Insurance costs our biggest threat, say small firms
These are the top two problems of the 12 most negative factors in the survey, impacting on the ability of small business to invest, develop, expand and create new jobs . The survey was distributed to a sample 3,500 of the SFA’s 8,000-member companies and 1,014 companies responded.
The sample was drawn from manufacturing, distribution, retail and services sectors and from a regionally representative sample. The results show that insurance costs and labour costs are by far the two most significant issues affecting small business at a micro level, with 21% of respondents citing insurance costs as their biggest difficulty and 15% of respondents citing labour costs as the most significant problem for business confidence.
Companies were asked to rank the impact that various issues were having on their business. The SFA can identify over 1,700 job losses associated with increases in insurance costs. The spiralling cost of insurance is costing the economy jobs and closing otherwise profitable companies. The SFA says it is time for the Government to conduct an inquiry into why insurance costs are between three and six times those of our competitors. The issue of frequency, quantum and legal costs must be investigated fully.
Labour costs ranked number two, with 15% of respondents citing this as their biggest problem and 77% as a major business problem. The survey shows that average earnings have increased by 9% or three times the eurozone average of 2.9%. The ability of the economy to create jobs is declining rapidly and there will be a very significant downturn in employment creation in 2002. This year, demand for labour will be 6.5%, down from 7.8% in 2001 and 10.9% in 2000. For the third successive year, small companies created less jobs than the previous year.
While they will create 36,238 jobs in 2002, the corresponding figure in 2001 was 45,942 and 64,201 in 2000.
Late payment by debtors was cited by 8.9% as the top problem and 62% as a major business problem, despite the introduction on August 8 of EU Directive 2000/35/EC, which makes it compulsory for all firms to pay accounts within 30 days following the date of receipt of invoice or of goods or services. The average payment period in Ireland is currently 54 days, while Britain and Germany are 49 and 38 days, respectively. The legislation will have a significant impact, but the SFA is concerned it may result in small companies having to seek short-term finance and still have limited access to a court system and raises the need for a new small claims court for business.
Inflation ranked fourth, but the most important for 8.4% of companies. Inflation is over twice that of the eurozone average of 2.1%. This leaves Ireland vulnerable to a further loss of competitiveness and threatens jobs. Inflation will edge higher over the next two months because of increases in health and education costs. The most worrying aspect of the figures is that, for the main part, inflation is domestically led. The SFA expects that over the coming months the inflation rate will fall back but the major threat to this scenario is wage pressure.
