Business confidence improving

THE State's small firms believe the business environment is improving and many of them are looking to increase their staffing levels.

ISME, the small business body, said in its spring trend bulletin that there has been a significant improvement in business confidence, employment prospects and investment opportunities for small enterprises.

It found that business optimism levels among SMEs have significantly improved and are at their highest since the beginning of 2001, with 35% of firms more optimistic about their prospects. "The improved optimism is particularly noticeable in the manufacturing sector, which, while continuing to lag behind other sectors, has seen a considerable turnaround, with improved prospects over the next 12 months. This time last year many manufacturing companies were on their knees and threatened with extinction.

ISME said the fact that 30% expect to be employing more in the next 12 months compares extremely favourably to a minimal net 3% forecasted increase for the preceding year.

It said: "25% of exporters reported that the value of their exports was greater than at the same period last year, in comparison to 22% who experienced a reduction a net increase of 3%. This compares with a net 13% decrease recorded this time last year, indicating that exporters have adjusted to the strengthening euro."

But it was not all positive news. It found that business costs continue to rise with increases of 10% recorded in rents, wages, raw materials and insurance.

IMSE members also said the biggest threat to employment creation is the continuing high cost environment, with labour costs now being seen as the most significant threat to SMEs in the immediate future and have the potential to hinder job creation and business expansion. It added that less than fewer than 40% of members were happy with social partnership and 62% either had no opinion or indicated that social partnership had not been beneficial to their company.

"When one considers that SMEs make up over 98% of all businesses in the country, it is easy to see that there is, at best, a widespread ambivalence towards the agreement," ISME said.

"As social partnership talks continue, it is absolutely crucial that all sides realise that increased wage costs could kill off the future potential in the economy and hinder investment and growth in both jobs and wealth. Any real cost increases will have serious repercussions not only for SMEs but for the economy as a whole."