The State's "deteriorating cost competitiveness" has undermined the ability of many companies to compete in international markets, a new study by the National Competitiveness Council (NCC) has concluded.
The NCC's Statement on Prices and Costs says wages in the Republic have been rising faster than in other EU countries for a number of years with nominal compensation per employee (before tax) growing on average by 37.1 per cent.
This compared with average growth in nominal compensation per employee of just 8.7 per cent in Germany.
By 2004 gross annual average compensation in Ireland was estimated at €38,140, higher than that of the EU-15 average (€34,630) and the UK (€35,750).
The report claimed: "Rising pay costs have been offset by rising worker productivity only in a small number of capital-intensive sectors".
The report also found that of the country's surveyed Ireland was the second most expensive for electricity costs for industrial users.
Electricity prices for industry have increased by 40 per cent in the three years to September 2004.
The report says a typical industrial user pays 40 per cent higher electricity costs in the Republic than in the UK.
Of European capital cities, only London and Paris were more expensive than Dublin for the cost of office space.
Other non-pay costs that were found to be higher in the Republic relative to other EU countries included insurance and waste management charges.
NCC chairman Mr William Burgess said: "There is considerable evidence to suggest that both business costs and consumer prices in Ireland are now out of line with other advanced economies."
Mr Burgess said: "Our relative cost position is not justified by economic fundamentals and poses a threat to our continued economic success."
He called on the Government to make Ireland's international costs competitiveness a high priority.
