Small firms performing well, but labour costs threatening - Isme

Ireland's small business sector is continuing to perform robustly with positive indicators on business confidence, employment and investment, according to the Irish Small and Medium Enterprise Association.

In its second quarterly survey, Isme said that SMEs will continue to be the main drivers of employment growth, with 36 per cent of companies expecting to increase employment over the next number of months.

On a cautious note it said that, in terms of warning signs, the construction sector is the least positive about business prospects despite recording the highest increases in employment.

The survey states that the high-cost environment continues to be the biggest threat to future development and growth, with production costs increasing by 10 per cent per annum on average. According to Isme a reduction in exports is linked directly to persistent high costs.

It also warns that the proposed second round of benchmarking constitutes an added threat to future economic and business performance.

"It is the cost area that provides the biggest threat to business, with energy, transport and environmental charges representing the biggest cost increases in the last quarter" according to Isme chief executive Mark Fielding.

"The survey confirms that, as in previous quarters, the cost environment continues to dominate with labour costs once again being identified as the number-one concern for SME's," he added.

Isme said that as the public sector benchmarking body sits down again, it is absolutely essential that it takes account of the impact of an increasing public sector pay bill on the economy.

"With the construction sector peaking, the last thing the country and the small business sector needs is to have to pay for the grossly exaggerated public sector wages through tax increases . . . If this scenario occurs, the negative effect on small business and economic performance will be devastating and the Government will have to answer for its continued benevolent munificence to the unelected public sector at the upcoming election," Mr Fielding said.