SME business confidence 'at record low'

The results of a major European survey of SMEs issued today has confirmed that a new record low in business confidence was reached in the last number of weeks.

The EU-Wide survey of 50,000 SMEs, conducted by UEAPME, the European craft and SME employers’ organisation, (which includes ISME as its Irish representative) confirms that almost half of the companies polled expect negative developments in their business in the first half of 2009, compared to only 20% two years ago.

The sharpest fall took place in the last six months, where the UEAPME Business Climate Index came down to 55.1, dropping by 14 points.

The survey also demonstrated that smaller businesses are still reluctant to lay off workers to cope with the downturn, however.

Business expectations on investments and orders for the months to come are strikingly negative, although the service sector expects the decrease in orders to stop during this semester and foresees a relative improvement in personal services orders.

Commenting on the results, ISME chief executive Mark Fielding, said: "The survey results confirm the downwards trend in business confidence among European businesses since the beginning of 2008, with the steepest fall taking place in the last six months.

"A decrease in confidence was easily predictable, but not by such a large extent. This is a clear sign of the tough times European small businesses and Irish businesses, in particular, are facing."

As a result of the crisis, an increasing number of respondents reported a reduction in employment. However, marked differences emerged between micro enterprises and larger businesses, with the former being considerably more reluctant to lay off workers than the latter.

"While the European experience suggests that micro enterprises are keeping more persons employed than pure turnover considerations would require, this would have been reflected in the situation in Ireland 12 months ago, but is no longer the case," continued Fielding.

Significant disparities also emerged from employment data among different sectors, with twice as many companies in manufacturing and construction, recently affected by the car industry crisis and by the bursting housing bubble, planning to lay off workers compared to the services sector.

The only encouraging results of the survey came from business expectations on orders. Although all economic sectors reported negative figures, the business services sector expects the decrease to stop and the personal services sectors foresee a relative improvement in the months to come.