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IMAGE HERE INTO GREY AREA.
By Elaine Sloan & John Clarke
J.3156
Behaviour & Attitudes Business Confidence Monitor 3rd Quarter 2011
2
Introduction
Given the state of the economy, and the uncharted waters businesses find themselves in,
Behaviour & Attitudes conduct a Business Confidence survey on a quarterly basis in tandem with
its Consumer Confidence survey.
A questionnaire has been developed for the business monitor which covers issues such as recent
business results, projected employment levels, profit margins and expectations for the
forthcoming year.
The quarterly survey is conducted via telephone amongst a sample of 350 Business
owners/Managers countrywide.
The sample is drawn from a ‘deduped’ mix of reputable business listings including Bill Moss, Data
Ireland, the Irish Times and Business & Finance Top 500 companies in Ireland
3
Sampling Approach
The chart below sets out the profile of business company size in Ireland (Source:
CSO and Bill Moss) compared with the achieved Behaviour & Attitudes Business
Confidence Monitor sample:-
No of employees % % %
1-3 42 43 42
4-9 28 28 28
10-19 14 14 14
20-50 11 11 11
50-250 6 5 6
250+ 1 1 1
The survey data is subsequently weighted to reflect the known universe profile.
A sample size of 350 will yield a dataset which can be deemed to be accurate to
within plus or minus five percentage points.
Known
Profile
(Bill Moss)
B & A
Business
Monitor
Sample
B & A
Weighted
Results
4
Sampling Approach
Interviewing was conducted through Behaviour & Attitudes Computer Aided Telephone
Interviewing Unit (CATI) at Milltown House in Dublin.
Interviews were conducted with the owner/Chief Executive of each selected company.
Fieldwork on the project was conducted between the 26th October – 2nd November 2011.
All interviewing was centrally supervised and quality control verification was conducted
on 15% of interviews undertaken.
5
Detailed Survey Results
6
Higher
The Same
Lower
Business Activity Looking back – short term analysis
compared with equivalent period last year
23 29 29
23 20 22
53 51 48
1st Qtr 2011
Vs
1st Qtr 2010
(353)
%
Gap (Pos vs Neg) -30 -21 -19
Q.1 Business activity may be measured by gross income, chargeable hours worked or any equivalent measure of volume of activity appropriate in
your business. How has your business performed in the second quarter of this year – from April to June. Were your results higher, lower or the
same compared to the same period last year?
2nd
Qtr 2011
Vs
2nd
Qtr 2010
(350)
%
3rd
Qtr 2011
Vs
3d Qtr 2010
(353)
%
Some minor improvement over the course of the year evident but even with that business activity continues to trend downwards.
7
22 28 28 28
33 32
24 20 22 23
22 22
54 52 50 48 46 46
Higher
The Same
Lower
Business Activity Looking Back – 3rd Quarter 2011
compared with equivalent period last year
Any Export
1st Qtr
(247)
%
2nd
Qtr
(244)
%
Indigenous Only
Gap (Pos vs Neg) -32 -24 -22 -20 -13 -14
3rd
Qtr
(230)
%
1st Qtr
(97)
%
2nd
Qtr
(103)
%
3rd
Qtr
(109)
%
Both indigenous and exporting companies continue to underperform and while those with
an exporting dimension looked like they were making some headway earlier in the year,
that now seems to have stalled.
8
28 23
28
34
30
32
38 47
40
Higher
The Same
Lower
Business Activity Looking Forward – short term analysis
compared with equivalent period last year
Looking ahead
to 2nd
Qtr 2011
vs
2nd
Qtr 2010
(353)
%
Q.4 And thinking ahead to the fourth quarter – October to December – do you think your performance will be higher, lower or the same as the
fourth quarter of 2010?
Companies believe
their performance
will be weaker for the
4th
quarter 2011
compared with last
year. The slight
easing apparent may
be simply seasonal
variations.
Looking ahead
to 3rd
Qtr 2011
vs
3rd
Qtr 2010
(350)
%
Gap (Pos vs Neg) -10 -24 -12
Looking ahead
to 4th
Qtr 2011
vs
4th
Qtr 2010
(353)
%
Factoring in Christmas activity (where we would anticipate a greater degree of
optimism), forecasts remain subdued.
9
Higher
The Same
Lower
Business Activity Looking Forward – 4th Quarter 2011
compared with equivalent period last year
23 18
25 26 23 27 36
31 34
35
27
30 32
29
32
34
33 33
42
54 45 42
47 41
30 36 33
Gap (Pos vs Neg) -19 -36 -20 -16 -24 -14 -6 -5 +1
Business confidence has marginally increased in anticipation of Quarter Four but
the negative sentiment pervades for the smaller companies.
