ISME PRESS RELEASE 4th QUARTERLY TRENDS SURVEY 2011 ISME’s TRENDS SURVEY CONFIRMS THAT SME BUSINESS CONFIDENCE AT TWO YEAR LOW Nearly half of companies expect business conditions to deteriorate. Less jobs being shed, however employment creation prospects remain weak. Export performance powers ahead as domestic reliant businesses, particularly Retail, continue to struggle. Economic uncertainty, reduced orders and access to finance remain main concerns. ISME, Wednesday 21st December 2011. The fourth quarterly business trends survey results from ISME, the Irish Small & Medium Enterprises Association, which attracted a response from 626 companies, confirms that business confidence among the SME sector continues to slide, with confidence levels at their lowest in two years. Business confidence has now fallen in every quarter this year, which is indicative of the huge levels of uncertainty that remains, not only about the domestic economy but also the situation internationally. The Retail Sector remains the most pessimistic (-50%), followed by Manufacturing (-36%), Distribution (-27%), Construction (-20%) and Services (-6%). While SMEs continue to reduce employment, the number of companies that have let people go is down on Q3, with a net 13% of companies reducing employment, compared to a net 22% in the previous quarter. In fact this quarter reported the lowest number of companies reducing jobs for over three years. The Retail Sector (-27%), reported the highest incidence of job losses, followed by Services (-18%), Construction (-10%) and Manufacturing (-3%). Employment expectations have improved slightly on Q3, with a net 6% of companies anticipating letting people go, compared to a net 8% at the end of the previous quarter, but once again the indications are that SMEs will continue to reduce employment over the next 12 months and employment prospects remain weak. 59% of companies still view the overall business environment at present as being ‘poor’ or ‘very poor’, with almost half of companies (48%) expecting conditions to deteriorate over the next 12 months. Turnover is down for 52% of companies on last year and 38% of companies experienced a cancellation of orders in the last three months, the majority of these orders cancelled locally. There is positive news with export performance continuing to remain very strong with a significant increase in the last quarter. The net value of exports in the last three months (+32%), is up considerably on Q3 (+16%), and is slightly higher than the previous record figure recorded in Q2 (+29%). Even taking account the current uncertainty internationally, 48% of companies expect to increase their exports over the next 12 months, with 10% anticipating a reduction. Also, more companies are increasing investment compared to those who have reduced their investment levels. Page 1 of 2 Business costs continue to increase in many areas with cost increases of 5% plus reported for insurance, energy, transport, raw materials, and waste. Once again following on from previous quarterly trends surveys, the majority of owner managers have highlighted economic uncertainty as their main concern, with reduced orders, access to finance and the cost environment issues identified as being particularly problematic. Commentary According to ISME Head of Research, Jim Curran, “Not surprisingly against the backdrop of the recent Budget, international uncertainty, together with Government inability to control its own cost areas and the reluctance of consumers to spend, SME business confidence continues to deteriorate for the fourth quarter running and is now at a two year low. This is very evident particularly amongst companies operating in the domestic marketplace, where economic uncertainty is killing any discretionary spending as people defer spending decisions. Not surprisingly, therefore, Retailers are the most pessimistic”. On the flip side the export sector continues to power ahead with export values up significantly in the latest quarter confirming that export values are at their highest in many years. While there are obvious concerns about international trade, 48% of companies believe that their export values will increase further in 2012. While almost two thirds of companies view the overall business environment as ‘poor’ or ‘very poor’, the number of companies shedding jobs, while still negative overall, is at its lowest level in three years, indicating that the labour market is stabilizing. Employment prospects, however, remain weak, with more companies anticipating letting people go than those who plan to increase net employment. According to Curran “Overall the results highlight that the two-speed nature of the Irish economy, which has been very evident over the last 12 months, will continue for the foreseeable future, with domestic demand remaining very weak, and exports continuing to perform positively, albeit at a slower pace of growth” "There is no doubt that the uncertainty that has dominated the economic landscape will continue in the months ahead, with potentially disastrous consequences for the already weak domestic sector. The Government therefore needs to step up to the plate and attempt to resuscitate the domestic economy by addressing business concerns, including cost competitiveness, access to finance, late payments and the deteriorating labour market. Addressing these issues is key to improving business confidence, which is so important to job creation, which will benefit consumer demand, with positive implications for the domestic marketplace and the overall economy,” concluded Curran. For further information contact: Jim Curran Head of Research Office: 01 6622755 Mobile: 086 2640469 Mark Fielding Chief Executive Mobile: 087 2519675 Note to Editors: ISME is the only independent voice of Small & Medium business in Ireland, representing in excess of 8,500 members across all sectors. The Association is owned and run by owner managers and is independent of big business, government and unions; the only TRUE voice of the Irish SME. www.isme.ie Page 2 of 2