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Irish Businesses Sceptical Of Economic Recovery

by Jason Gorringe,, London

01 June 2011

The Irish government must maintain the low rate of corporate tax, while implementing a strong economic recovery plan, according to a new survey, which also shows that business confidence in the state of the Irish economy remains low.

The Irish CEO Pulse survey was conducted in March by PwC, and involved 182 respondents over a variety of sectors and ownership types. It found that a mere 16% of those questioned see a favourable outlook for Ireland's economy over the coming year, with 88% not expecting growth until 2012 or later.

However, this lack of confidence, demonstrated clearly by the drop from 29% in 2010, does not match that recorded by PwC in either 2008, when only 14% saw the economic forecast as favourable, or the dismal levels seen in 2009, when confidence fell to just 3%. It is, moreover, ironic that confidence peaked at 74% in 2007, shortly before the financial crisis.

Nonetheless, while overall economic confidence was down, 72% of multinational corporations expressed satisfaction with their existing Irish investments. 33% are looking to increase their investment, with 39% keen to maintain it at current levels. The proportion of those exploring further investment is down from 40% last year, but is not as low as the 32% recorded in 2009. 2007 was, once again, the peak year, when 70% were anticipating greater investment.

Businesses are also expecting to see internal growth over the next twelve months. 54% anticipate an increase in revenues, up slightly from 53% last year, and considerably from the 2009 figure of 29%.

Moving to a more general perspective, the survey reveals that an overwhelming majority of respondents view the retention of the country's 12.5% rate of corporation tax as a governmental priority. In addition, 70% argued that the implementation of a robust national economic recovery plan is essential. Rounding out the top three business demands is the reduction of public sector costs, with 68% seeing this as necessary.

On the other hand, several barriers to economic recovery were also identified. 58% cite a lack of consumer demand, 52% blame pressure on margins, and 33% argue that regulatory pressures hinder progress in this area. In contrast, 56% viewed the global economic recovery as driving Ireland's own, with 49% regarding a stable government, and 47% a reduction in public expenditure, as crucial.

Commenting on the survey, Richard Bruton, Minister for Enterprise, Jobs and Innovation, said: "It confirms that confidence in the Irish economy is still a major problem, among both indigenous and multinational CEOs, which is clearly a concern. However, encouragingly, it also shows that an increasing number of CEOs are planning for growth; and, crucially, that three-quarters of CEOs believe that innovation is critical ... I believe that the three key challenges for me and my Department in attempting to improve the environment for business are reducing costs, improving access to finance, and encouraging innovation".

TAGS: tax | economics | business | Ireland | fiscal policy | corporation tax | multinationals | standards | regulation

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