Ireland needs to boost productivity in the domestic sector if it is to make up lost ground on rivals, according to Siptu’s head of research, Michael Taft.That just might be the one area where there is complete agreement between the State’s biggest union and those representing its many small and medium employers.At a recent conference of the Nevin Economic Research Institute (Neri), a union-backed think tank, Taft presented an update on research he and Neri’s Chris Smart had conducted into productivity within Ireland’s indigenous sectors and how it compared with other small, advanced, open economies in Europe. The findings in the original research – covering a period between 2017 and 2019 – were stark, with productivity across Ireland’s domestic firms almost 15 per cent behind the average in a group that also included Austria, Belgium, Denmark, Finland, Luxembourg, the Netherlands, Norway and Sweden. When Taft went back and examined the period between 2021 and 2023, that gap had widened to 19.4 per cent. Just one sector was performing strongly – professional and scientific, where productivity was 28.8 per cent above the group average. Productivity in small and medium-sized businesses in the construction, financial services and transport sectors were all 30 per cent or more below the average across the other economies studied.As with so many measures of the Irish economy, foreign-owned multinationals skew overall productivity data. CSO figures show that productivity at larger, generally foreign-owned firms stands at €543.60 an hour compared with just €63.80 in domestically-owned places of employment. The cost of labour involved averages less than 10 per cent of the added value in the first category but more than 50 per cent in the second.Productivity is improving but, in the case of domestic firms, it is too slow. There is, Taft argues and just about everyone seems to agree, a great deal of scope for improvement. Reaching the average for small, advanced, open economies would, he says, deliver productivity gains worth €25 billion.“This is something the Irish economy has been wrestling with for a long time,” he says “and it’s actually difficult to put your finger on a particular cause because there are a lot of them and they vary from sector to sector.”A key one for Taft is worker representation in the form of collective bargaining, board-level representation and consultation, things that, he says, have paid dividends elsewhere. More universally cited are investment, research and development and training or upskilling.On research, development and innovation, think tank ESRI, in a report published in December that drew on data from the National Competitiveness and Productivity Council and the CSO, noted that foreign-owned firms spend 5½ times more than Irish-owned ones. Large businesses are spending 3½ times more than small ones.Taft suggests that, in many cases, the businesses simply do not have the scale to generate the returns required to make substantial reinvestment possible. But he also contends that the emphasis placed on Ireland’s hospitality sector over the years has been a strategic error while inefficiencies related to scale have hampered growth in the transport sector, about which he is scathing.On the National Training Fund (NTF), he says trade unionists and business representatives such as Ibec and Isme are “as one”.“The NTF should be providing more support to businesses to train, upskill and reskill their workforce, to identify labour shortages and address them by redirecting people into those areas, making sure the people have the skills to make those transitions.”The Government makes positive noises about it all in a succession of reports and plans, he says, but is not responsive enough to business needs or the desire of workers to play a bigger part in the process.“One of the areas we fall down on is sectoral planning,” he says. “It sounds like one of these five-year plan kind of things but, actually, the last government, in its programme for government, proposed sectoral taskforces.“I thought it was great. You know, there was the line minister, all the stakeholders involved, experts. So at a sectoral level, you could kind of analyse what’s coming down the line, whether it’s to do with international events, skills, adoption of AI, climate change, all sorts of things.“But it never happened. They never got off the ground. “Now the Government doesn’t really talk about productivity because what they want to talk about is what they call cost competitiveness, particularly [Minister for Enterprise] Peter Burke. And usually that cost competitiveness comes down to wages.”Dublin Chamber of Commerce director of public and international affairs Aebhric McGibney is more positive about the Government’s plans to help improve productivity and Burke’s contributions on the issue but he acknowledges it is a significant challenge.“It’s a story as old as the hills at this stage,” he says. “We’ve been very good at growing and attracting FDI [foreign direct investment], and that FDI has evolved from when a company like IBM used to make and assemble computers here to now doing kind of cutting-edge AI research.“What we haven’t been so good at doing, in a general sense, is growing indigenous firms, with those firms that have been successful tending to be bought out. Almost nobody stays there and becomes another Stripe.”McGibney says the tax system is one issue, with a significant proportion of those who successfully sell a start-up moving abroad to pursue their next venture because of tax rates here, while the relative lack of venture capital in Ireland is also a constraint, he says.As for R&D, he suggests the credits introduced more than 20 years ago immediately benefited foreign companies. Many Irish companies struggled to access them because a substantial upfront spend could cause them serious cash flow problems.The situation improved as governments sought to provide reimbursements much more quickly and Dublin Chamber, he says, continues to push for the upper limits on those amounts to be increased.The organisation would also like to see a vouchers scheme introduced for employers hoping to access training for their workers, with the funds coming from the NTF.Greater use of the fund for training is one of the issues touched on in a report published by the National Competitiveness and Productivity Council earlier this month called Ireland’s Competitiveness Challenge 2026. That was welcomed by Neil McDonnell of Isme.“We are ad idem with the unions on the problem analysis here; where we have gone farther is on the solution,” he says. “We hope there is common ground with trade unions in ensuring that NTF money is spent where it was always intended, on those in work or those upskilling for work.”Too much of the NTF money has been banked or used to support third-level institutions, he says, while the entire economic analysis continues to be skewed by the bloated figures for multinationals.McGibney says the Government is getting a better handle on the issues and how to address them.“In fairness to the action plan on competitiveness [published by the Department of Enterprise last September and containing 85 proposed actions], it’s quite a decent one in terms of what they think the problems are now and how to deal with them.”How well companies, and economies, use AI to boost productivity will be a key factor over the coming years. When asked why things haven’t gone better up to now, McGibney says: “Well, it’s not for want of trying.”