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Irish business recovery gathers momentum

Wednesday, January 29 10:50:05

The recovery of Irish business is building momentum, though there will be no dramatic improvement in employment, according to the Winter 2013 KBC Bank Ireland/Chartered Accountants Ireland Business Sentiment Survey.

The survey showed that Irish companies reported a further step-up in activity in the final quarter of 2013, with over half of firms reporting increased output in the final three months of last year - the largest percentage since the summer of 2007.

The survey also analysed businesses' attitudes towards the end of Ireland's EU/IMF assistance programme which revealed strong consensus that this would have a positive effect even if the majority take the view that it will be modest.

Commenting on the results, Pat Costello, Chief Executive, Chartered Accountants Ireland noted that the results of the winter business survey point towards a clear further improvement in Irish business at the turn of the year.

"The majority of companies reported increased activity levels-the first time this has happened since the summer of 2007. So, these results suggest a broad recovery in business conditions is taking hold. A still challenging environment means that one in eight companies reported weaker conditions but unlike the experience of recent years, companies reducing output are now very much the exception rather than the rule," he said.

He added that it clearly points to a strengthening recovery but it also suggests a gradual rather than a surge in business activity levels.

"As a result, jobs growth was only slightly better than three months ago. Encouragingly, the greatest improvement in hiring came in smaller companies. This likely reflects a healthier trend in domestic spending of late that requires companies to add to their headcount. Through the remainder of 2014, 42pc of companies plan to increase employment compared to 10pc that envisage a decline in their payrolls. This suggests companies will continue hiring as the year progresses."

Commenting on the results, Austin Hughes, Chief Economist, KBC Bank Ireland said: "While companies reported a step up in activity levels, there also appears to have been a sea change in their thinking about the broader Irish economy of late. Clearly, this reflects growing evidence that a recovery is taking hold but the survey also suggests that Ireland's exit from the bailout may have had a sizable impact on business confidence. 68pc of companies expect the exit from the EU/IMF assistance programme to have a positive effect with only 2pc envisaging a negative impact. This may be related to the bailout exit highlighting a clear difference between conditions now and three years ago. There may also be hopes it will improve Ireland's reputation abroad and might be a catalyst to stronger domestic spending."

Mr Hughes also noted: "Although companies are reporting stronger activity levels, the majority indicate that selling prices in the markets in which they operate are flat or falling. This is likely to be a key influence on their expectations of very modest pay increases in the coming year. As a result, one-third of companies expect average pay to remain unchanged. A further third expect increases of less than 2pc. A relatively small number (18pc) see pay rising 2 to 5pc. Less than 1pc expect an increase above 5pc. A small but not negligible 4pc of companies envisage pay cuts this year."