SMEs worry over Irish economic recovery

SME confidence took a knock during the first quarter of the year, as firms have become concerned about the length of time the economy is taking to recover, a survey shows.

As of the end of March, 39% of SMEs said their business confidence was high; as opposed to 50% at the same period last year.

The percentage of firms with high expectations has gone from 65% to 57%. Overall, 11 of the 12 key indicators in the latest quarterly business trends survey, from small firms lobby group, Isme show annualised reductions.

Firms confident of upping investment have dipped from 44% this time last year to 31%, while the percentage hopeful of upping staff levels in the future have dipped from 23% to 20%. Profitability expectations have also declined after two quarterly increases.

According to Isme chief, Mark Fielding: “Despite the exceptionally strong net exports — mainly from the foreign direct investment sector — which on GDP figures alone made Ireland the fastest growing economy in the EU in 2014, the domestic-facing SME sector continues to struggle out of the recession.

“The better macroeconomic environment has boosted tax revenues and helped achieve fiscal targets, while the quantitative easing has devalued the euro, giving a boost to exports. The reality for SMEs is that the recovery is glacially slow and patchy,” he said.

Isme believes the economy, as a whole, will grow strongly this year, but claims that a rebalancing of the domestic sector will be slower-than-anticipated and its latest survey offers “many reasons for caution”.

“The main caveat to this upbeat assessment is that, excluding car sales, consumer spending is still fragile; many aspects of activity are coming off a very low base and growth rates are somewhat exaggerated and the recovery has been concentrated in the Greater Dublin area, and ‘contract manufacturing’ is exaggerating the growth statistics,” according to Mr Fielding.

“There is still a strong level of fragility surrounding the economy and there are still many problem areas to work through and challenges to be surmounted,” he added.

Highlighting the need for a general election, Mr Fielding said political instability is having a dampening effect on SME investment and job creation.