2006 a good year for small business, says Isme

The year ending has been a good one for small business, with exports, output and investment all increasing, according to Isme, the representative body for small and medium-sized enterprises.

In an end of year message, Isme said the services and distribution sectors performed particularly well during 2006.

"The same unfortunately could not be said about manufacturing which declined significantly in the last six months. The prospects for the sector are particularly problematic going into 2007, with no new employment expected to be created."

The group said the Budget was a "mixed bag" for small business.

"It was disappointing that the Minister failed to address the Government's contribution to inflation [ 11.5 per cent increase in current Government expenditure in 2007].

"The massive public sector pay bill has been growing exponentially under the present Government with the gap between the average industrial wage and average public sector pay earnings increasing at a pace." It said the cost environment was the biggest issue confronting small and medium-sized enterprises and required a concerted effort by Government in the coming year.

Surveys by the group show most businesses are confident about their prospects in 2007. The main risks continue to be external, with oil, the US economy and the risk of a further depreciation in the dollar among the items highlighted by Isme.

"For small business the challenge will be the strong growth of the Asian economies and the increase in outsourcing to the Far East and eastern Europe. Like many of our EU counterparts, we face serious challenges from these low-cost competitors."

The group said controlled and sustained major investment in infrastructure was needed in 2007 to bring the economy up to more competitive standards.

"As the housing construction industry begins to cool next year, it is important to see controlled growth in public infrastructure investment, which will assist in a soft landing for the sector. The new National Development Plan to be published in early 2007 must set out the Government's plans to optimise economic growth, at almost full employment, without overheating the economy. Included in this plan must be a strategic place for indigenous SMEs and not a 'crumbs from the table' approach as heretofore."

Consumer spending is expected to be the main engine of economic growth in the coming year, the statement said.