Ireland ranks 9th position amongst 33 major EMEA economies as a location for private businesses to thrive - says PwC’s latest EMEA Private Business Attractiveness Index

By Colm O'Callaghan, Partner, PwC Private

Ireland ranks in 9th place among 33 EMEA countries as a location for private businesses to thrive in the latest PwC Private Business Attractiveness Index, up from 14th place two years ago, but has fallen two places from 7th position last year.   

Switzerland, Sweden, Germany, Netherlands, Denmark, Norway, United Kingdom, Finland, Ireland and Spain form the top 10 jurisdictions across 33 major economies in Europe, Middle-East and Africa in PwC’s latest  Private Business Attractiveness Index. These economies have emerged as the best places for private businesses to thrive in EMEA. 

The index ranks the relative attractiveness of the environment and conditions needed for private businesses to thrive across 33 EMEA countries, based on nine categories including macroeconomics, private business landscape, tax and regulatory environment, sustainability and climate, social responsibility and governance, public health, education, skills and talent, technology infrastructure and startup ecosystem. 

While sustainability and climate, social responsibility, governance and public health, all impact this year's rankings, three categories stand out as having a high correlation with countries’ overall ranking: private business landscape; technology and infrastructure and the start-up ecosystem. Virtually all of the jurisdictions in the higher positions on the table perform strongly in these areas, more than making up for their lower scores in other categories. Conversely, tax and regulatory regime and macroeconomic data category, or even GDP per capita, have less bearing on the overall performance on the Index. 

PwC’s EMEA Private Business Attractiveness Index confirms that to encourage and attract private business and entrepreneurs, countries need to continually focus on the fundamentals that help drive an attractive environment for businesses to thrive.

Ireland

The positives driving Ireland’s attractiveness as a place for Private Businesses to thrive include:

• Ireland has improved one position to 6th place for ‘start-up ecosystem’. 
• Ireland also improved its ranking to 9th place from 12th last year for ‘education, skills and talent’.
• The country scores 10th place for ‘Tax & Regulatory environment’, up from 11th place last year.  However, there was a marked improvement from 20th position in 2021.

However, some worrying trends have outweighed these positives this year: 

• Ireland fell in its ranking for ‘macroeconomics’ to 6th position, from first place last year. Much of this significant slip in ranking for the macroeconomic metric, from 1st to 6th, stemmed from the costs of living crisis and cost increases being felt most strongly during 2023 in the private businesses sector. In this regard, Ireland ranked 30 out of 33 for the cost of electricity and 29 out of 33 for the cost of living metrics leading to an impact on our overall macroeconomic standing.
• Ireland scores 13th and 8th respectively for ‘sustainability & climate’ and ‘social, responsibility & governance’. 

The overall fall in the Index by two positions this year to 9th place for Ireland reflects the intense pressure that some private businesses are under and the urgent need for continued supports for this important sector of our economy.  Over the last few years, private businesses had to deal with the pandemic, then a period of steep inflation, high interest rates, electricity price increases and other cost pressures often while working with restrained cash flows.  For example, PwC’s recent Restructuring Barometer reported that insolvencies in Ireland will likely be close to 1,000 by the end of 2024.

Now private businesses are facing even more cost pressures from an increased minimum wage, pension auto enrolment and employer PRSI hikes all coming together.  And while it's good news that the Minister for Finance announced that the interest rate on the tax debt frozen since the pandemic has been cut to zero, and indeed that the Revenue Commissioners have indicated that they will take a flexible approach to the repayments, new or creative long term solutions may still, nevertheless, be ultimately needed to help businesses service or repay the debt due while continuing to grow.  

Long term simple and clear policy measures aimed at supporting Private Business, so as to further encourage entrepreneurship and innovation has to be a key driver of Government over the next 12 to 24 months.  In particular, Ireland needs to do more to help support indigenous private businesses to become world leaders in their sector.  For example, supporting businesses to invest in their finance teams and their transformation journey will help them scale and internationalise faster. In addition,  allowing entrepreneurs and founders of trading businesses access to the reduced 10% rate of Entrepreneurs Relief on the payment of a salary, instead of having to sell the business, will encourage retention of many businesses in the private sector to become world leaders while under private ownership. Overall, if the Government can have  a clear, simple and stated policy to help private businesses flourish and grow, it will make a notable long term contribution to Ireland’s economy and naturally hedge any dependency on the FDI sector.

 

Other key findings include:

• Switzerland and Denmark have been among the most consistent performers throughout the last three editions of the Index, retaining their ranks of 1 and 5, respectively. Countries such as Sweden, Germany and Netherlands have improved their rankings consistently over the years. 
• The UK slipped 5 spots to 7th position, primarily driven by disruptions from Brexit, supply chain breakdowns due to the pandemic exacerbated by the conflict in Ukraine.
• France has declined consistently and has slipped out of the top 10 in the latest Index. 
• Germany is in the top three for the first time.

 

Ireland must take a whole of Government approach to attracting and retaining private business. We need to continue to prioritise supports to help these businesses meet the increased costs of doing business in Ireland. We also need to look at additional tax incentives to encourage digital transformation, investment in SMEs and energy transition. We welcome the Government consultation on simplifying Ireland’s business tax regime and it is vital that measures to implement this are brought forward in the next Budget.