•Results show overall improvements in Business Confidence and Profitability Expectations. • Positive indicators of growth broadening across SME sector. • Caution advised as future employment expectations give cause for concern.
ISME, Monday 6th October, 2014
The results of the ISME Quarterly Business Trends Survey for Autumn 2014, released today (6th October) show that the recovery in the SME sector is strengthening and beginning to extend across the sector, becoming more broad based. There are increases in 8 of the 12 Key Business Indicators, with one static and three showing decreases. The results follow on from the positive results in the previous quarter and show the SME economy continuing the slow progress out of recession.
While business confidence and expectations have experienced an upwards surge, a note of caution must be acknowledged as future employment and export expectations have both experienced decreases. The Association sounded a warning to Government and unions on the fragile nature of the SME recovery and advised against any premature rush to demands for wage increases, which could scupper the recovery.
The survey was conducted in the last week of September with 1044 SME respondents. 52% of the respondents employ less than 10, while a further 39% employ between 11 and 50 and the remaining 9% employ between 51 and 250.
• The four general Business Indicators have seen double digit increases in the quarter, with Business Environment increasing by 23 points.
• Current Employment shows a 2 point increase from 14% to 16% but Expected employment growth has dropped back to 24% from a previous high of 27%.
• In this quarter Current Sales have increased by 11 points to 22% and Sales Expectations increased by 12 points from 30% to 42%.
• Current investment experienced a small increase from 29% to 32%. Future Investment remained static at 31% for the third quarter.
• Both Current and Future exports experienced decreases in this quarter. Current Exports dropped 6 points from 32% to 26% and Export Expectations decreased to 51% from 55%.
According to Mark Fielding, ISME CEO, “The key indicators monitored in this survey point to a much more balanced recovery, with increased optimism among SME owner-managers and, it is noteworthy that, Sales and Profitability Expectations have both increased in the quarter. It is also interesting to note that 11 of the 12 indicators have improved on the same quarter last year, with only Export Expectations experiencing a decrease on Q3 ’13 going from 63% to 51%.
These results are certainly a positive sign of economic improvement for SMEs but Government cannot afford to be complacent. The decreases in the export indicators in conjunction with the drop in Future Employment expectations give some cause for concern. In this ‘year for jobs’ it is worrying that SME owner-managers, who employ almost 70% of the private labour force, do not see a major increase in hiring levels in the coming months.”
“It is imperative that the upcoming budget introduce real reforms and initiatives that make it profitable for SMEs to hire new staff. Owner-managers are concerned that the Budget may bring unwelcome and unviable cost increases and they are also worried by the constant Union demands for wage increases. They are being prudent in their business decisions after many years of struggling through the recession. SME owner-managers will not hire new staff until they are confident that the expected economic growth is actually happening and they also need assurances that labour costs will not spiral in the near future. Government has a crucial opportunity in this budget and in the upcoming Action Plan for Jobs to introduce real disruptive reforms which will stimulate job creation.”
The Retail sector has shown positive moves in this Quarter with all 10 Retail Indicators increasing, albeit from a very low base in most cases. Profitability Expectations are now at 18% and Current Employment is at 14%. Investment levels have seen a large increase from -6% to 18% and Sales Expectations have gone from -6% to 41%. As growth in employment continues it should stimulate consumer demand. Manufacturing.
The Manufacturing sector has a mixed report with increases in 6 of 12 indicators and decreases in the remaining 6. All four general indicators are increased as are the sales, both current and future, up 16 and 7 points respectively. Current Employment is down 13 points from 32% to 19% and future employment is down 1 point to 34%. Future Investment expectations have decreased from 43% to 34%. Exporting.
The export figures continue to demonstrate a zig-zag effect with just three positive indicator moves. Current Exports and Export Expectations both decreased in this quarter. Current Exports went from 32% to 26% and Export Expectations decreased from 55% to 51%. Exporters reported a drop in Current Employment from 49% to 26%. Profitability Expectations remained static at 36%. Services
Similar to all other sectors the Services sector saw massive increases in business confidence and expectations. Current Sales increase from 0% to 11%. Sales Expectations increased by 6 points from 32% to 38%. In line with the general export figures, Export Expectations decreased from 47% to 39%. Current Investment levels have increased from 24% to 36%.
The Association called on the Government through the Budget 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.
• Attacking the scourge of ever-increasing black economy activity.
“It is encouraging to see the long-awaited recovery take hold, especially in the SME sector. There are still warning signs to be heeded. We must protect the slight increases we have made in competitiveness in recent years and continue to drive for more. As the recovery takes hold we must guard against Union pressure for wage increases as the recovery is still at a very early stage and by comparison, Ireland is still a relatively high cost economy,” concluded Fielding.