Business confidence in the future welcomed

THE past week has been a bit of a mixed bag in terms of the economy.

Ulster Bank’s survey of businesses North and South reflected an indigenous economy that looked to be going pretty well.

But a Davy Stockbrokers property review did nothing to lift the flagging optimism surrounding the sector and also suggested that growth could also slow pretty sharply next year.

They have stuck the knife into the economy pretty hard this time and it remains to be seen how it all pans out in the next 18 months.

But Ulster Bank gave us something to cheer about on the indigenous business front.

Its survey of 1,000 businesses throughout the island found those in the North were expecting to do better in 2007, than those in the south.

If the North wasn’t upbeat at this stage in its evolution, it probably never would be, given the change in the political climate culminating in the new power sharing executive that is now truly in place.

Only 50% of businesses in the South are optimistic about this year and are expecting to achieve better results this year, against 63% for their counterparts in the North.

But on a longer view, the Ulster Bank survey found more than 70,000 businesses said they expect to grow their operations over the next three years.

That figure covers sentiment in both parts of the island and suggests that even if businesses here are a bit circumspect this year, they still see better times ahead in the next few years.

The survey also found, more firms south of the border will seek out new markets in the next two to three years to ensure continued growth.

The research, by the Amárach consultancy group, highlights the Irish Republic businesses are more export driven than the close neighbours.

That’s to be welcomed because if companies still feel they are good enough to take on new markets, it means they are confident they have the ability to still compete with the best overseas.

Enterprise Ireland (EI) has to be given a lot of credit for continuing to stress the need for innovation and for an overseas focus so that we learn to be less reliant on foreign investment.

EI led several trade missions to places as far away as China and without doubt Irish firms are starting to grow and to deliver.

That pace has to be upped and we have keep our commitment to selling into new markets.It is vital we continue to stay resolute, given foreign investors are looking elsewhere.

In contrast with the upbeat business survey that promised more jobs, Davy Stockbroker’s review of the housing market did less to lift the spirits, this week.

They said housing completions could dip by 30% on an annual basis in the final quarter of 2007.

The drop in activity means job losses will be offset to some extent by higher activity elsewhere in construction.

Nonetheless Davy suggest in the first quarter of 2008, the first real fall in jobs in construction will hit the economy.

Its economic forecast of 4.5% growth this year, falling to 3% in 2008 is pretty grim.

Those findings, true or false, are a sharp reminder that the slow down in house building is starting to hit the economy and how we cope with this will have a significant bearing on confidence and economic performance in the next few years.

Some pain was bound to hit the market after the massive surge in prices. Let’s hope that it will not be too unbearable.

The optimists are still of the view that, while house prices could tank for a while, the economy overall, which is the more important question, will not be too badly upset by the transition.