering, housing and commercial and for the first time since October 2006, each of the three sectors posted rises in construction activity.

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Ireland is expected to have the fastest growth in the EU in 2014

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According to the 2014 Autumn Economic forecast published today, Ireland is expected to have the fastest growth in the EU in 2014 with real GDP growth forecast at 4.6%.

The European Commission’s autumn forecast projects weak economic growth for the rest of this year in both the EU and the euro area. Real GDP growth is expected to reach 1.3% in the EU and 0.8% in the euro area for 2014 as a whole. Growth is expected to rise slowly in the course of 2015, to 1.5% and 1.1% respectively, on the back of improving foreign and domestic demand. An acceleration of economic activity to 2.0% and 1.7% respectively in 2016 is expected to be driven by the strengthening of the financial sector (following the comprehensive assessment by the European Central Bank and further progress towards the Banking Union).

Autumn Economic forecast

Autumn Economic forecast (PDF)

Residential Property Prices rise by 15% in the year to September

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In the year to September, residential property prices at a national level, increased by 15% the CSO reported yesterday. This compares with an increase of 14.9% in August and an increase of 3.6% recorded in the twelve months to September 2013.

In Dublin residential property prices grew by 2.5% in September and were 23.4% higher than a year ago. The price of residential properties in the Rest of Ireland (i.e. excluding Dublin) rose by 1.1% in September compared with a decrease of 0.1% in September of last year.

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Key Points in the Budget 2015

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Read the official summaries of the key budget measures and the detailed analysis from leading accountancy firms.

  • The finance minister announced a reduction in the higher rate of income tax from 41% to 40%.
  • Changes to the Employment and Investment Incentive (EII) raise company limits, increase the holding period by one year and include medium-sized companies in non-assisted areas and internationally traded financial services.
  • Noonan also announced that the Seed Capital Scheme will be re branded as ‘Start-Up Relief for Entrepreneurs’, and will be extended to individuals who have been unemployed up to two years.
  • Other tax measures include changes to the R&D Tax Credit scheme, where the 2003 base-year restriction will be removed from January 1 2015, at a cost of €50m to the government coffers.
  • The three-year corporation tax relief measure for start-ups on their trading income (and certain capital gains) will be extended to businesses setting up in 2015.
  • Noonan has also removed the restriction on capital allowances for the provision of specified intangible assets. The use of such allowances in any accounting period was heretofore restricted to a maximum of 80% of the trading income from the relevant trade in which the acquired assets are used. That restriction will now be removed, at a cost of €27m to the government.
  • The 12.5% corporation tax has not been changed, while the 9% VAT rate for the tourist sector has been retained.
  • The minister confirmed that Capital Gains Tax waiver that has been in place for the last number of years enabling purchasers of real estate to avail of a seven year exemption from CGT is to be phased out by year-end 2014.

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Government Finance Statistics Report

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A report from the Central Statistics Office (CSO) shows at end Q2 2014, Ireland’s Government deficit fell to 3.8% of gross domestic product in the second quarter of 2014 with Government Debt at 116.7% of GDP.

Government Deficit of 5.7 % of GDP in 2013

General Government experienced a deficit of €9,967 million (5.7% of GDP) in 2013 – an improvement on the 2012 position of €13,901 million (8.0% of GDP). Government revenue increased from €59,083 million in 2012 to €60,837 million in 2013 driven by increased tax and social contribution revenues, while expenditure decreased from €72,984 million to €70,804 million over the same period with decreases observable in most expenditure categories except interest and current transfers. Taxes and social contributions, the largest component of revenue over the period, represented just under 87% of total government revenue in 2013. Social benefits, the biggest expenditure category, accounted for just over 40% of government spending in 2013.

