Q2 2009 survey results "confirm that smaller companies are still in the throes of economic despair with employment levels, investment and sales remaining extremely negative. Despite this harsh environment business optimism has improved for the second quarter running, albeit from historically low levels." The survey was based on 600 companies responses shows both that there is no 'green shoots' improvement and that expectations for 12 months ahead are not offering much hope of an upturn "with companies further readjusting downwards their employment and investment levels."
Business confidence "has improved since the previous quarter with a net 56% of companies less optimistic in comparison to a net 71% in the previous quarter. The most negative sector is Construction with a net 73% less optimistic, followed by Retail at 71%, Distribution (70%), Manufacturing (51%) and Services at 48%." In contrast, "74% of companies, up from 69% in the previous quarter, viewed the current business environment as being either ‘poor’ or ‘very poor’." Only 23% expect business conditions to improve over the next 12 months, up from 16% in Q1 2009. 66% of companies said viability of their businesses was under threat over the next 12 months, if present conditions remain.
Employment conditions continue to deteriorate dramatically:
"Nearly two thirds (62%), (56% in the previous quarter), of companies employing less than this time last year and only 6% employing more. These figures are the worst ever recorded and confirm that there has been no slowing down in job losses in the sector, with evidence suggesting that this trend is to continue over the next number of months. The Construction sector was worst affected with 83% of companies letting people go in comparison to 72% of Distributors, 61% of Retailers and Manufacturers, and 43% of Service firms."Furthermore, "employment prospects remain bleak with 43% of companies anticipating letting people go over the next 12 months, with only 7% planning to increase employment numbers. Distribution companies are the most pessimistic with a net 52% expecting to let people go, in comparison to 40% in the Construction sector, 35% Retailers, 32% Manufacturers and 28% of service businesses."
Clearly distribution services are feeling the squeeze of higher excise duties, VAT and other consumption damaging taxes and retail sector collapse. Construction sector, despite having bled jobs at the fastest rate of all segments of Irish economy in the past still remains one of the focal points of jobs destruction. Ditto retailers. The spread between these sectors and services is narrow enough signifying that we are indeed heading for the second wave of layoffs in the higher wage sectors.
"Sales continue to fall off a cliff with a net 77% of companies reporting lower sales in comparison to a net 72% in the previous survey. To put this in context there has been an eight fold increase in the number of companies reporting reduced sales in comparison to the same period last year. Only 23% of companies expect to increase sales over the next 12 months. Not surprisingly profit levels are badly affected with a massive 73% of companies anticipating a reduction in net profits, while 61% expect revenues to decline over the next 12 months, down from 69% in the previous quarter."
A massive 81% of companies said their sales/order books are down in comparison to last year. But only 33% of companies reported that their stock levels are down for the year, in comparison to 24% in the previous quarter, suggesting that overcapacity is still plaguing this economy and putting more pressure ahead on employment levels.
Credit crunch is also getting worse: "26% of companies have orders, production capacity and markets unserviced for want of working capital."
And new orders are being pressured by existent orders cancellations (implying even more pressure on employment in the short term) as "54% of companies have encountered cancellation of orders in the last quarter." Interestingly (the level of detail supplied in the survey is remarkable), cancellations were from,
- Locally Based Multinationals 16%.
- Export Destinations 7%
- Local Indigenous Firms 77%
SMEs continue to reduce "investment in their businesses with 32% having done so in comparison to 30% in the previous quarter. 19% indicated they increased investment, down from 25% in the previous 3 months. Only 16% of companies anticipate an increase in investment over the next 12 months."
This puts to an end any arguments the Government might have had about aiding the investment cycle through 'knowledge' economy programmes and tax changes they 'introduced' in December 2008. It ain't working, folks.
Although our Government economists are keen on talking about deflation, "firms continue to experience inflationary pressures, with increases of 5% plus being reported for transport, energy, raw materials, Insurance and waste. However, there is evidence of reductions in wage costs and rents." So in the nutshell - the Government and its cronies in the unionised, state-controlled and priced sectors are still ripping-off consumers and producers, while ordinary workers are taking a pay hit.
Finally, "47% of companies apportion blame to the Government for the current economic crisis, with a significant number of SMEs concerned at the lack of direction being provided."
I don't have much to add to this one.
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