SME BUSINESS NEEDS BOOST FROM BUDGET- TIME TO PUT BUSINESS FIRST
SME BUSINESS NEEDS BOOST FROM BUDGET- TIME TO PUT BUSINESS FIRST
Overall conditions remain challenging or at best neutral.
Increase in Business Confidence among SMEs.
Employment stalled, due to uncertainty on wages and costs.
Budget 2016 must address state-influenced business costs.
Business Costs increasing with Insurance costs to the fore.
The results of the ISME Quarterly Business Trends Survey for the third quarter of 2015, released today (12th October) show a 'mixed bag' of results, with decreases in 6 of the 12 economic indicators tracked. The Association cautioned against any over optimistic expectations in the SME sector and advised Government to guard against complacency in relation to the overall economy. The Budget 2016 will have a major effect on the perception and plans of SMEs, as currently business costs are stalling growth and impeding competitiveness.
Mark Fielding, ISME CEO, commented on the results of the survey, "Conditions remain challenging or at best neutral for most SMEs. Demand, while improving, is still weak, credit conditions are tight and our competitiveness is under threat. The indicators on the current situation are down on the previous quarter, in sales, employment, investment and exports. At the same time the future indicators in the same categories are more positive. This confirms the stalled state of the domestic SME economy and demonstrates the optimism of SME owners".
"Positive expectations from entrepreneurs must be backed by correct policy responses from Government in order to achieve a SME sustained recovery."
"The importance of the Budget cannot be overemphasised. The Minister for Finance is tasked with ensuring the maximum possible buoyancy in all sectors of the economy and not just the internationally trading sector. We expect intelligent measures for the SME sector, including the removal of impediments to trade and the reduction of state imposed costs".
"If SME builders cannot build and sell houses at a profit because of taxation, then it must be changed. If small business cannot afford to trade because of commercial rates and rents and high minimum wage, then these must be addressed. These are areas over which Government still exercise some influence and a judicious adjustment of the tax code could have a major positive effect."
"Ireland now has a stronger entrenched business culture, with entrepreneurs willing to take reasoned risk. Now is the time to encourage the wealth creating sector by addressing the needs of business which will lead to jobs and a virtuous cycle of income and social adjustment."
"The long awaited recovery is still very fragile and predominantly in the large multinational sector. The SME sector is still very wary of the growth figures produced at national level and is waiting to profit from the effect of the global and national turnaround."
Business Costs continue to plague SMEs, despite the official inflation running at -0.3%. Almost three quarters of respondents (72%) have suffered increases in their insurance costs. Increases ranging from over 5% for a third of respondents 10% for a quarter and in excess of 10% for 15%.
We continue to be impacted by increases in energy costs, with over a half (54%) being hit with increases. Transport, environmental and wage cost increases are affecting half of the respondents.
"All of these increases clearly demonstrate that Ireland is still an expensive location in which to do business, although you wouldn't think it, the way our politicians are making promises, in order to buy the election", continued Fielding.
The survey was conducted in the last week of September, with 1,060 SME respondents. 61% of whom employ less than 10, while a further 33% employ between 11 and 50 and the remaining 6% employ between 51 and 250. Geographically, 25% are from Dublin with 67% spread across the country, with 8% with multiple sites, giving a good reflection of the country as a whole, sectorally, geographically and by employee numbers.
Business Confidence increased from 45% to 49%, while Business Expectations decreased.
SMEs perception of the Business Environment decreased by 1 point to 30% but Profitability Expectations for the next twelve months increased by 2 points.
Current employment is down points to 17%, while Future Employment Expectations have risen by 2 to 29%, the best since summer '07.
Current Investment levels decreased slightly in this Quarter, but Future Investment is up 7 points, showing that SMEs are planning for growth and are planning to capitalise on any upturn in the economy.
Current Exports are down, while a more optimistic view is taken on Future Exports.
Economic Uncertainty is still the biggest concern for 16% SMEs. It is noticeable that Government Action has risen to second place with 13% of respondents naming it.
The Retail Sector reported decreases in six out of the ten indicators tracked for this sector. Current Employment, Sales and Investment are all down for this sector and Business Confidence and Expectations have also decreased. Retailers reported an increase in their Business Environment from 4% to 7% and their Profitability Expectations also increased from 0% to 20%, a substantial increase in a key indicator. However the sector is still experiencing a slow recovery.
Manufacturers' indicators were disappointing, showing decreases in 8 of 12 indicators. They saw a decrease in Current Sales from 35% to 18% and a 14 point decrease in Sales Expectations (60% to 46%). Manufacturers also experienced decreases in Current Employment from 30% to 24% and Future employment went from 37% to 28%. The Current Export levels of Manufacturers have seen an increase from 18% to 23% and their Future Export Expectations decreased from 46% to 42%.
Exports are a key area of growth for Irish businesses. This Quarter showed increases in 8 of 12 indicators for Exporters. Current Exports decreased in this Quarter, going from 23% to 17% and Future Export Expectations went from 40% to 48%. They reported a large increase in Current Sales from 18% to 32%. Their Future Sales Expectations also increased from 40% to 50%. Exporters' investment levels decreased from 51% to 49% but their Future Investment expectations increased from 41% to 55%.
The Services sector has remained mostly stable in sales and employment. However, the sector saw a decrease in Current Investment going from 34% to 23% while Future Investment also went to 46% from 34%. Increases were seen in Current and Future Exports going from 0% to 33% and 20% to 58%, respectively.
The inflationary pressures are most evident in Insurance, Energy, Transport, Wages and Environmental charges. By far the largest increases are in Insurance, with 72% of respondents experiencing increases. Over half (54%) have energy increases, Transport, Wages and Environment affecting 50%.
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.
Expanding the export capacity of the SME sector through soft supports.
Attacking the scourge of ever-increasing black economy activity.
"The upcoming election is adding fuel to the over-egging of positive indicators, as politicians vie with each other for who can promise the most to the electorate. The vast majority of these promises will be a cost to business, affecting our basic competitiveness. It is extremely worrying to see the feeding frenzy of trade unions and politicians doling out the imaginary fruits of a nascent recovery, the result of which is stalling that very revival," concluded Fielding.