Association warns of over-enthusiastic expectations and complacency as survey results show a ‘mixed bag’.
Decreases in 5 of 12 Key Economic Indicators.
Manufacturing results give cause for concern.
Export Expectations drop 10 points.
Capital Investment continues to show positive trend.
The results of the ISME Quarterly Business Trends Survey for Spring 2014, today (14th April), show a slight reduction in 5 of 12 economic indicators, while a further 3 have remained static. The Association warned that these results signalled that a cautious approach must be taken in predicting economic growth, with SME manufacturers in particular, less upbeat. The general feeling of optimism noted in the Q4’ 13 survey has been replaced by a much more circumspect assessment of current and future business growth prospects.
Mark Fielding, ISME Chief Executive, commented on the survey results, “The Government and big business lobby PR machine has been in overdrive in recent months telling us all that the storm has passed. It is important that we temper our enthusiasm, manage our expectations and do not get complacent at this point as current signs of recovery are tentative, to say the least, and must be protected”.
The survey was conducted in the last week of March, with 1050 SME respondents. 42% of the respondents employ less than 10, while a further 46% employ between 11 and 50 and the remaining 12% employ between 51 and 250.
In this quarter current sales have remained static at +11%, while exports and employment have reduced by 2 and 7 points respectively, though still remaining positive.
Looking out over the next 6 months, employment is static at +18, with just a one point gain in future sales, while exports show a worrying expected drop of 10 points.
These results and expectations have led to a reduction in business confidence of 5 points and business expectations of 3, while the business environment remains static at -4 and expected profits rise by only +1. Despite this reduction in confidence, SMEs continue to invest in their business.
The one very positive area was in Investment, both current and future. SMEs are showing an increased appetite for Future investment, as this indicator has increased 4 points to 31%. Current investment also increased in this quarter to 28%.These indicators are showing a positive trend and represent a general appetite for investment within the SME sector.
Previous results of this quarterly survey had emphasised the precarious situation of the retail sector and its struggle to survive, in light of reduced consumer spending and increased costs. However, some improvements have been noted for Retailers in this set of results. Current Sales going from -39% to -7% and Current Investment going from 17% to 40%. Retailers also reported a doubling in Business confidence which went from 13% to 27% in the quarter. Manufacturing.
The Manufacturing sector showed the most cause for concern with either declines or no change in all 12 indicators. Current Sales for this Sector are particularly worrying as they went from 29% to 12%. Business Confidence in the sector decreased by an alarming 29 points to 23%. Current and Future Investment levels also decreased by 17 points and 1 point respectively. Employment growth within the sector has dropped from 28% to 14% and Future Employment expectations declined 6 points to 15%. Exporting.
Current Exports and Export Expectations both declined in this quarter, a worrying development in an economy that is highly export dependent. These export results cast a shadow over the Government’s export led recovery aspirations, as outlined in the Medium Term Economic Plan. Current Exports decreased by 2 points to 18% and Export Expectations decreased by 10 points to 46%. Current Employment also decreased from 34% to 24% however Future Employment expectations increased by 4 points to 27%. Services
The Services sector saw Current Sales increase by 4 points to 7% but Sales Expectations decreased by 2 points to 28%. Export Expectations declined dramatically from 50% to 24%. Business Confidence and Expectations were both down in the quarter but Current Investment levels have increased from 25% to 31%. The employment indicators in this sector also decreased with Current Employment going from 11% to 8% and Future Employment moving from 21% to 20%.
According to Fielding, “Decreases in the SME Manufacturing sector, in particular, are worrying. The situation appears to have taken a turn for the worse with all indicators being either down or unchanged. If these decreases become a trend the Government will have to act swiftly to save jobs. The results of this survey reveal a loud and clear message from manufacturers that business continues to be challenging and employment and export growth cannot be presumed”.
The Association called on the Government to assist the recovery by:
Reducing government influenced business costs to below the EU average.
Tackling the banking crisis to ensure real measurable access to credit for viable SMEs.
Outsourcing more state sector services to SMEs
Reforming the social welfare system to make it more profitable to work
Expanding the export capacity of the SME sector through soft supports
Ensure that the transition from CEBs to LEOs runs smoothly and does not have a negative impact on the services offered to SMEs.
Attacking the scourge of ever-increasing black economy activity.
“It is of the utmost importance that the fragile revival in the economy is nurtured and that there is a continued acceptance that there is still a long way to go. Businesses are not recovering at the rate that reports and rhetoric would have us believe. It will take a lot more time and sustained effort before we can truly put the effects of the recession behind us. The economic realities of Ireland post-troika must be understood and Government, employers and employees must be prudent, productive and continue to work on the economic revival”, concluded Fielding.