More gloom ahead, predict business chiefs
Massive insurance hikes, increased wage bills and spiralling inflation combined to make 2002 a bad year. However, business leaders say the situation will get even worse if the US goes to war with Iraq and benchmarking payments are approved by the Government.
The Irish Small and Medium Enterprises organisation says firms suffered particularly badly from internal and external pressures in the last 12 months, according to an end of year survey.
ISME chairman Mark Fielding said the Government must tackle inflation, which his group predicts will rise above 6% in the next few months.
He was critical of Government spending, of Charlie McCreevy’s Budget, which he claimed was inflationary, and was extremely concerned that benchmarking wage increases would send inflation out of control.
“The Benchmarking Report is like the sword of Damocles hanging over us. It will create havoc if it is taken on board,” Mr Fielding said.
He added that as a small open economy, Ireland was highly susceptible to the sluggish global economic climate and consequently, experienced slow domestic growth.
“Multinationals either pulled out of Ireland altogether or downsized. Business confidence was deflated and consequently investment orders decreased, impacting on employment prospects, particularly in the indigenous manufacturing sector,” Mr Fielding said.
ISME predicts that in the first six months of 2003 businesses will face further insurance hikes and multinationals will continue retrenching.
The second half of 2003 will be characterised by slowly increasing growth levels in the US economy, unless war breaks out in Iraq.
“If that happens the situation will get worse. On its own, an increase in the price of oil will skew up all predictions. We are very dependent on outside influences,” Mr Fielding said.
This year, the ISME said employment prospect figures were the worst recorded since the currency crisis in 1993. A recent ISME Business Trends Survey found that 21% of companies expect to employ less in the next 12 months, compared to 18% that project job increases.
Meanwhile, wages increased across all sectors by an average of 7.5% Insurance increases are also crippling some businesses, with average hikes at 71%, but some as high as 500%. Mr Fielding said public sector pay was out of control and, if not contained, would have serious repercussions on the economy.
