Business, The economy and the environment + Community development and State Agencies

Price inflation

price inflation is defined as the sustained increase in the general level of prices from one year to the next

How is inflation measured

• Inflation us measured by the consumer price index

What does the consumer price index measure and how does it work

• It measures the overall change in prices of goods and services that people typically buy over time

• The data is gathered by the CSO on a basket of goods chosen and assign weights to them based on the average income spent on them

• Cpi measures inflation at which a consumers purchasing power falls

Impacts of increasing inflation rates on irish businesses (1)

Higher costs of production - raw materials' and input costs like electricity will cost more which increases the cost per unit - a business will need to increase their prices or accept a lower profit margin on products

Impacts of increasing inflation rates on irish businesses (2)

Wage demands - strikes may occur in businesses as employees will look for cost of living pay increases to mantain their standard if living - this can lead to disruption in the workplace and higher costs for the businesses if wages are increased

Impacts of increasing inflation rates on irish businesses (3)

Less competitive exporting - If Ireland’s inflation rate is higher than competitiors in other countries then Irish goods will become more expensive meaning they will less be competitive in those export markets as consumers can get cheaper alternatives

Economic variables Interest rates

Interest is the cost of borriwnf money expressed as a percentage if the amount of the amount of borrowed. It also is the reward for saving money expressed as a percentage of the amount saved

Impacts of rising interest rates

Debt capital is more expensive - Business will take out less loans as debt repayments will be more expensive as interest rates higher - this will limit the businesses ability to expand and grow - it can also limit new businesses from setting up

Less consumer spending

It will make borrowing more expensive so consumers will borrow less and therefore have less money to spend reducing the demand for a firms products

Harder to attract investors

The return for savings will increase so many potential investors may choose to save their money instead of investing it into a business

Economic variables - Exchange rates

Exchange rates are the prices of one currency expresses in terms of another currency

Impacts of rising exhange rates on businesses

• If the euro increases in value relative to the UK pound or US dollar irish exports will make them more expensive abroad making them less competitive this is bad for irish businesses as it will decrease their sales and profit

Raw materials becoming more epxeinsive

If the euro decreases in value relative to the UK pound and the US dollar it will make imported raw materials more expensive which may result in Irish businesses increasing their price or reducing profit margins

economic variables - unemployment

Unemployment is defined as the percentage of the labour force which is currenty unemployed. The labour force consists of everyone either in work or looking for work

Decreased government spending increased gov revenue (less unemployment)

Decreased government spending and increased government revenue due to more revenue from income taxes as more people are working and therfore paying taxes and there is less spending on social welfare as less people are spending it

Less immigration

Less immigration due to more employment opportunities in Ireland - this leads to less educated people leaving to find work erradicating the brain drain phenomenon

Labour shortages and skill shortages

Labour shortages and skill shortages can occur as some are in high demand this can lead to upwards pressure on wages which may cause inflation

negative impacts of less unemployment

• Increased house prices and rent prices in urban areas where a lot of jobs are based which results in an increase demand in accomadation pushing up the price the price of expensive housing can also make ireland less attractive to MNCs

Increased in time commuting

Increase in the time spent commuting as as people have to live further away from their job in commuter towns

Economic variables - Taxation

Taxation is how the government makes money - individuals and firms in an economy both pay taces to the government which the latter uses to fund the country

direct taxes

Direct taxes are taxes that are paid on individuals incomes and profits, these taxes go directly to the government. for example income tax such as paye usc and corporation tax that a firm pays on their profits

Corporation tax ( In ireland it is quite low 12.5% which is the reason why there is so much fdi

Indirect taxes

Indirect taxes are taxes on goods and services that are paid by individuals and firms that are not directly paid to the government instead they are paid through a third party such as the shop or business that have purchased your goods and services from examples of direct taxes are vat, import duties and excise duties The standard rate of vat is 23%

Ways the government could use the tax system to create a good business environment

• Recuce corporation tax levels so that businesses pay less tax on profits - they could use the money to reinvest their businesses and try to grow and expand the businesses

Reduce vat which makes irish goods cheaper

Reduce vat which makes irish goods cheaper so consumers can afford more and more and it will increase demand for irish goods and international market

Reduce income tax

Reducing income tax would mean that consumer purchasing power would increasse purchasing power and stimulate demand in the market

Increase tax credits

This means individuals will have more take home pay and therefore this will help stimulate demand

