05/01/2009 Pessimism amongst PHB's in Ireland

PRESS RELEASE
5 January 2009

Widespread pessimism amongst privately held businesses in Ireland – Slump in consumer demand most pressing concern

Ireland is now one of the most pessimistic countries in the world in its business outlook for 2009.  A global league table on optimism amongst privately held business commissioned by Grant Thornton shows that in two years Ireland has moved from being one of the most optimistic countries to one of the most pessimistic.

Ireland has gone from having a  +84 percent and +82 percent balances in the 2006 and 2007 surveys to -50 percent in the 2009 survey.  The country ranks 30th most pessimistic out of 37 countries surveyed, with countries like India, Botswana, Philippines and Armenia reporting far more optimistic outlooks than Ireland.  

Overall, the survey shows a collapse in confidence globally amongst privately held business, with optimism down -56 percent in the last twelve months.  The International Business Report, which surveyed senior executives from 7,000 PHBs across 36 economies, shows an overwhelming consensus that falling consumer demand is the greatest threat to PHBs. 

This finding is reflected in the Irish market, with one third of the businesses surveyed here reporting that they are most concerned about the fall in consumer demand.  A further 25 percent of businesses say they are worried about shortages of business credit and 14 percent report they are concerned with lack of consumer credit. 

Pat Burke, head of PHB in Grant Thornton said, “If the government needed any further proof that there is a pressing need to stimulate consumer spending and kick-start the economy this survey should surely convince them.”

He continued, “There is no doubt that the concerns expressed by PHBs about the collapse in business and consumer credit is directly linked to the slump in consumer demand. The lending freeze in the banking sector exacerbated already depressed sentiment on foot of the housing crash and rising jobless figures.  Whilst the government’s “Framework for Economic Renewal” contains some proposals to develop a ‘smart economy’ and includes a welcome commitment to long term capital infrastructure projects, such as a school building program, there is little evidence of incentives which will stimulate consumer demand, which is essential if businesses are to weather the stormy conditions predicted for 2009.”

Ireland’s GNP was 4.9% lower in the three months to September 2008 compared to the same period last year with the full year contraction forecast to be 2.6%. The outlook for 2009 is also bleak, with analysts projecting GNP to fall by up to 4.6%.

The pessimism expressed by Irish privately held business is reflected around the world in this Grant Thornton optimism/pessimism barometer.  For the first time since this research began in 2003, pessimists outweigh optimists by -16 percent.  This is compared to a +40 percent rating this time last year. 

Of the four largest trading nations, PHBs in the United States and mainland China, who together contribute over 32 percent of global GDP, scored their optimism at -34 percent in the United States but +30 percent in mainland China. Similarly, Japan and India (collectively contributing over 11 percent of global GDP) scored their optimism at -85 percent and +83 percent respectively.  This would indicate that despite the widespread pessimism, there are pockets of hope in the global marketplace, particularly in emerging economies. 

Despite the pessimism, the survey found PHBs from 11 countries remained optimistic about the outlook for their economies, with India (+83 percent), Botswana (+81 percent) and Brazil (+50 percent) heading the list. Japan (-85 percent) and Spain (-65 percent) were the most pessimistic. The biggest swing in sentiment was in Hong Kong, which went from +81 percent optimistic last year to -49 percent, a factor of its exposure not only as one of the hard hit financial services centres but also of its close trading links with both the East and the West.

Regionally, the European Union emerged as the most pessimistic trading block at -38 percent on the optimism/pessimism barometer. Latin America (+11 percent) and Asia Pacific (+3 percent) both recorded optimistic scores, albeit down on last year.

ENDS