Challenging Times

02Feb09

2008 saw the onset of extremely challenging times for the vast majority of our clients.

The Irish economy began to change dramatically during the year after 15 years of sustained and unprecedented growth. There was a significant slowdown in the economy, the main causes of which are attributed to varying degress to a combination of: downturn in the construction sector and the housing market; the slowing of the US economy; the appreciation of the euro against the US dollar and British sterling; declining tax revenues; and the increasing cost of energy prices.

The Irish Economic and Social Research Institute (ESRI) reported that in 2008 the Irish economy experienced a recession for the first time since 1983.

The onset of the recession is also reflected in the public finances. From an overall budget surplus of circa €5 Billion in 2006, the Government incurred a deficit of circa €8 billion in 2008.

This is the economic environment that businesses and in particular micro-enterprises are now operating, and this situation is compounded by the current credit crisis.

A national online survey of a representative sample of CEB clients (mainly owner-managers of micro-enterprises) undertaken in December 2008, of which there were approximately 1,000 respondents, revealed that:

· 54% of respondents indicated that their business activity is being curtailed at present due to Bank Credit issues (i.e. unable to access necessary overdraft facilities; term loans; bridging finance; etc.);

· 52% indicated that the banking situation is having either a serious or very serious adverse effect on their business;

· 31% reported that their business is at risk of closure due to lack of credit; and

· 74% reported that debtors and/or debtor days has increased, putting severe pressure on their working capital and cash-flow needs.

The national network of CEBs recently submitted proposals to the Department of Enterprise Trade and Employment for the introduction of a range of new supports in order to be more responsive to the needs of our clients in these challenging times.

This included the introduction of a micro-credit scheme (i.e. Enterprise Loan Fund) as a response to the growing credit crisis adversely impacting upon micro-enterprises.
We shall keep you posted of developments.

Sean.
www.kceb.ie

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