Firm fury over issues that keep on choking
Things are getting better, but businesses are up against it in trying to get paid and stay liquid. It's no joke. You'd want to be an optimist to be running a business in Ireland today, writes Roisin Burke
Published 01/08/2010 | 05:00
They've halted staff layoffs and are upbeat about the economy, but Irish companies tell us they are battling serious cash flow issues.
It's not just because credit is scarce, but because they're waiting months on end to get paid in many cases, our Business Owners Survey 2010 shows.
The results also revealed a demand for radical change to the social welfare system to make it easier to employ staff, and resounding dissatisfaction with the Government, and with cosy crony board nominations.
Job cuts brake
In a major reversal, a big majority (66 per cent) of company owners said they would not cut jobs this year. This was in sharp, positive contrast to last year's poll, where over half said they were letting employees go.
"It shows the optimism that is out there," says ISME's Mark Fielding.
"Order books are starting to pick up again and employers are starting to bring back staff that had been on reduced working weeks."
That said, unemployment still stands at a high of 13.4 per cent, and a considerable 24 per cent of owners do expect to have to cut employee numbers this year. But it's not all gloom. One in every 10 say they plan to recruit.
A hefty 38 per cent of owners said getting paid was their top worry, in answer to the question: "What's the biggest issue facing your business?"
"It's a massive problem," Fielding confirmed, adding that the average length of time it takes an SME to get its money has shot up from 52 days to 76.
"We have letters on file from big companies like Diageo, C&C and Pfizer all saying they were pushing out their payment days," he says.
The small firms group wants the Prompt Payment of Accounts Bill 2002 to be updated to compel big firms to pay faster and set down a 30-day payment deadline. "The Government is doing absolutely nothing to help the position of small suppliers in this," Fielding claims.
In its own backyard, the State has acted, however, with government departments now paying suppliers within 15 days, but Fielding says this needs to be extended to other state agencies such as the HSE and the semi-state bodies.
"They are playing ducks and drakes with suppliers, looking for invoices to be re-issued or new order numbers -- the 'dog ate my homework' type excuses."
Payment delays are then creating a cash-flow domino effect, with owners needing to turn to reluctant banks for bridging loans or other credit.
Though Finance Minister Brian Lenihan has threatened to legally force Nama banks to lend to SMEs, ISME says that 55 per cent of companies have been refused credit in recent months. "There's been no reduction in that figure whatsoever," Fielding maintains.
More than one-third of owners responding told us that their business has been jeopardised by lack of bank credit. In answer to the question: "Has your business been put at risk by banks refusing credit?" 33 per cent said yes.
A further 10 per cent were undecided, while 57 per cent said it hadn't.
Accessing credit was cited by 10 per cent of owners as the biggest issue facing their business.
"The banks don't want to lend to what they see as riskier businesses, but we want to see them lend to viable but vulnerable firms, who are only vulnerable because they're not being paid," says Fielding.
"Banks should consider the long-term economic value of SMEs, just as the Government is doing with Nama assets."
Minimum wage and dole changes
A massive 79 per cent told us that they want to see the Government cut the dole.
"The generosity of the Irish social welfare system pushes up the cost of wages," Fielding argues. "The number of stories we hear from our members who, when looking to re-hire staff full time find they prefer to sign on and have income support, a medical card etc -- it's quite problematic."
With black and grey economies back in force, it's easier for some to do "a nice three-day week, a little nixer here and there" and sign on the dole. "The Government shoots itself in the foot by not making dole less attractive."
Most owners (40 per cent) favoured a 10 per cent dole cut, 27 per cent want to see it slashed by 20 per cent, and 12 per cent want it docked by even more than 20 per cent. Some (21 per cent) think it should stay at present levels.
Almost one-third (31 per cent) would favour bank holidays being scrapped, suggesting that employment costs and lost man hours are worrying. However, a majority of 61 per cent rejected the idea, and 9 per cent were undecided.
Some 76 per cent of owners want to see the minimum wage reduced, with staff costs given as the biggest issue facing 15 per cent of businesses.
More than half (53 per cent) of owners think there should be more restrictions on foreign workers coming here, echoing last year's survey.
Though consumer sentiment showed its highest rise since October 2007 in June's ERSI/KBC data, it is still a major concern for business. Some 18 per cent of owners say it is their biggest concern.
Their fears are reflected in dropping retail sales, as Retail Excellence Ireland's (REI) figures for Q2 showing a five per cent fall in retail sector sales on the same period last year.
"Consumer confidence is shot," REI's David Fitzsimons says. "There's an awful lot of negative sentiment -- fear of unemployment and negative debt, which has led to excessive saving by consumers."
The €631m nefarious hassle of red tape that has been well covered in these pages is the biggest key concern for 15 per cent of leaders.
Bosses face a nightmare of telephone-book sized documents and hundreds of laws and regulations that have to be tackled regularly just to stay in business.
Fianna Fail would get hammered if an election depended on the business vote, our survey suggests. An overwhelming 80 per cent majority would vote for a party other than the main one in power now, which shows the same dissatisfaction rating as last year's survey. Just two per cent of respondents would give the Green Party their vote.
Fine Gael polled strongly, getting 45 per cent of the business owner vote -- a good 15 per cent higher than on a national level in recent opinion polls. Some 20 per cent would vote Fianna Fail if an election were held tomorrow. Labour would take 14 per cent of the vote. Sinn Fein would take two per cent of the vote and 18 per cent of owners selected the 'other' preference.
No to cronyism
A resounding 'no' was the landslide vote against the Government putting its mates on the board of state bodies like Fas, the ESB and the DAA.
A massive 96 per cent of owners didn't want to see former politicians or political supporters appointed to boards of state bodies. Not one single business chief who responded said 'yes'.