A worrying trend showing a drop in confidence regarding future business performance among small and medium enterprises, particularly in the retail sector, has just been recorded. Interestingly, workers in the construction sector are hopeful of a more vibrant market.
According to ISME (Irish Small and Medium Enterprises ), the results of the third quarterly trends survey for 2010, which attracted a response from some 500 companies, are extremely worrying and outline that SME business confidence has deteriorated sharply in the last quarter.
The figures confirm that two thirds of respondents view the economy as either ‘poor’ or ‘very poor’, with economic uncertainty a main concern, followed by fear of reduced orders. Concerns were also expressed about imminent Government measures and the impact they may have on the sector as well as access to credit.
Only one in four companies expects business conditions to improve over the next 12 months with 47 per cent expecting a further deterioration. The results indicate that companies are continuing to shed jobs with little hope of net job creation for the foreseeable future. Investment by companies remains static with no sign of the situation improving. The only positive indication is that export values are continuing to increase, maintaining a trend going back 18 months.
The sharp reduction in business confidence reverses a trend that had been improving since spring ‘09, recording now that 44 per cent of companies are less optimistic about business prospects in comparison to 26 per cent in the previous quarter.
The retail sector is the least confident with a net 50 per cent of companies less optimistic about business prospects, in comparison to manufacturing (23 per cent ), services (19 per cent ) and distribution (11 per cent ). Surprisingly, construction was the only sector that recorded a net positive response with five per cent of companies overall more optimistic about their business prospects.
The current business environment is viewed as ‘poor’ or ‘very poor’ by 67 per cent of respondents, in comparison to 56 per cent in the previous quarter.
Only one in four (25 per cent ) expect business conditions to improve over the next 12 months, down from 40 per cent in the previous survey; 47 per cent anticipate a deterioration in business conditions.
The threat of company closures is still very evident with two thirds of firms (65 per cent ), outlining that present conditions threaten the viability of their businesses over the next 12 months.
An increase in export values is the only positive sign recorded in the survey, which shows that ongoing economic uncertainty is the main concern threatening business survival.
Overall employment prospects are not good and it will take a considerable period of time before net job creation is reported.
“The results of the latest quarterly survey confirm that the SME sector is extremely concerned at the direction of the economy, with a dramatic reduction in business optimism and little confidence in the overall business environment,” said ISME head of research Jim Curran. “This is primarily as a consequence of huge uncertainty and a continuing deterioration in business conditions. With companies in general reporting a reduction in orders and sales, and no sign of an improvement in consumer confidence, the future outlook looks bleak, with many businesses hanging on by their fingernails.
“What SME business owners and the public are crying out for is clarity and certainty, which has clearly been absent for a considerable period of time. Without this, businesses will not invest and consumers will continue to save. It is absolutely essential that the Government’s four year budget plan, to be published next month, outlines a clear path for getting the economy back on track, by addressing unemployment, the public finances, and business concerns, including cost competitiveness and access to finance,” concluded Curran.