The National Competitiveness and Productivity Council has said there must be 'an urgent focus' on projects to diversify Ireland’s energy sources and upgrade our electricity infrastructure.

In a bulletin entitled ‘Inflation and the Competitiveness of Irish Enterprises’, the Council notes that Ireland is experiencing inflation at a rate not seen in 20 years and that half of it is accounted for by higher energy prices.

It says the private and public sectors must both ‘proactively manage their cost base and drive efficiency’ in order to create ‘a virtuous circle between the costs of living, wage expectations and cost competitiveness.’

It says it is vital that Ireland protects previous gains in productivity and tackles "...inappropriately high costs ...wherever they arrive."

It says given the high level of uncertainty, there is a risk inflation could go higher.

The Council refers to the Department of Finance’s severe case scenario sketched out in the recent Stability Programme Update that if energy prices were to continue to increase, inflation could average 8.2% this year.

It also warns that any possible easing in price pressures later this year would be more likely to see a slowing-down in the rate of increase than any reversal of the price increases which have already taken place.