Business confidence among small and medium sized businesses increased significantly in the second quarter, a new survey indicated today.
Isme's Quarterly Trends Survey for 2009, said sentiment was still negative but respondents were more optimistic about their prospects than at anytime in the past two years.
The survey, which took in 600 small companies, found 21 per cent of companies were less optimistic about business prospects, compared to 37 per cent in the previous quarter and 74 per cent in the fourth quarter of 2008.
The manufacturing sector was the most optimistic, with construction remaining the most pessimistic.
However, the increased confidence was not reflected in underlying business trends, and there were still serious concerns about economic uncertainty.
Modest improvements had been seen in business conditions over the past three months, with a slight upturn in employment, sales and orders offset by a reduction in investment and "no discernable improvement" in exports.
Almost three quarters – 74 per cent - view the current environment as poor, compared to 69 per cent in the third quarter. Two thirds of businesses said the viability of their businesses was under threat in the next 12 months.
However, a more optimistic 29 per cent said they expected business conditions to improve in the next 12 months, a raise from 23 per cent previously recorded.
Distribution and construction companies were the most pessimistic regarding employment, with 49 per cent and 42 per cent expecting to shed jobs.
The report said smaller businesses were continuing to suffer delays in receiving payments, with the average waiting period now 75 days. Almost half of the firms are waiting more than three months to be paid.
However, companies are slightly more upbeat about investment, with 20 per cent anticipating an increase in the next 12 months. This compares with 19 per cent in the previous quarter.
There is still some wariness among smaller firms, with 32 per cent of companies reducing investment during the fourth quarter, a rise from the 28 per cent seen in the previous period.
"The results overall are more positive than in the previous quarter, but huge concerns still remain. While business confidence has significantly increased, with slight improvements reported in employment, sales and orders, it is far too early to declare that green shoots are visible, particularly as many businesses are concerned for their future," said ISME head of research Jim Curran.
"Economic uncertainty is still a major challenge and remains the number one concern, followed by reduced orders and a lack of credit. It is obvious that businesses still remain concerned about Government plans to address the seriousness of the issue.
"With many small businesses currently faced with exorbitant costs, a reduction in consumer demand, late payments and a difficulty in accessing credit, the indications are that many will be reviewing their investment and employment position over the next number of months, unless immediate action is taken to address these concerns."
A Government-commissioned report by accountancy firm Mazars disputed the level of loan refusals to small and medium-sized companies reported by five banks, claiming refusals may be almost a third higher.
The Irish Banking Federation (IBF) today insisted that the sector is still committed to supporting SMEs.
It pointed to a decline in turnover for SMEs and a rise in the extent to which SME customers are not meeting their repayment obligations as factors in a reduction in credit demand.
"Less than half (46 per cent) of SMEs surveyed requested credit during the seven-month period to end-September 2009 – down six percentage points on the previous period," the IBF said in a statement.
"And it is notable that at least three-quarters on average of these credit applications were approved – amounting to some 70,000 approved credit applications and a drawdown of more than €2.6 billion in loans and finance and leasing in that period."
The Small Firms Association said the report indicated that SMEs face a more challenging environment in accessing credit than when the first report was released in July 2009.
Director Patricia Callan said little had been done to implement the recommendations of the first Mazars report, leading to the increase in the number of credit applications declined in the latest report.
"When a small business fails, it is not because it runs out of customers, ideas or products. It simply runs out of money. With one in four small businesses in Ireland not getting enough credit, we have a very serious problem, with potentially 62,500 small business closures and 200,000 jobs lost as a result," she said.
"With only two main Irish banks, we are concerned that the competition factor from which Irish small businesses have benefited so much over the past decade, will be erased."
The group called for tge Government to intervene to share risk with the banks and allow them back more businesses or reduce the collateral and conditions they set with particular clients.
