Survey suggests worst of recession may be over

ONE IN six companies have reported that business has improved, giving rise to hopes that the worst of the recession has passed, according to a new survey by KBC Ireland and the Institute of Chartered Accountants in Ireland (ICAI).

The survey of 340 Irish companies, conducted in June, found that 16 per cent indicated an improvement in business volumes, holding out the possibility that business activity levels may have begun a “bottoming-out” process in recent months.

However, the business sentiment survey found that companies continued to expect tough trading conditions in the months ahead.

“The majority of Irish businesses feel the freefall that began last autumn has begun to ease. Although business conditions remain tough, the panic that occurred around the turn of the year has faded,” said Austin Hughes, economist at KBC Bank Ireland.

The survey also found that more than half of companies have let workers go in the past three months. “Presumably, because they feel that output won’t return to boom type levels in the foreseeable future, they have acted aggressively to reduce their workforce to meet weaker projected demand,” said Mr Hughes.

“This process appears to be well advanced although it is not complete.”

Ronan O’Brien, communications director at the ICAI, said it was clear from the “marked tonal differences” in its summer survey responses that many companies believe the worst may be over.

“Conditions are expected to remain tough in the months ahead.

“So, it seems Irish businesses expect to bounce along the bottom rather than experience any marked recovery between now and the end of the year.”

Four out of five companies reported that passing the Lisbon Treaty in October had become more important as a result of the changed economic climate.

The survey also suggests that demand for credit is likely to remain weak as firms continue to be cautious about capital spending.

Two out of three businesses said they did not plan to borrow more over the next 12 months.

One in five companies said they had found it more difficult to access credit in the past three months, with businesses in hard-hit areas such as construction and retail reporting greater than average problems.