1st Qtr
(148)
%
Number of Employees
2nd
Qtr
(122)
%
1-3 1
st Qtr
(91)
%
2nd
Qtr
(73)
%
4-9 1
st Qtr
(114)
%
2nd
Qtr
(155)
%
10+ 3
rd Qtr
(150)
%
3rd
Qtr
(87)
%
3rd
Qtr
(116)
%
10
26 28 25
36 33 36
36
19 33
29
22 24
38
52
42 36
46 40
Higher
The Same
Lower
Business Activity Looking Forward – 4th Quarter 2011
compared with equivalent period last year
Exporting companies are more positive overall and demonstrate even greater confidence as
they move into Qtr 4.
1st Qtr
(97)
%
2nd
Qtr
(103)
%
Any Export
1st Qtr
(247)
%
2nd
Qtr
(244)
%
Indigenous Only
Gap (Pos vs Neg) -12 -24 -17 = -13 -4
3rd
Qtr
(109)
%
3rd
Qtr
(230)
%
11
Optimism?
12
Business Environment – Optimism for 2011 as a whole?
14 15 14 16
58 61 56
59
28 26 30
24
Jan
(205)
%
Very optimistic
(8-10)
Neutral/Not sure
(4-7)
Very worried (1-3)
Q.5 And looking forward to 2011, how optimistic are you for a favourable business environment by end December 2011. Lets use
a scale of 1-10 where 10 means you are very positive about prospects and 1 means that you are very concerned or worried.
On this scale, how optimistic are you?
Aug
(350)
%
May
(353)
%
Gap (Opt vs worried) -14 -16 -11 -8
The jury continues
to be out on how
business will fare
by the end of the
year. However, still
more companies
are worried than
are positive (albeit
with some easing
over the year).
Oct
(353)
%
13
15 11
15 12
25 18
60
56 54 64
56 64
25 31 29
26 19 18
Business Environment – Optimism for 2011 as a whole?
Evidence of further entrenchment among indigenous only businesses despite the marginal
increase in optimism.
Any Export Indigenous Only
Gap (Pos vs Neg) -10 -20 -14 -14 +6 =
Very optimistic
(8-10)
Average
(4-7)
Very worried (1-3)
1st Qtr
(97)
%
2nd
Qtr
(103)
%
1st Qtr
(247)
%
2nd
Qtr
(244)
%
3rd
Qtr
(109)
%
3rd
Qtr
(230)
%
14
Employment
levels
15
Employment Levels Compared to Last Year
0 10 10
15
59 61 57
31 29 28
Higher
The same
Lower
Gap (Pos vs Neg) -21 -19 -13
Net employment is still negative, albeit easing, indicating that unemployment is
continuing to rise into the fourth year of the recession.
Q. 7 Could you indicate whether your employments levels are higher, lower or the same compared with the first quarter of last year?
1st Qtr 2011
Vs
1st Qtr 2010
(353)
%
2nd
Qtr 2011
Vs
2nd
Qtr 2010
(350)
%
3rd
Qtr 2011
Vs
3rd
Qtr 2010
(353)
%
16
Prices and profits
17
Operational Profit – Year on Year
19 19 22
25 25 27
56 56 52
Higher
The same
Lower
Over 50% of companies report lower levels of profit than last year.
Gap (Pos vs Neg) -37 -37 -30
Q.8 Could you tell us whether operational profit is higher, lower or the same compared with the first quarter of last year?
1st Qtr 2011
Vs
1st Qtr 2010
(353)
%
2nd
Qtr 2011
Vs
2nd
Qtr 2010
(350)
%
3rd
Qtr 2011
Vs
3rd
Qtr 2010
(353)
%
18
Prices Charged – All Businesses
9 8 6
46 42
51
45 49
43
Higher
The same
Lower
There is no doubt that pressure on pricing continues despite evidence of some
companies having hit their ‘floor’.
Gap (Pos vs Neg) -36 -41 -37
Q.9 Could you tell us whether prices charged are higher, lower or the same compared with the third quarter of last year?
1st Qtr 2011
Vs
1st Qtr 2010
(353)
%
2nd
Qtr 2011
Vs
2nd
Qtr 2010
(350)
%
3rd
Qtr 2011
Vs
3rd
Qtr 2010
(353)
%
19
Eurozone
20
Confidence in a lasting/durable solution to
Eurozone Crisis Base: All companies – 350
5 4 8 2 5 4
26 27 19 32 27 23
42 39 42
47
39 49
27 30 31
19 28
24
Very confident
Fairly confident
Not very confident
Not at all confident
Total
%
1 to 3
%
4 to 9
%
10+
%
Any
export
%
Indigenous
Only
%
Q.12 How confident are you that a lasting and durable solution to the Eurozone crisis will be found by the end 2011?
