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From Accountingnet.ie Recession
· Activity levels marginally lower in late 2009 and will remain tough in early 2010.
· Employment still falling but drop is getting smaller.
· Budget 2010 boosts Irish economic prospects.
· 2/3 of companies have seen pay cuts but job cuts the key response to the downturn.
The Winter Business Sentiment survey produced by KBC Bank Ireland and Chartered Accountants Ireland suggests that the economy may be starting a gradual turn even if there is still weakness in terms of activity and employment. Commenting on the results, Mr. Tom Fitzpatrick, President, Chartered Accountants Ireland, noted ‘Irish businesses are reporting that conditions remain quite tough but they are altogether better than they were twelve months ago. So, the Winter Business Sentiment Survey is telling us the worst is over. Equally, however, very few firms expect anything approaching a dramatic recovery in the early months of 2010.’ Mr. Fitzpatrick also suggested a gradual turnaround is emerging but conditions vary widely across sectors. ‘It seems clear that an improvement in global conditions has translated into more encouraging signs although domestic spending remains under pressure.’ Mr. Austin Hughes, Chief Economist at KBC Bank Ireland said that softer activity has prompted a further fall in employment. ‘It remains the case that job losses were widespread but the scale of those cuts has eased slightly and has even been a slight pick-up in the number of firms increasing their payrolls.’ Mr. Hughes said that sharp reductions in headcount and signs of continuing downward pressure or costs should make Irish companies more competitive. ‘Although this has been a very painful process, the sentiment survey suggests the Irish cost climate has adjusted very sharply in the past year and there are tentative signs from the employment component of the Winter survey that businesses believe the bulk of the adjustment to the downturn may be behind us.’ The Winter sentiment survey also indicates that the recent budget has given a significant boost to business confidence. Mr. Fitzpatrick said ‘the majority of those surveyed feel the Minister got the balance right between tackling the Public Finances and not damaging the economy. Indeed, three times as many firms think the Budget will have a positive impact on Irish economic prospects as take a negative view.’ Mr. Fitzpatrick noted that firms seemed to be taking a long term view of the budget measures. ‘There is little expectation that the stimulus measures announced in Budget 2010 will have a major effect on activity. The strongly held view is that the impact will at best be modest and is more likely to be negligible.’ The Winter Sentiment Survey also asked firms what they considered the major response they had made to adapt to the economic downturn. Mr. Hughes said ‘93% of firms have taken measures to improve their viability. Far and away the most important change has been a reduction in payroll numbers as companies adjust to the prospect that pre-crisis levels of demand are unlikely to return.’ Mr. Hughes said that reductions in non-pay costs and in pay were widespread but not nearly as important as job cuts. ‘Although companies didn’t regard reductions in pay as the key action taken, as many as 66% of respondents said there had been pay cuts at their companies. Clearly pay cuts have played an important role but the major adjustment has been a reduction in payroll costs through job losses.’. The KBC Bank / Chartered Accountants Ireland Business Sentiment Survey reflects the view of chartered accountants working in senior positions (CEO’s, MD’s and FD’s) in Ireland’s leading companies. The survey was conducted December 10th – December 15th and the results presented are based on 361 completed responses. Rónán O’Brien, Chartered Accountants
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