Export-focused firms report increase in trade

IRISH BUSINESSES with a focus on external trade saw a pick-up in activity in the final quarter of 2010, but those serving Irish consumers and operating in the construction sector saw activity decline further, a survey of senior Irish executives has found.

The latest KBC/Chartered Accountants Ireland business sentiment survey showed that while business activity generally remained steady towards the end of the year, conditions varied widely between sectors.

Some 360 senior management personnel, including chief executives, managing and finance directors, were interviewed for the survey between December 8th and 16th.

Those in the manufacturing, food and business services sectors, heavily dependent on exports, are optimistic about prospects for 2011. Some 40 per cent of respondents in the manufacturing sector expect business to pick up in the first quarter of 2011, compared to 15 per cent who expect it to decline. Similarly, 39 per cent of those in the food industry expect further improvement, compared to 19 per cent who do not.

Conversely, only 20 per cent of domestic-consumer-focused businesses expect an improvement in activity early next year, while 42 per cent expect it to decline further. Of those representing the construction industry, 9 per cent are optimistic about business recovery in the first quarter of 2011, while 47 per cent are negative.

Paul O’Connor, the president of Chartered Accountants Ireland, said the figures showed that while the improving global recovery was helping many firms make significant gains, a similar number of companies had experienced weakened demand.

“This divergence is likely to increase in early 2011,” he said.

“With the international outlook reasonably promising, export-focused firms should see further growth but large budget cutbacks mean domestic spending could weaken further.”

The number of consumer-related firms reporting a weakening in volumes increased in the quarter. Almost half said that business activity had weakened in the final quarter of 2010, compared to one-third in the previous quarter.

While this may reflect the effect of severe weather conditions on businesses in November and December, the decline in activity may also be due to the International Monetary Fund-EU bailout and larger-than-expected budget deficit on consumer spending.

Overall, the survey found that most business leaders were positive about the bailout, with 61 per cent of businesses saying it had improved the economic outlook.