Size
There is a distinct lack of confidence that the Eurozone Crisis can be solved by year end, perhaps not
surprisingly exporting companies showing more concern than their indigenous only counterparts.
21
Summary of key findings
22
Behaviour & Attitudes Business Monitor Summary of Main Findings
Business Confidence:
The current business confidence monitor reveals that the distinctly tough business
environment that has endured during 2011 has not seen any significant uplift in the
third quarter.
Given that Ireland is arguably in its fourth year of recession, the situation for
businesses is Ireland and prospects for short/medium term growth remains subdued.
The majority (48%) of all companies have seen lower levels of business activity in the
third quarter by comparison with the same period in 2010. This trend of lower
activity has persisted across the year to date, with some easing apparent. One might
hope that this is an indicator that the ‘floor’ has been reached.
Only 29% of companies have seen an improvement in their activity compared with
this time last year. 22% indicate that their activity level has remained the same
against the benchmark period (Q3 2010) while the balance are performing less well.
Taking everything into consideration, any indicators of any rejuvenation across the
Irish business community are minimal.
23
Behaviour & Attitudes Business Monitor Summary of Main Findings
Business Confidence:
Looking ahead, 7 in 10 Irish businesses believe that their company performance in Q4
of 2011 will be at a similar level (32%) or worse (40%) than for the same period of
2010. Taking into account year end and the festive season, this provides further
evidence of the lack of confidence impacting on Irish businesses. Only 28% of
companies believe that they will perform better than last year over this period.
Among companies that are exporting (exclusively and in combination), the third
quarter was at best on a par with last year, which was not a good year.
This is a key concern as export driven growth is a key cornerstone of the current
economic policy for a return to economic growth.
The impact of the ongoing Eurozone Crisis and the foreshadowing of a further global
recession appear to be having a credible and volatile impact in business confidence.
This, added to further retrenchment levels of domestic demand post the December
budget, does not inspire short term confidence for the Irish business environment.
24
Behaviour & Attitudes Business Monitor Summary of Main Findings
Business Confidence:
It must be borne in mind that the survey was conducted prior to any leaking of
information around an increase in the level of VAT on goods and services. One
expects this is likely to hit all businesses hard.
Perceptions of the prospects of the Irish business environment as we close the year
out, as a whole, are being undermined by uncertainty. 60% of all companies are
unsure of how to gauge the business environment. Only 16% are optimistic and the
remaining 24% pessimistic – not a great way to end the year.
To an extent, the level of business confidence is mirroring that currently being
experienced by consumers, with the vast majority of key variables (international
demand, export potential, consumer domestic demand, input cost & budgetary
impact measures) outside of their control.
This level of uncertainty is underpinning subdued confidence levels as it does for
consumers.
25
Behaviour & Attitudes Business Monitor Summary of Main Findings
Employment
Employment has marginally increased for companies this quarter in comparison to Q3
2010. Still the net impact remains negative, with more companies having less staff
when compared with the equivalent period for 2010.
While the overall impact is continued shrinkage of employees at a macro level, it
may also be an early indication that the rate of decline is slowing down.
Pricing
Pricing structures remain under significant pressure among Irish companies, with 43%
of companies now selling at lower prices than for the same period last year and a
further 51% of companies working to the same price level.
Essentially we can see that margin reduction (a key element of employment
reduction) had remained a constant into the fourth year of a recession.
26
Behaviour & Attitudes Business Monitor Summary of Main Findings
Profits:
The only positive, and a narrow positive at that, is that the negative trend in
reduced operational profit has declined for the first time this year in comparison to
its benchmark quarter.
Yet over half of companies (52%) are still recording lower operating profit in Q3 2011
than in Q3 2010.
27
Behaviour & Attitudes Business Monitor Summary of Main Findings
The Eurozone Crisis/Durable Solutions
Only 3 out of 10 Irish companies are in any way confident that the Eurozone Crisis
will be resolved before the end of 2011 with exporting companies marginally less
confident.
The fragility of each new measure to resolve the crisis has continued to expose, with
ever growing rapidity, that no solution (as of yet) has had a decisive impact on
market perceptions of Eurozone stability and growth potential.
Unfortunately the interrelationship of Ireland's export led growth policy and the need
for a stable international economic environment has placed Ireland’s potential for
economically sustainable growth in question until a final resolution is achieved.
The impact on the Eurozone of the poor performance of the German sovereign debt
auction, the fragility of Belgian bonds and the continued crisis in currently stressed
Eurozone counties (including Ireland), in particular Spain and Italy, have placed
considerable pressure on Irish export prospects and the prospects of the Eurozone as
a whole.
28
Thank you