Three out of four firms do not plan to cut pay again

COSTCUTTING measures are coming to an end as a survey reveals that two out of three businesses have already cut pay by an average of 13%.

The latest KBC Bank chartered accountants business sentiment survey also indicated that the worst may be over but any recovery is likely to be modest.

Three out of four firms have no plans to cut pay further this year, it found.

A separate survey from the Small Firms Association (SFA) found that one in four businesses expected to cut jobs over the next three months.

Close to a third saw job numbers fall in the last three months with almost a half expecting to freeze recruitment in the coming months.

Just over one in five will reduce spend on training, according to the SFA.

KBC economist Austin Hughes said this suggests many businesses feel their wage costs may be approaching a sustainable level.

“However, the fact that nearly a quarter of businesses see pay falling further implies downward pressure on costs remains substantial for many companies. Again the survey emphasises circumstances vary widely across Irish business,” he said.

According to the findings, manufacturing and business services saw an improvement in the first few months of this year while construction and consumer related firms remained weak.

Chartered Accountants Ireland president Tom Fitzpatrick said it was clear companies had implemented major cutbacks, with four out of five firms having now turned their attention to stabilizing activity to prepare for an upturn.

One in five firms is facing tighter credit conditions and most believe NAMA will help, but only a little.

“Business conditions have remained tough in the early months of 2010, but a glimmer of light is appearing that suggests some improvement in activity could be in place by the middle of the year.”

He said any looming recovery was unlikely to be anything like the downturn that preceded it.

Mr Hughes said the survey shows “significant differences” in conditions facing firms in different sectors and even between firms in the same sector.

“Clearly, improving conditions abroad are supporting manufacturing companies and also helping those in the business to business area.

“In contrast, businesses focused on construction and consumers continue to report weakening activity, although there are tentative signs that some building firms expect to see greater stability in activity in coming months.”

Job shedding continued in early 2010 but at a slower pace, while costs continue to tumble as Irish businesses improve their competitive positions.

Mr Fitzpatrick said Irish companies had put in place speedy and substantial adjustments in response to the recent downturn.

The survey reflects the view of 353 chartered accountants working in senior positions.