Research conducted by Irish trade credit insurer Atradius shows that the retail and construction sectors in Ireland are still struggling as economic recovery is under way. The latest Market Monitor to be published by Atradius expects improvement in GDP but this is accompanied by a small increase in unemployment and corporate insolvencies totalling 1,800 cases – up from 1,409 in 2009.
“Domestic demand is anticipated to remain flat in the short term so any recovery for the Irish market is likely to be driven by exports,” said Stuart Ramsden, country manager of Atradius Ireland. “The relative weakness of the euro against both the US dollar and British pound should assist the Irish balance of payments, as large volumes of trade go to the US and UK.”
Insolvencies are still rising, up by 22 per cent year on year in the first six months of 2010. Hardest hit were companies operating in the construction, services, hospitality, and retail sectors, which collectively accounted for almost 75 per cent of the total so far this year, with construction accounting for almost 30 per cent of failures. Meanwhile 143 companies have gone into receivership this year — a rise of 142 per cent year on year — suggesting that banks are adopting stricter loan collection methods in an effort to improve their own situation.
Retail in general remains under pressure, with rent and leases proving onerous for retailers as footfall decreases. Atradius has seen signs that consumer confidence is returning and spending levels are increasing but this is being undermined by concerns over job security, personal debt reduction, cautious saving, higher taxation levels, and lower wages.
“There were 277 insolvencies in construction for the year to July, accounting for 30 per cent of the yearly total so far,” Mr Ramsden said. “Year-on-year planning permissions for homes dropped 61 per cent in quarter one. We expect new build to remain low until the stock of completed units is cleared, banks start lending again, and consumers believe that the property market has actually bottomed out. With cutbacks in Government spending, due to the budget deficit, we can see a number of infrastructure projects being put on hold and this will contribute to the difficulties the sector is experiencing.”
In contrast, 18,200 new entities — limited companies and business names — were registered with the Companies Registration Office in the first half of the year, 9.6 per cent up year on year, which indicates that people are still willing to invest and start up businesses despite Ireland’s economic difficulties.