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CAI Publishes Irish Business Sentiment Survey

by Jason Gorringe,, London

30 December 2010

Chartered Accountants Ireland, publishing its Winter 2010 Business Sentiment Survey, has said that while activity levels overall appear to be stabilizing in the Irish economy, there are concerns that the government’s austerity package will stunt the growth being exhibited by a number of sectors.

The survey’s main findings show that:

  • Business activity was broadly steady at end 2010 but conditions vary widely between sectors;
  • The gap between improving ‘traded’ sectors and weakening domestic demand is increasing;
  • A slight improvement is expected in early 2011 but divergences are set to widen further;
  • Employment has fallen modestly as downward pressure on costs intensifies;
  • The government’s EUR6bn budget cuts were judged about right but business feels tax increases went too far;
  • Government economic forecasts felt to be ‘slightly’ too optimistic but majority feel 4-year plan provides a reasonable framework;
  • 61% of businesses feel EU/IMF assistance improves Irish economic outlook while 16% think it worsens prospects;
  • Slight majority (56%) also feel Ireland’s membership of the Economic and Monetary Union of the European Union has helped the economy through the crisis but 30% disagree; and,
  • Opinion is split on whether the ECB has helped or hurt the Irish economy.

Commenting upon the publication of the report, Paul O’Connor, the President of Chartered Accountants Ireland, said:

“An improving global recovery is helping many firms make significant gains but similar numbers of companies, mainly those selling to Irish consumers or in construction, report a further weakening in sales of late. This divergence is likely to increase in early 2011.’

O’Connor added that: “With the international outlook reasonably promising, export-focused firms should see further growth but large budget cutbacks mean domestic spending could weaken further.”

Lastly, O’Connor noted that the survey suggested opinions differed on the government’s four year plan: "Although the majority view of business is that the plan provides a reasonable blueprint, 27% of companies feel a new government should make major adjustments."

Similar sentiments emerge in relation to the Budget 2011: "There is a strong view that EUR6bn was broadly right in terms of the scale of adjustment but almost half of the companies surveyed feel the recent budget relied too heavily on tax increases," O'Connor reported.

TAGS: tax | business | Ireland | fiscal policy | budget

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