Ireland ranks ninth in business attractiveness index

Ireland’s placement in this year’s PwC Private Business Attractiveness Index has been helped by our start-up ecosystem and talent but challenges remain in other areas, writes Colm O’Callaghan

Ireland ranks ninth among 33 EMEA countries as a location for private businesses to thrive, according to this year’s PwC Private Business Attractiveness Index. This is higher than Ireland’s 2022 ranking in 14th place, but below last year’s ranking in seventh place.  

The index ranks the relative attractiveness of the environment and conditions needed for private businesses to thrive based on ten categories. These include:

1. Macroeconomics.
2. Private business landscape.
3. Tax and regulatory environment.
4. Sustainability and climate.
5. Social responsibility and governance.
6. Public health.
7. Education.
8. Skills and talent.
9. Technology and infrastructure.
10. Start-up ecosystem.

While sustainability and climate, social responsibility, governance and public health all impact this year's rankings, three categories correlate highly with the countries’ overall ranking. These are private business landscape, technology and infrastructure, and start-up ecosystem.

Virtually all jurisdictions in the higher positions perform strongly in these areas, more than making up for their lower scores in other categories.

Conversely, tax and regulatory regimes and macroeconomic data categories – or even GDP per capita – have less bearing on the overall performance in the index.

The index confirms that countries need to focus continually on the fundamentals that support an attractive environment for businesses in order to encourage and attract entrepreneurs and business founders.

Trends in Ireland

Several positives are driving Ireland’s attractiveness as a place for private businesses to thrive:

• It is in sixth place for ‘start-up ecosystem’;
• It is in ninth place for ‘education, skills and talent’; and
• It is in tenth place for ‘tax and regulatory environment’, up from 20th in 2021.

Some concerning trends have outweighed these positives this year, however.

Ireland’s ranking for ‘macroeconomics’ has fallen to sixth place this year, down from first last year. This is a significant slide, much of it stemming from the cost of living crisis and the fact that rising costs in the private business sector were most keenly felt in 2023.

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, impacting its overall macroeconomic standing.

Ireland also scores 13th place and eighth, respectively, for ‘sustainability and climate’ and ‘social, responsibility and governance’.

Ireland's overall fall by two positions to ninth place in this year’s index reflects the intense pressure some private businesses are under and the urgent need for continued support for this important sector of our economy. 

In recent years, private businesses have had to deal with the pandemic followed by a period of steep inflation, high interest rates, electricity price rises and other cost pressures, often while working with restrained cash flows.

Private businesses now face further cost pressures ranging from an increased minimum wage, pension auto-enrolment and employer PRSI hikes all coming together.

It is good news that the Minister for Finance has announced that the interest rate on tax debt (frozen since the pandemic) has been cut to zero and that the Revenue Commissioners has indicating that it will take a flexible approach to the repayments.

However, new and creative long term solutions may still be needed to help businesses service or repay the debt due while continuing to grow. 

A key driver of Government over the next 12 to 24 months must be simple, clear and longterm policy measures aimed at supporting private businesses and further encouraging entrepreneurship and innovation.

In particular, Ireland needs to do more to help support indigenous private businesses to become world leaders in their sector.

Supporting businesses to invest in their finance teams and performance-led transformation could, for example, help them scale and internationalise faster.

Business owners could also be given access to the reduced 10 percent rate of Entrepreneur Relief on the payment of a salary instead of having to sell their business. This would encourage the retention of businesses in the private sector and help to create more world-leading companies in Ireland under private ownership.

Overall, if the Government can introduce a clear, simple and stated policy to help private businesses flourish and grow, doing so could make a long-term contribution to Ireland’s economy and naturally hedge our dependency on foreign direct investment.

Colm O'Callaghan is a partner with PwC Private