POTENTIAL FOR 60,000 JOBS IN SME SECTOR IF COSTS CURTAILED
POTENTIAL FOR 60,000 JOBS IN SME SECTOR IF COSTS CURTAILED
SMEs showing positive trends at year end
Increases in 10 of 12 indicators.
Current and Future Sales very positive, at highest in 8 years.
Owner-managers generally positive in expectations for the new year.
One ‘Black spot’ is Job Creation in Retail due to decrease as result of Minimum Wage increase.
Euro Exchange Rate is the biggest area of concern.
ISME, Wednesday, 4th January 2016
The results of the ISME Quarterly Business Trends Survey for the final quarter of 2015, released today (4th January) show increases in 10 of 12 of the economic indicators tracked. The Association reported that SME owner-managers are noticing improvements in business and these are filtering through to increased sales and employment. However, Retail is concerned about wage increases and predicts decrease in job creation the coming months as a result. Economic Uncertainty has been replaced BY Euro Exchange Rate as the biggest concern of SME owner managers.
Mark Fielding, ISME CEO, commented on the results of the survey, “Following on from a mixed-bag of results in the previous quarter it is a relief to see such a positive report coming from owner-managers this time round. The recovery might finally be trickling down to SMEs but it is important that we focus now on managing our costs and nurturing this growth”.
“Despite the improvements at a macro level, SME competitiveness has taken many blows this year. Rents, insurance, energy and legal costs have all increased while the slack consumer demand has dictated that pricing and margins have reduced. This means that small businesses operating on increasingly tight margins cannot afford any more cost increases. The increase in the minimum wage due in January will be a difficult adjustment for labour-intensive sectors and may force some businesses to reduce staff hours.”
“As we move towards the election, we are being treated to more and more outlandish political promises and policies. Our electioneering poiticians must remember that their giveaway rhetoric influences the business environment and often forces owner-managers to adopt a cautionary approach to expansion and employment growth. Labour’s promises to impose a ‘living wage’ during the next administration will result in cost conscious employers delaying and cancelling job creation which will be unaffordable if those increases are introduced.”
“This effect of cost increases is clearly demonstrated in the one ‘black spot’ in the Survey. The future employment prospects in the Retail Sector, despite experiencing an increase in Sales and Employment in the final quarter, shows a drop of 13 points to a -10% as a result of the imminent imposition of a 6% increase in the National Minimum Wage and the expected knock-on effect across the sector.”
This clearly confirms that politicians should spend their time creating the right environment in which businesses can flourish and desist from interference and allow the market to set wage rates.”
The survey was conducted in the third week of December, with 956 SME respondents. 54% of whom employ less than 10, while a further 36% employ between 11 and 50 and the remaining 10% employ between 51 and 250. Geographically, 32% are from Dublin with 59% spread across the country, with 9% with multiple sites, giving a good reflection of the country as a whole, sectorally, geographically and by employee numbers.
Biggest-Concern Euro Exchange Rate
Business Confidence decreased slightly from 49% to 47%, while Business Expectations increasing from 58% to 62%.
SMEs perception of the Business Environment increased by 10 points to 40% and Profitability Expectations for the next twelve months increased by 2 points to 36%.
Current employment is up 6 points to 23%, while Future Employment Expectations have risen by 1 to 30%, the best since summer ’07.
Current Investment levels increased slightly in this Quarter, but Future Investment is down 7 points to 36%.
Current Exports have more than doubled in the final quarter to 36%, leading to a 3 point increase in Future Exports.
The Euro Exchange Rate is the greatest area of concern for SMEs at present with 13% citing it as their number one worry. This has replaced Economic Uncertainty which has dropped to 9%.
The second most worrying concern among owner managers is Labour Costs and Access to Credit, acknowledged by one in eight respondents.
The Retail Sector reported increases in six out of the ten indicators tracked for this sector. Current Employment, Sales and Investment are all up for this sector and Business Expectations have also increased. Retailers reported a decrease in their Future Employment from 3% to -10%, due to the expected effect of the rise in the National Minimum wage. Their Profitability Expectations also decreased from 20% to 5%, a substantial decrease in a key indicator. However, the sector is experiencing a slow recovery and may revise its negative jobs forecast if the recovery takes hold at SME level and after the election, when Government gets back to proper and prudent economic management.
Manufacturers’ indicators were much better this quarter, showing increases in 9 of 12 indicators. They saw an increase in Current Sales from 18% to 49% and an 11 point increase in Sales Expectations (46% to 55%). Manufacturers also experienced increases in Current Employment from 24% to 28% and Future employment went from 28% to 32%. The Current Export levels of Manufacturers have seen an increase from 23% to 27% and their Future Export Expectations decreased from 42% to 48%.
Exports are a key area of growth for Irish businesses. This Quarter showed increases in 7 of 12 indicators for Exporters. There was a drop in Current Exports in this Quarter, going from 23% to 17%, however Future Export Expectations went from 40% to 48%. They reported a large increase in Current Sales from 32% to 58%. Their Future Sales Expectations also increased from 50% to 58%. Exporters’ investment levels remained at 49% but their Future Investment expectations decreased from 55% to 47%.
The Services sector has remained mostly stable in sales and employment. However, the sector saw an increase in Current Investment going from 23% to 26% while Future Investment reduced from 46% to 32%. Export Expectations decreased from 58% to 40% while current exports remained at 33%.
The Association called on the Government to assist the recovery by:
Reducing government influenced business costs to below the EU average.
Ensuring 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.
Attacking the scourge of ever-increasing black economy activity.
“Hopefully, the gains made in 2015 will continue into 2016. The prospect of extra jobs in the economy must be at the top of the agenda. As demonstrated in the past, SMEs have the ability to expand their workforce, once given a stable business environment. The priority now must be to create stability and sustainable growth, so that we can benefit through an improvement in living standards across the economy,” concluded Fielding.