Nearly a third (32%) of Irish business leaders expect their operations to return to growth in 2010 with 44% expecting the upturn to happen in 2011. This is according to PwC’s Business Sentiment Snapshot Survey carried out at their annual 2009 Client Conference ‘What next for Ireland’ held on Monday and Tuesday 9 and 10 November 2009. Over 800 leading executives from Ireland’s top companies participated in the survey.

Key findings are:

• Some retrenchment still ongoing notably over half still looking at workforce reshaping and reduction
  
• Nearly half (45%) looking to review basic salary levels
  
• Long term objectives are top of mind with many looking at new markets and seeking strategic alliances
  
• A third looking to wind down or dispose of underperforming/non-core operations
  
• Interestingly a fifth (20%) say that they looking to centralise further activities into Ireland.
  

The survey was carried out amongst financial services and non-financial services organisations. Notable differences as between these areas were:

• Financial services organisations are more positive as to when growth would return to their businesses. For example, 41% of financial services companies said growth would return in 2010 compared to 22% for non-financial services organisations
  
• Financial services organisations are more focused on winding down or disposing of underperforming/non-core operations. More than a third (36%) said this area was under the spotlight compared to only a quarter (23%) for non-financial services companies
  
• Nearly a third (29%) of financial services organisations said they are planning or will plan to centralise further activities into Ireland compared to 11% for other organisations
  
• Reviewing basic salary against the market was less on the radar screen for financial services organisations with just over a third (37%) looking at this area compared to over half (52%) for non-financial services organisations
  

Launching the survey, Kevin Egan, Leader, PwC Assurance Practice said:

“Not surprisingly, over half of survey respondents (57%) reported that controlling the cost base is a key challenge. In our experience companies continue to recalibrate their business models taking out whatever cost they can to ensure they become fit for the future. Some 42% said that growing market share is another key challenge. It is clear that companies are keen to take advantage of weaker competitors as they seek out opportunities to position themselves for the upturn.”

Restructuring spotlight – a lot happening

The survey reveals that businesses are dealing with the downturn head-on. For example, over half (56%) of survey respondents said that they are undertaking or planning to undertake workforce reshaping and reduction. It is clear that workforce reshaping continues to feature prominently as an area for cost reduction potential.

Winding down or disposal of underperforming/non-core operations was the next most significant item in the restructuring spotlight with nearly a third (30%) of respondents undertaking these activities. Other restructuring initiatives in the spotlight were working capital and treasury management as well as contractual arrangements entered into pre-downturn.

According to the survey, companies are also looking at their reward strategies. Ensuring the reward strategy is linked to sustainable business performance is key. Nearly half (45%) of participants said that they are reviewing basic salary against the market. Nearly a third (30%) said they are overhauling annual bonus plans.

The future

Looking to the future the survey suggests that companies are seeking opportunities to ensure they can operate as sustainable competitive businesses. For example, nearly half of survey respondents (48%) reported that they are planning to access new markets or launch new products while 40% said that they are seeking strategic alliances to deliver revenue and cost synergies. Interestingly, a fifth (20%) said that they looking to centralise further activities into Ireland. A lesser proportion (17%) said that they were moving certain activities to off-shore locations.

Kevin Egan concluded:

“The survey suggests that companies are looking beyond the short-term and clearly identifying how they can better position themselves for the upturn. While retrenchment is ongoing in some areas and companies continue to tackle their cost base, many are now looking at new markets and alliances to grow the revenue line. In addition, with some disposal of non-core operations planned, there should be opportunities to purchase competitively priced assets.

“Although there has been a lot of pain, the survey suggests that 2010 and 2011 should see an Ireland that is more competitive and better positioned to compete for foreign direct investment.”