Provide more tax incentive schemes for businesses

Provide more tax incentive schemes for businesses which will allow for more businesses to set up and for existing businesses to grow

The role of the government in encouraging and regulating business

• By creating a low tax environment for business it encourages and entrepreneurs to set up new businesses. A low corporation tax ensures that the entrepreneurs get to keep most of what they have gained in the business

• They could also offer tax breaks for money spent on expansion so as to encourage investment by the business

Givernment legislation

Consumer Laws such as the Consumer Protection Act 2007 which ledto the development of CCPC and allows consumers to make complaints about against businesses

Employment laws such as the employments equality 1998 and industrial relations Act 1990 means that employees are protected by the govenrment as they regulate businesses

State agencies

State agencies such as enterprise Ireland and the local enterprise office encourage different different business acitivites and help support irish business through advuce training and grants

Government capital and current expenditure

Capital expenditure is once off large expenditure such as infrastructure and building schools and hospitals etc . This creates jobs and consumer demands leading to higher business sales

Current expenditure is regular government spending which the government could increase to helpp businesses by offering more business supports

How the government can affect labour source in ireland

• The government can increase the public sector workforce and directly employ more people

• The government can provide to grants and incentives to foreign companies to encourage them to locate in Ireland. If MNC’s locate in ireland then they will provide employment opportunities for irish workers

• The government could invest in the infrastructure in the country and invest in new capital projects which would lead to an increase in the number of workers employed in the construction industry. If there is better infrastructure then it will attract more FDI which will provide for better employment opportunities

• The government could invest in training and education whcih will result in more skilled educated and employable workers whis will encourage them to set up in ireland as there will be a more educated work force

Community development

community development is the improvement of local areas and local communities society and economically through the efforts of the local citizens and residents. It is about the spirit of enterprise within the community as opposed to depending on the government or outside agencies to help them develop

Benifits of community development

• Creates employment opportunities and so increase spending in the local community as new enterprise and initiatives can create jobs and so develop the local economy

Spin off Jobs

Spin off jobs are created from community development further increasing employment due to increased demand for the goods and services of other businesses in the area

empowers the local community

empowers the local community and creates a sense of pride in the local area as the community has come together to achieve a common goal - It helps develop and build relationships between people in the area and make residents feel proud to be a part of the community

Encourages entrepreneur mind set

Encourages new business in the area leading to a culture of people being willing to take risk and set up new enterprises

It prevents depopulation or brain drain

It prevents depopulation or brain drain because people will no longer leave the community that will stay and work in the local community and spend their money there

Local enterprise office

LEO’s describe themselves as First Stop Shop for anyone seeking information and support on starting or growing a business Ireland

LEO’s servies

• Mentoring program: Leo’s will connect businesses with experienced experts that have been successful in businesswho will offer expert and guidance in the business

• Training program: Thry will put on workshops about different aspects that a new business or a growing business may encounter

• Business net working: They will organise netowkring events which puts entrepreneurs in contact with like minded people whose experience and knowledge can help in solving day to day issues of running a business

• Financial: They offer grants to entrepreneur for things like feasibility and expansion

enterprise ireland

enterprise ireland is responsible for developing indigenous Irish industry with an export focus - It is focused on helping irish owned businesses with 10 or more employees seeking to deliver new export sales

Enterprise Ireland provides funding and support

Enterprise Ireland provides funding and support for companies and entrepreneurs with business proposals for a high potential start up or large companies expanding their activities and and growing international sales. Funding can also be in form of equity investment for business

Enterprise ireland helps networking

Entrepreneur ireland helps netowrking as it will introduce entrepreneurs to local industry connections in foreign markets and help them develop and establish links

Enterprise Ireland puts on trade fairs

Enterprise Ireland puts on trade fairs that promote irish exporters globally at events trhough their website

Industrial development authority ireland

Is repsonsible for the attraction and development of fdi in ireland all MNC’s that would have set up in Ireland

Role of ida

Ida provides information and statistics on key business sectors and locations within ireland to make decisions

• IDA ireland helps networking by introducing investors to local industry

• IDA Ireland builds links between Irish and international education

• Ida ireland builds links between irish and international eduxation

Tourism Ireland/ Bord Fáilte

Tourism Ireland is the marketing body responsible for marketing the island of Ireland overseas

Bord Bia works for small Irish food producers by promoting and certifying farmer markets and for bigger producers by offering international marketing services