Tuesday 21 November 2017

Chinks of economic light that help to lift the gloom

Don't worry, be happy -- the portents are good... Nick Webb looks at the 10 most positive things happening in the Irish economy

Ireland has great "bounceability", telecoms entrepreneur Denis O'Brien told RTE last week. We could get out of the financial crisis if we're not negative. This was echoed by another of Ireland's more powerful businessmen, Goldman Sachs' Peter Sutherland. Are these two beats of business right? Is that the sound of a heartbeat?

1. Stockmarkets are rising

Since November 30, the Irish stockmarket has risen more than 10 per cent in six weeks.

With the exemption of the banks -- which now only make up a small part of the Index weighting -- the price rises have been widespread. Crucially, shares with a major exposure to the domestic economy have risen. Michael Chadwick's DIY firm Grafton, Tommy Breen's distribution firm DCC and media group INM are all up close to 20 per cent in less than two months.

This is not a uniquely Irish story, as global markets have rebounded strongly from the early days of the European sovereign debt crisis.

2. M&A activity is up

Investment bankers are out to lunch again, as deals and mergers have returned with some gusto.

BAE is buying Paul Kerley's ISEQ-listed Norkom Technologies for a cool €217m. Cyril McGuire's Trintech was taken over by Spectrum in a €100m deal late last year. Michael Chadwick's Grafton felt secure enough to buy a group of stores from Travis Perkins. Even listed concrete company Readymix is in play, with the quoted firm revealing that it had received an approach.

Oaktree tried to buy McInerney Holdings, before the examinership process scuppered the transaction.

This all indicates a shift away from the risk aversion paralysing the markets.

3. Property deals ARE being planned

The property market is largely dependent on two things; Nama getting its thumb out and the banking sector providing acquisition finance.

Last week, Nama's chief executive Brendan McDonagh indicated that the State behemoth would sell up to €200m of Irish assets in the next two months, on top of the €2bn worth of sales last year. This will go some way to providing a floor for commercial property prices, which have been in stasis as Nama took an eternity to get moving.

McDonagh told the Public Accounts Committee that "foreign investors" were looking at the Irish market.

Ryanair chairman David Bonderman runs one of the world's biggest private equity companies in Texas Pacific Group (TPG). He's looking at Ireland, with the firm getting close to buying €120m in retail property assets before Christmas. The deal was shelved when the IMF came in -- but it is likely to be reheated as more certainty returns.

Some of the developers are even looking less peaky, with Sean Mulryan's Ballymore successfully refinancing a big chunk of debt and Treasury Holdings having positive news from China.

5. Record Foreign Direct Investment

Former CRH boss Liam O'Mahony certainly hit the ground running when taking over as chairman of the IDA last February.

New data shows that 2010 was one of the best years on record for attracting multinationals to Ireland, with some big-name firms such as Citigroup and Accenture cutting the ribbon on chunky investments and jobs.

Around 125 foreign direct investments were announced by the IDA last year -- and of these, around 43 were brand new companies coming to Ireland for the first time. Some 11,000 new jobs were created last year, compared with just 4,615 in 2009.

IBM's 2010 Global Locations Trends report ranked Ireland first globally for jobs for multinationals, with the IMD World Competitiveness Yearbook also giving Ireland exceptional high scores.

6. Exports ARE up -- and not just OF THE multinational stuff

Apart from the buoyant multinational export sector, some of our domestic industries are pedal to the metal.

Last Thursday, Bord Bia chief Aidan Cotter revealed that Irish food and drink exports had spiked 11 per cent in the past year. Food and drink exports provided something close to one-third of the growth in exports in the first nine months of 2010, according to Bord Bia. Meat and livestock exports rose nine per cent last year, with dairy up a riproaring 17 per cent.

Last year, Ireland exported €161bn worth of goods -- up nine per cent on 2009, according to figures from Irish Exporters' Association boss John Whelan. The organisation expects the export sector to grow by 7.2 per cent this year, fuelled by an increasingly caffeinated global economy.

7. Industrial Output HAS goNE through the roof

Ireland's industrial output -- the stuff we produce -- has grown faster than anyone else in Europe over the last year.

Figures from Eurostat last week showed Irish industrial output had zoomed ahead 14 per cent in the 12 months up to November 2010.

Even the super-efficient Jerries couldn't match that, recording a leap of just 11.4 per cent in the year. The hike in industrial output is the va-va-voom for the much-talked-about export-led recovery.

8. A weak euro

It's bad. It's scary. The European sovereign debt crisis could lead to massive contagion, with one country after another forced to seek assistance. But exporters can't get enough of it.

Back in 2008, the euro was ridiculously strong against both sterling and the dollar, which cut the legs off our exporters. Cross-border shopping in Newry was another result of the currency rates. But then Greece blew up. And Ireland. And now Portugal.

The euro has tanked against sterling and the dollar over fears that debt contagion could spread and force the collapse of the currency.

It almost certainly won't -- but that doesn't stop speculators shorting the euro. A weak euro means that our exporters are even more competitive on the world stage. Result.

But the debt crisis has hammered consumer confidence and the domestic economy, which will be weighed down for more than a decade by the punitive, so-called bailout by the IMF/EU.

There are signs that the interest rate on our bailout fund may even be reduced if the European rescue fund is enlarged. Also, the creation of some form of eurobond may also cut our borrowing costs. A default on some of the senior bond holders would really give us a boost.

Either way, Europe is making more co-ordinated efforts to solve the problem, which is positive.

9. Some form of economic stability

Despite the high-profile implosions at Ivan Yates's Celtic Bookmakers and Jim Mansfield's Citywest, unemployment figures are stabilising.

Just over 12 months ago, some economists were forecasting unemployment rates of 15 per cent and higher. While December's live register figures were particularly grim, the unemployment rate was 13.4 per cent -- well below some of those doomsday estimates.

The most positive aspect of the figures is that the rate of redundancies has fallen 29 per cent on 2009, according to Batt O'Keeffe's Department of Enterprise and Employment. Things are bad, but they are not getting worse.

A very pale green shoot.

Another plus -- one highlighted by Goldman Sachs' Peter Sutherland last week -- was that tax returns were showing a positive momentum. Our budgetary deficit for 2010 is now set to be lower than predicted just months ago, coming in at 11.5 per cent against a forecast 11.9 per cent.

10. Much leaner and meaner fighting machine

The "internal deflation" of the past two years has massively improved our competitiveness, which had got seriously out of whack with reality. But the pain isn't over yet.

"The cost reductions are definitely helping to bridge the gap in competitiveness which was allowed to open up over the past decade and is to be welcomed. But much more needs to be done," said new American Chamber of Commerce president Gerald Kilcommins last week.

Irish-based companies have cut annual costs by an average of seven per cent in the past two years, with their output rising.

The legendary 'rip-off republic' is largely buried, thanks to the recession. Apart from falling wages and living expenses, some business costs have also dropped. Prime city-centre rents are now about €16 per square foot, compared with close to €40 per square foot at the top of the market.

Ireland used to be the fifth-most expensive location for office rents during the boom. It has fallen to 33rd place, according to the IDA.

Sunday Indo Business

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