SURVEY: Only half of the 100 firms polled believe that the Irish economy will grow, with 44 per cent believing it is at a standstill.
Rising wages and higher costs across the economy are the main causes of concern for Irish business, according to the latest Irish Times/Ulster Bank business survey. The survey also found that only half of the 100 firms polled believe that the Irish economy will grow, with 44 per cent believing it is at a standstill.
Two-thirds of those interviewed said rising labour and other costs were their main concern, with smaller firms even more worried than their bigger competitors. "While retailers are bearing the brunt of the pressure - four-fifths of them put this as their number one concern - they are passing on the pain to their customers, which in turn is adding to inflation," says the survey, which aims to gauge the confidence of the business sector.
Ulster Bank head of research Mr Pat McArdle says that the consumer price index (CPI) is stuck at 5 per cent, or twice the EMU level, mainly because prices for services are rising by 8 per cent to 10 per cent per annum.
"At the same time, only 9 per cent of those polled put recruitment difficulties as a major concern," he says.
"This clear indication that the Celtic Tiger era is over, has not been reflected in the national psyche and has yet to influence wage trends."
He said that instead, it would appear that "the expectations of the existing workforce have lagged economic developments and are reflecting an era which is behind us."
Mr McArdle added that the prospect of increased taxation, "unheard of in the Celtic Tiger era, and now only beginning to dawn on many, was the second highest concern among companies, with rising energy prices in third place."
Despite some optimism regarding the global economic outlook, the view on domestic prospects is considerably more cautious, according to the survey.While 70 per cent said they expected global growth to resume later in the year, only half felt the Irish economy would grow. Even these more optimistic businesses were relatively muted.
"More than 80 per cent of them put growth within a 2 to 4 per cent range and there were no super-optimists. Business is more cautious than either the general public or the economics profession, none of whom is forecasting zero growth," said Mr McArdle.
In a wish list for the incoming government, businesses place transport infrastructure at the top, with some 73 per cent urging the new administration to invest in transport, having put this in either first or second place in their order of priorities.
"It is a concern which is felt most keenly by Dublin based respondents and big companies - not surprising given the difficulties experienced by the daily commuter - but is also a national problem with practically all non-Dublin respondents giving it some preference. Clearly, there is considerable disenchantment despite recent efforts and we still have ground to make up to compensate for past neglect of this critical area," said Mr McArdle.
Health, education and telecommunications were also highlighted as areas to be tackled.
However, only 15 per cent of those surveyed were prepared to approve a spend and tax policy, while 84 per cent believe that borrowing should be used to fund Government spending or that Government spending should be cut. Additional capital projects should be financed by borrowing, according to 71 per cent of respondents.
The outlook for jobs and profits is mixed, with more than half expecting no rise in employment this year, while 33 per cent say they will hire more. A sizeable minority expect to shed labour - these firms are mainly large companies based outside Dublin.
Companies are somewhat less optimistic regarding profits - 35 per cent expect them to rise but 25 per cent foresee a fall. The pharmaceutical sector is viewed as the most strongly positioned for profitability this year. The retail sector is second in terms of positive expectations, with the construction industry also well-placed.
Wider issues addressed include their views on future new partnership and wage agreement. Some 79 per cent said they would back this approach. On interest rates, 60 per cent expect higher rates by the end of the year while 32 per cent believe interest rates will not change.
