Bank of Ireland launches Second Edition of Irish Business Review

- Healthcare expenditure continues to grow with total healthcare spending for 2004 amounting to €12.7bn

- 2005 set to be the best year for Retailers since 2000 with rises in household income and rise in employment

"2005 is set to the best year for Retailers since 2000 with high street sales up an annual 5.6% in volume terms and manufacturing in quarter two saw a modest rebound, implying that Irish exports will also see an uplift in the last months of 2005". This is according to Bank of Ireland's second edition of Irish Business Review, a sector-by-sector analysis of Irish business launched today (Sunday 11 December 2005).

Commenting Pat Gaynor, Managing Director Bank of Ireland Corporate Banking said: "The Irish Business Review combines our deal-flow experience with economic analysis from our Global Markets division, enabling us to present, on a sector-by-sector basis, a unique picture of the current trends that underpin the domestic macro-economic environment.

Healthcare Spending in Ireland

As the topic of Healthcare continues to be debated across the country, it is a sector that has seen increased expenditure in recent years with total healthcare spending amounting to €12.7bn in 2004 which equates to approximately 8.5% of GDP. Government spending, which is the main source of health spending in Ireland, is estimated to have risen by a further 15% in 2005, and according to the Book of Estimates, is projected to increase by 6% in 2006. The remainder of health spending is financed by the private sector - through private healthcare insurance, end-user charges and capital expenditure. According to the Department of Health, total private health expenditure amounted to €2.6bn in 2004. Reflecting the significant increase in total health spending, employment in the health sector has grown by almost 70,000 to 188,000 (or 10% of total employment) since 1999.

Despite increased investment, the healthcare sector continues to struggle to cope with the current levels of demand for health services. This demand is set to increase in the future owing to the projected rise in the population, which has risen from €3.6m in 1995 to €4.1m in 2005, an increase of 1.4% per year. Another factor is the proportion of the Irish population aged 65+ which is projected to rise from 11% currently to approximately 17% in 2026. As a result, the total dependency ratio is projected to increase over the next twenty years while the proportion of the population of working age falls. This may have implications for the future mix of health spending, which is currently heavily skewed towards public spending financed mainly through taxation.

Two areas that are currently attracting significant private investment are the private hospital and the nursing home sectors.

Private Hospital Sector

The provision of a satisfactory medical service to the community has long been a debated issue. In Ireland, the Government contribution to the healthcare spend has remained relatively constant at approximately 75%-80% with the remainder privately financed. The Government through legislation is creating an attractive environment for private investment, which has meant that capital allowances are available in respect of private hospitals, sport injury clinics, nursing homes and private convalescent facilities.

Nursing Home Sector

This highly fragmented sector is dominated by single or low multiple units, although some larger groups are now beginning to emerge. Irish nursing homes are classified as public, voluntary or private. According to the Irish Nursing Homes Organisation (INHO) there were approximately 26,500 - 27,000 nursing home beds in 2004, with 60% of those beds in private homes. A 10% increase in beds is forecast for 2005. Growth in the sector has been somewhat artificially fuelled due to the tax relief available in nursing home developments.

Retail Sector

There has been a significant upturn in retail spending with 2005 set to be the best year for retailers since 2000. Figures on retail spending are available to August. They show high street sales (i.e. retail sales excluding cars) up an annual 5.6% in volume terms. Hardware remains the star performer reflecting the new-found Irish love affair with everything to do with the house or garden; hardware sales in August showed annual growth of 12.8%. Spending on clothing and footwear is also growing at a double digit pace, with the value of sales up 10.6% in August. Spending in Pharmacies has also remained firm, albeit somewhat softer than in early 2005. In contrast, the price margin in Food and Drink has deteriorated, with prices slightly lower in August on an annual basis, against a 1% rise a year earlier.

Not all sectors are seeing positive growth, with Furniture and Lighting showing a decline in August. In part this reflects a very strong summer showing in 2004, so dampening the year-over-year growth in 2005, but it may also signal a market share gain for department stores which have shown significant gains in furniture sales. For the first time since the summer of 2001, the value of bar sales in August rose by 2.3%. The surge in employment may be a factor as is the level of immigration. It may also be that that Irish public and tourists are also returning to bars in numbers, having discovered the benefits of a smoke-free environment.

Construction

2004 saw another record year for home building. Close to 77,000 new units were constructed, up almost 12% on 2003. Indications for this year point to a levelling off in activity.

Hotel and Restaurants

This sector is benefiting from a favourable economic backdrop, with an increase of 3% in the numbers employed in the year to the second quarter of 2005. The trends in tourism and travel are also supporting the sector. The growth in visitor numbers to Ireland is set to exceed last year's outturn, with official data showing visitor numbers over the first eight months up almost 5% on the same period in 2004.

For reference;

Anne Mathews
Media Relations Manager
Bank of Ireland Group
Tel: 01 6043836 / 087 2460358

Carol Gregory
Marketing Manager
Bank of Ireland Corporate Banking
Tel. 086 906 6561