Enterprise Ireland (EI) has warned Irish exporters to lift their prices to protect margins and secure their future ability to grow amidst growing inflation worries, the Irish Independent has learned.
The State agency, which helps businesses sell to global markets, says Irish exporters compare poorly to global peers in putting through price hikes, leading to margin erosion and lower investment in innovation and productivity.
In a study of nearly 500 client companies across 12 industries, EI found that while nearly three-quarters of firms were planning a price rise this year, the track record of Irish companies actually achieving higher prices was poor.
The average realisation rate for price increases was 21pc, significantly below the global average of 33pc. This means a company trying to raise prices by 2pc would only achieve around a 0.4pc increase on average.
As inflation pressures rise globally, prompting debate about the durability of the economic recovery, Irish companies will have to offset rising costs to fuel future growth and prevent unsustainable loss of profit margin, EI said.
Yesterday, Federal Reserve chair Jerome Powell tried to ease concerns about last month’s 5.4pc US inflation figure. Mr Powell said inflation would remain elevated for a few months before moderating and that the Fed would not be tightening rates to rein in consumer prices.
Irish exporters are clearly concerned that high prices could be here to stay, though.
EI presented its price study to client companies last week in the second-highest attended event in its history – behind only its post-Brexit event five years ago.
“There are all sorts of debates about long-term versus short-term inflation, but as a business, you don’t want to make a bet on that,” said Deirdre McPartlin, EI’s UK manager and lead on the agency’s pricing initiative.
“The external environment has all kinds of pressure. If your costs are increasing, you need to be able to have a conversation with your customers about about that.”
She said the study had put a spotlight on capability gaps among Irish businesses, many of which tend to be behind their international clients in both scale and skill.
With digitalisation making pricing more transparent, Irish companies will need to protect themselves from a race to the bottom.
“Growth requires margin,” she said.
