Thursday 20 July 2017

Business chiefs believe bailout will lift economy

Export growth fuels cautious optimism about 2011

Charlie Weston Personal Finance Editor

MOST senior business people feel the €85bn bailout from the IMF/EU will improve the economy.

However, they also feel the tax hikes in this month's Budget went too far.

A new business sentiment survey also found that most businesses expect a slight improvement in 2011.

The KBC/Chartered Accountants survey found that firms feel the Government's economic forecasts for next year are too optimistic.

Business activity was found to be broadly steady at the end of 2010, but conditions vary widely between sectors.

In findings that again point up a two-speed economy, the survey showed that exporting firms are benefiting from a tentative global recovery. On the other hand, companies selling to Irish consumers and those in the construction sector said their sales were getting weaker.

The president of Chartered Accountants Ireland, Paul O'Connor, said export-focused firms should see further growth.

But large cutbacks in state spending and tax hikes mean domestic spending could weaken further.

Subdued activity among domestic-focused firms meant that declines that have taken place in employment were almost inevitable.

The survey, which reflects the views of chartered accountants working in senior positions, showed support for the IMF/EU bailout of the State.

Six out of 10 of those surveyed indicated that the bailout improved Ireland's economic outlook compared to only 16pc who felt it worsened Ireland's economic prospects.

Ireland's membership of the single currency was also supported, but by smaller numbers.

KBC economist Austin Hughes, who put the survey together, said three out of 10 senior business people felt Ireland's participation in the euro currency had hindered stability. Mr Hughes also noted that opinion on the European Central Bank (ECB) was sharply divided.

"While 38pc feel the recent stance of the ECB has helped the Irish economy, presumably through the impact of low policy interest rates, a similar number feel the ECB's actions have hurt the Irish economy.

"This may be due to perceptions in relation to the ECB's role in the banking crisis and in the run-up to the EU/IMF support."

Adjustment

When it came to opinions on the Budget, there was a strong view that €6bn in cuts was broadly right in terms of the scale of adjustment.

But almost half of the companies surveyed feel the recent budget relied too heavily on tax increases.

Mr Hughes said the pace of job losses has eased slightly and that there has also been a marginal improvement in new hiring.

However, continuing uncertainty about the future and the fact that growth is strongest in less employment-intensive industries mean that there appears to be little prospect of a marked turnaround in Ireland's jobs market anytime soon.

Mr Hughes suggested a cautious approach was also reflected in a further reduction in business costs of late.

"Companies remain focussed on improving their competitiveness rather than expanding payrolls. However, in time, the ongoing decline in costs will make Ireland a more attractive place to grow employment."

Meanwhile, there was a small chink of good news for the economy yesterday when a leading estate agency said it had seen an increase in commercial lettings in the last three months of the year. CB Richard Ellis said lettings were ahead of its expectations for 2010.

Willie Dowling, of the real estate firm, said there was evidence of a recovery this year in transactional levels from the all-time lows of 2009.

Irish Independent

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