Ireland’s economy is at a turning point, and we are witnessing a closer alignment between the wider macro-economic outlook and the micro-economic intentions of firms in Ireland, according to a report released by leading Irish law firm, McCann FitzGerald.
The research, which was compiled by Amárach, was carried out among 250 senior Irish business leaders and decision makers at large corporates, SME’s and micro-businesses and looks at their corporate outlook for 2014 including ambitions, prospects, risks and impediments.
Entitled ‘Half full? Half empty?’ the research found that, on the whole, firms are cautiously optimistic as they head into 2014. They expect to grow their sales overseas (driving trade), increase their capital expenditure (driving investment) and increase their staff levels (driving consumer spending) in 2014.
In terms of trade with overseas markets, 54% expect their overseas sales in 2014 to be higher than in 2013 with Europe expected to provide more opportunities than previously was the case (targeted by 46% of Irish exporters in 2014 versus 36% in 2013). However, competitiveness still remains the number one business priority for the year ahead and the majority (63%) foresee rising costs as a threat to their growth ambitions, while 58% worry about a lack of finance inhibiting growth.
Commenting on the research, John Cronin, chairman of McCann FitzGerald, said: “This research has captured a picture of corporate Ireland at a crucial stage in our economic recovery.”
Cronin added: “The findings bode well for Ireland’s economic growth in 2014 as businesses play a crucial role in driving investment, trade and consumer spending. Whilst acknowledging continuing fragility in the economy and the eurozone, the weight of expectations and planned activity is clearly balanced towards a positive outlook, one comprised of more than mere business optimism.”
One of the most encouraging findings of the McCann FitzGerald survey is the expectation that businesses have around recruitment for 2014. In recent times, businesses have been cautious about hiring – roughly equal proportions have increased their staff numbers as have reduced them in the past year (though this doesn’t necessarily equate to the same ‘number’ of jobs).
However, all that is about to change with almost a third of those surveyed expecting to hire more staff in the year ahead, and only 10% anticipate a reduction in headcount.
Interestingly, the McCann FitzGerald research found that despite Ireland’s high levels of unemployment, businesses are cautious about their ability to recruit the right staff with issues such as staff retention and supply problems rapidly emerging. Over a quarter of firms see wage pressures (especially for skilled workers) as their number one concern, either making it harder to keep their staff or too expensive to hire new staff. Any economic pick-up will lead to certain skills in increasing demand. Of those surveyed, 26% felt that emigration is also a key concern, as skilled employees look abroad in search of better prospects.
Looking at the M&A landscape, over the next 18 months, some 16% of those surveyed expect to buy or sell a business. The biggest change is expected in terms of location, with almost 60% of those planning M&A activity in 2014, planning to do so in Ireland. This is up from just 39% in the last three years.
Firms told McCann FitzGerald that M&A will enable them to deliver expansion and growth. Most (34%) expect to fund their activities organically via cash reserves, etc, however 27% expect to use bank debt (particularly apparent as the preferred option for micro-firms and SMEs). Therein lies a potential problem given the capacity and willingness of our indigenous banks to fund such efforts. Businesses also expect joint ventures and partnerships to play a bigger role in the coming 12 months, with a quarter of micro-firms and SMEs planning to go down this route.
McCann FitzGerald also report that not all activities will take the form of traditional M&A as joint venture and partnerships are expected to play a bigger role in delivering expansion over the next three years. On the capital expenditure front, 39% of firms anticipate growth in the budget for capital expenditure in 2014.
The digital revolution
The survey examined the share of online sales in terms of total revenues for Irish businesses. In 2013, nearly half of those businesses surveyed didn’t generate any sales online. Looking ahead to 2014 the research showed that the expectation is that the share of ‘offline’ business (with no online sales) is expected to fall dramatically to a little over a third by the end of the year.
The vast majority of firms agree that social media will be relevant to their business in 2014. Corporate reputation in the digital world is a growing challenge for many businesses, as is the dilemma of managing staff access to social media. Only 18% of the firms surveyed allowed staff access all the time,48% offer some to limited access, and a sizable 18% block staff access completely.
Perhaps, surprisingly, the business decision makers surveyed by McCann FitzGerald are themselves quite sophisticated users of social media. Three quarters of those senior decision makers surveyed have a Facebook account, with almost 40% logging on daily. In terms of LinkedIn, 14% claim to log in daily, with a further 22% claiming to log in once a week. Interestingly, some 50% of those surveyed have a Twitter account, with 15% logging on daily and 22% reporting they access Google+ daily.
A third of those surveyed had invested in data storage solutions such as cloud computing, while a quarter have hired staff with specific digital skills they deem necessary to respond to the new realities, 43% of corporates have hired specific digital skills, and a fifth of SMEs have invested in cloud computing solutions.
The full report can be found here.