INSIDE THE WORLD OF BUSINESS
From enterprise births to recession deaths
With its Business in Ireland 2010, the Central Statistics Office has presented us with a detailed and lucid snapshot of where the Irish commercial world stood two years ago.
Yes, it’s a touch dated, but it is effective nonetheless, particularly in a chapter tracking the life path of businesses established in recent years. The CSO rather engagingly refers to businesses started as “enterprise births” and to those closing as, you’ve guessed it, “enterprise deaths”. As such, there were almost 16,700 businesses “birthed” in 2006. Of these, 89.8 per cent survived for a year, 81 per cent lasted two years, 72.8 per cent kept going for three years and 63.7 per cent made it 2010, or four years. Not so bad, perhaps.
Go further though and there is a bit more cause for concern. Between 2006 and 2009, the rate of growth in businesses that were still alive after their first year slowed quite dramatically as recessionary worries spread. In 2006, these businesses grew their employment by 81.4 per cent whereas by 2009, this had fallen to just 26.9 per cent. It’s still growth, but not as it could be, probably because business-owners’ fear of risk and expansion grew to equal their fear of failure. In 2009, enterprise deaths exceeded enterprise births by 10,700.
These are the figures that should be capturing the Government’s attention because these are the numbers that will, to a large degree, dictate how well we all emerge from economic crisis.
Some businesses should fail, either because they are badly-run or because they were a bad idea in the first place. This does not mean, however, that struggling enterprises should just be left to sink or swim. Helping the owners of viable businesses to stay the course when it all becomes too much – often through sensible access to credit and advice – needs to be prioritised. With this research, the CSO has done some of the Government’s groundwork in this regard.
Noonan managing debt expectations
The latest comments from Minister for Finance Michael Noonan in the “will we or won’t we get a deal on the bank debt?” saga should be seen as a case of managing expectations. Noonan this week sounded a cautious note about the EU rescue fund, the European Stability Mechanism, taking a stake in the still-standing (okay, just about standing) Irish banks – namely Bank of Ireland, AIB and Permanent TSB.
At an Oireachtas committee hearing on Thursday, Noonan queried whether “a fund in Europe that is designed as a rescue fund are really the best people to run an Irish bank? Obviously, they have no experience in running a bank”.
Such a concern would hardly have registered with the Government back in June when the door was left ajar on the ESM possibly taking a stake in the Irish banks. In fact, the Government would have taken the ESM’s arm off if it had offered to buy bank shares . Noonan has already signalled that there is a better prospect of the Government securing a deal on those pesky promissory notes used to pay for most of the cost of Anglo Irish Bank and Irish Nationwide than on the ESM buying shares in the banks from the Government. If the ESM never directly recapitalises the banks in a “retrofit” recapitalisation, Noonan’s comments softening the Government’s stance on a possible deal with the ESM will have been be seen as trying to save face in anticipation of exactly that happening. Various deadlines for a deal on the promissory notes, including the Patrick Honohan-inspired “40 for 40” option (swapping the notes for a bond of €40 billion for 40 years) have come and gone, and this “technical paper”, promised months ago, has never materialised.
Department of Finance secretary general John Moran repeated the latest Government line this week, saying the deadline now being worked towards was the next March 31st payment of €3.1 billion due under the promissory notes. Don’t be surprised if, in the absence of a long-term deal on the debt, there is another short-term annual fix for the March instalment. That’s one expectation that will undoubtedly soon be managed by the Government if these protracted discussions continue to drag on.