Government Debt at 123.3% of GDP in 2013

The gross debt of General Government stood at €215,550 million at the end of 2013, or 123.3% of GDP, up from €210,226 million at the end of 2012, or 121.7 % of GDP. General Government Net Debt for 2013 amounted to €160,962 million or 92.1% of GDP.  This net debt figure is obtained by deducting the values of the financial assets from the corresponding categories of financial liabilities in General Government Gross Debt

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PMI reports increase in construction activity

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The September construction PMI (purchasing managers’ index) shows house-building activity grew at its fastest rate since 2000.

The PMI report – a seasonally adjusted index designed to track changes in total construction activity – posted 61.5 in September, broadly unchanged from the reading of 61.4 in August and thereby signalling a further strong rise in activity at Irish construction firms.

New business and employment both rose at sharper rates than in August. Commercial construction also rose at a sharp pace, although growth was at a slightly slower rate than in August. The commercial index read 62.7 in September, below the previous month’s figure of 63.2.

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SFA calls for cut in capital gains

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The Small Firms Association (SFA) has called for a cut in capital gains tax as part of next week’s Budget.

At a meeting with Minister Simon Harris, TD in Leinster House, Director of the Small Firms Association, Patricia Callan, stated that “small businesses around the country are effectively being prohibited from tendering for public contracts, in the move to centralise government procurement into large-scale contracts that they are ineligible to apply for.”

The body said the rate should drop to 10% for entrepreneurs selling businesses, which would bring it in line with Britain’s levy. It also wants the general GCT rate to fall to 20%.

In 2013, the published data suggests that 28% of tenders are being awarded to countries outside of Ireland, up from a previous high of 18% recorded. Ireland frequently tops the list of countries most likely to award to non-national countries and this trend is increasing all the time.

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Ibec predicts GDP growth of 6.1% for this year

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Ibec, the group that represents Irish business, today published its new Quarterly Economic Outlook which is forecasting GDP growth to reach 6.1% on the back of a broad-based recovery in the economy, which includes a 1.5% increase in consumer spending, a 14.2% increase in investment and a 12.2% increase in exports this year.

According to Ibec, there is no need for the Government to do an austerity budget as the level of growth in the economy will reduce the fiscal deficit down to 2.5%,

In the Q3 Economic Outlook, Ibec also raised its 2015 GDP growth forecast to 4.5% (up from 3.9%), and this year’s GNP growth forecast to 5.4% (up from 2.5%).

Key issues highlighted in the forecast include:

  • Imports and exports: Exports will grow by over 12% this year, the strongest growth since 2000. Imports, however, will also grow strongly by 11% and the resulting net exports will contribute 3.5% to GDP growth, by far the largest contribution to growth.
  • Investment: Ibec’s business sentiment index remains high and indicates that companies’ confidence in the recovery is strong. Therefore, we expect strong investment growth this year and next (14.3% and 13.8% respectively).
  • Consumer spending: Increased job creation and a reduction in the budget adjustment will mean disposable income will increase by around 3% next year. On the back of this we expect consumer spending to rise by 1.5% this year and 2.9% in 2015.
  • Employment: There has been a slowdown in overall year-on-year employment growth compared with the second half of last year (from +3.2% to +2%); but these figures are still the strongest in the EU. The quality of employment growth has also been better as more new roles are full-time rather than part-time. We expect the number at work to return to early 2009 levels by the end of 2015.

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Spar to open 50 new stores with creation of 1,000 jobs

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The BWG group, the owners of SPAR, are to invest €100m in store development over the next five years. The investment will see 50 new stores open around the country between now and 2016 with the creation of approximately 1,000 jobs.

The announcement was made at a SPAR retailer convention in Killarney this morning. It follows the recent investment by BWG South Africa, which saw it take an 80% holding in the group.

Dealz to open six more stores in Ireland

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UK-listed discount retailer Poundland is planning to open six new Dealz stores in Ireland over the next year. The new openings will bring to 41 the number of shops in the Republic for Dealz, which opened here three years ago.

To date, the UK company has invested approximately €53 million in its Irish network with about €4.5 million being spent this year on its expansion. It attracts about 200,000 customers a week to its Irish stores. The group’s revenues from the Republic amounted to £55 million for the year to the end of March 2014.

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