Outlook positive - SFA

The economic outlook for the remainder of the year is "extremely positive" but competitive risks remain, the Small Firms Association (SFA) said yesterday.

Releasing the SFA's summer economic statement, its director, Pat Delaney, warned that while the economy is very sound, it remains open to "frictional" problems.

These threats, such as high oil prices and "inefficient public service delivery" continue to undermine the economy's competitive base, he said.

It is imperative, Mr Delaney said, that the Government maintains its existing economic policies and keep "a strong hold" on public spending.

"There must not be a return to highly expansionary budgeting which would undermine business investment, employment and economic growth, he said.

The SFA is expecting the economy to post growth of 5.5 per cent this year while creating 61,000 new jobs and keeping inflation at 2.5 per cent. "The rest of the EU could learn from the Irish model. A focused budget, continuity in interest rates and lower inflation have all contributed to creating this mindset of investment," said Mr Delaney.

Prospects for employment are very strong and the small business sector is at the "fulcrum" of employment creation, according to the SFA's analysis.

A labour market survey carried out by the association has found that 40 per cent of small companies are citing recruitment difficulties as a barrier to expansion.

"For the first time we have in excess of two million people at work," said Mr Delaney.

On public services, the SFA is calling on interested parties to display the "political and social courage" needed to solve problems within health, education, housing and local authorities' services.

"If money alone could solve the problems in our health sector the problems would have been solved long ago," he said.

The SFA wants "urgent and focused management, not increases in spending".

The association also calls for a major review of the efficiency of structures and systems in local authorities so that increased accountability and better value for money can be achieved.

Local government current expenditure now stands above €3.8 billion, with user charges accounting for 60 per cent of local authority income and most of these charges are paid by business, Mr Delaney said.