Businesses more optimistic about future prospects

BUSINESSES are becoming more optimistic about their future but most have stopped asking their banks for credit, a new survey has found.

The results follow an economic trends survey on the second quarter, which saw Cork Chamber survey the managers of 150 SMEs and multinationals in the Cork area.

It found that optimism is on the rise with 75% of respondents saying they are confident about the financial future of their businesses.

This represents an increase of close to 6% on the first quarter of this year, and a 16% increase on the second quarter of 2009.

Chamber president Ger O’Mahoney welcomed this positive development and said it shows that businesses are more confident about their future prospects across a range of indicators.

But he warned about underlying trends after the survey found that nearly 80% of respondents are not seeking bank finance.

“When one takes into consideration the wider economy, and given that getting loans to flow more normally to small businesses is a critical ingredient to sustaining our economic recovery and reducing unemployment numbers, one has to question whether the SME’s, which represent the largest part of the Irish enterprise base, have no requirement for additional funding at present or have they given up dealing with the banks?” he asked.

He said this result also highlights the importance of all banks outside the NAMA process playing their part in making credit available to business and engaging with the Credit Review Office process.

The survey also found that:

* 85% of businesses indicated that they have no plans to cut jobs in the next 12 months, which compares favourably with a figure of 52% for the same period in 2009.

* 38% of companies plan to increase employee numbers over the next year.

* 54.4% said generating new business is their biggest challenge.

* 34.5% said reducing costs was the next biggest challenge.

One of the main objectives in the chamber survey was to take a closer look at NAMA and to gauge how it is affecting businesses in Cork either directly or indirectly.

While almost 79% of respondents indicated that they materially understood NAMA, the majority (70%) said they were unaware of the implications of being an associated debtor.

And over half (51%) indicated that they were unaware of what classes of loans would be transferred to NAMA.

A total of 78% said the transfer of all relevant loans in the €5 million to €20m category in the first quarter of 2011 would not directly or indirectly affect their business.

And despite the recent falls in the cost of services and in the Consumer Price Index, Mr O’Mahoney called on the Government to take further action to reduce costs for the business community, citing commercial rates and other local authority charges in particular.