Upturn evading firms ‘in economic limbo’

IRISH businesses said they are not seeing a sharp turnaround in the economy, with many claiming they are in “economic limbo”.

According to the latest KBC/Chartered Accountants Ireland business sentiment survey most firms believe the worst of the downturn has passed but the country is far from a clear upturn.

It also found that the problems in accessing credit remain widespread, with more than half of the firms surveyed suggesting credit constraints were an issue for their business.

About half of these signalled credit access posed some degree of difficulty but the remainder indicated that access was a major concern.

The president of Chartered Accountants Ireland, John Hannaway, said that how access to credit evolves could make a marked difference to Irish growth prospects for 2012.

“It’s not entirely surprising that business activity weakened slightly in the third quarter. The outlook for the global economy has deteriorated and domestic spending power is still being squeezed,” he said.

Mr Hannaway added that “the reported increase in optimism in relation to Irish economic prospects suggests business believes the right actions are being taken even if these mean relatively weak conditions in the near term”.

KBC chief economist Austin Hughes said a further drop in company payrolls is disappointing but it reflects both the “sluggishness of activity of late and the degree of uncertainty about the future”.

“In those sectors such as manufacturing and business services where activity has improved of late, the need for ongoing productivity gains means growth would have to be much stronger than it has been to warrant increased hiring,” he said.

“In most other areas the reality is that weak demand conditions imply companies have had to make further job cuts. A key feature is that while the economy as a whole may be stabilising, it doesn’t have sufficient momentum at present to deliver a turnaround in the jobs market.”

He added: “Only when growth picks up to the point where it delivers jobs can we say Ireland is set on a sustainable recovery path.”