40% of SMEs reduced employment in last quarter

Trading conditions continue to be extremely difficult for SMEs, with 40% of companies employing less and 15% employing more, according to a report issued today.

Trading conditions continue to be extremely difficult for SMEs, with 40% of companies employing less and just 15% employing more, according to a report issued today.

This net 25% is up from the net 15% of companies who confirmed in ISME’s last quarterly trends survey that they have let people go.

The construction sector recorded the largest increase in job losses, with a massive net 73% of businesses employing less than this time last year, up from a net 48% in the previous quarter.

Manufacturing at 27% was the next worst sector followed by retail (20%) and services at 11%.

A fifth of companies (net 21%) expecting to be employing less over the next 12 months. While this is a slight improvement on the previous quarter (net 22%) it still represents a 38% turnaround on the same period last year when a net 17% of companies anticipated creating jobs.

The survey, which attracted a response from more than 400 companies, reported that business confidence levels, while showing a slight improvement on the previous quarter, are still extremely fragile, with a net 47% of companies less confident about their business prospects than they were 12 months ago. This compares to a net 53% recorded in the previous survey, a 20-year low.

The most negative sector, probably as a consequence of high fuel prices, is the distribution sector with a net 79% less optimistic about business prospects, followed by construction at 60%, retail (53%), manufacturing (47%) and services at 31%.

Company investment is down, with a net 20% of SMEs having increased investment in the last 12 months, in comparison to a net 21% in the previous quarter.

Sales have slumped, with a net 18% of companies reporting that turnover is now less than the same period last year, in comparison to a net 10% who reported reduced sales in the previous quarter.

"What a difference a year makes," said ISME head of research, Jim Curran.

"This time last year we recorded that businesses were continuing to expand, were increasing employment and investment and in general were relatively optimistic about business prospects.

"The change in the last 12 months is stark, with negative sentiment across the board. Nowhere is this more evident than in the jobs market, with a dramatic reduction in numbers employed, with job losses over the last quarter among the highest ever recorded.

"The plummeting level of sales since the start of the year has been a key factor in leading to job losses, but as the trends survey once again confirms, businesses are identifying economic uncertainty as being their number one concern, which would explain why companies are simply not investing and are cutting back in all areas.

"Consequently, many in the SME sector are barely staying afloat, still grappling with exorbitant cost increases and are indicating that things are only going to get worse before they get better.

"What is required is firm leadership from Government and nowhere will this be more evident than in the upcoming Budget, were among other things the costs imposed on business need to be tackled."

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