Businesses in 'economic limbo' as crisis drags on
IRISH businesses are in "economic limbo" with no upturn in sight, a new report says. Companies are not seeing a sharp or broadly based turnaround in the business climate but instead say commercial activity and employment is weakening.
The research, by KBC Bank and Chartered Accountants Ireland, said the uncertain economic conditions were weighing on company spending and hiring and that many firms were experiencing problems in getting loans from banks.
The autumn 2011 business sentiment survey found that one in four firms had significant problems accessing bank credit, with one in six saying things had gotten worse in the past three months.
Businesses are also fearful about the impact of another savage budget.
KBC chief economist Austin Hughes said activity had improved in the manufacturing and business services sectors but this increased productivity was not sufficiently strong to prompt these firms to hire more staff.
"In most other areas, the reality is that weak demand conditions imply companies have had to make further job cuts," he said.
"A key feature is that while the economy as a whole may be stabilising, it doesn't have sufficient momentum at present to deliver a turnaround in the jobs market. Only when growth picks up to the point where it delivers jobs can we say Ireland is set on a sustainable recovery path," Mr Hughes added.
John Hannaway, of Chartered Accountants, said it was not surprising business activity had weakened.
"The outlook for the global economy has deteriorated and domestic spending power is still being squeezed," he said.
"Unfortunately, the type and scale of problems the Irish economy faces mean we can't expect a sharp or straight-line turnaround."
On the next Budget, Mr Hughes said that while businesses understood the necessity for another painful adjustment in December, they were concerned a bigger-than-expected package could be very harmful.
"A clear message from the survey is that in a fragile economy, a larger-than-necessary adjustment carries greater risks than rewards. Interestingly, most companies believe that a large adjustment could weaken growth prospects in 2013 and beyond," he added.