In its Autumn Economic Statement, published on August 2, Ireland's Small Firms Association urged the need for "sensible policy decisions and strong political leadership to create a better and sustainable enterprise and economic future", arguing that things in the Republic are still economically "very challenging".

According to the most recent SFA Sentiment Survey, businesses questioned felt that the business environment had improved "slightly" in the second quarter of this year, but were less than optimistic with regard to Q3 2011. The Association went on to warn that many small firms in Ireland remain under "serious pressure", explaining that:

"For the first time since Q4 2009 the confidence outlook fell in the manufacturing sector with the outlook from the distribution sector the weakest of all. Although companies continue to rate their own business more favourably than the overall business environment, the figures have slightly fallen on the previous Q1 2011 survey mainly due the large negativity from domestic focused businesses. "

Assistant Director of the SFA, Avine McNally suggested that one of the government's key priorities should be the restoration of consumer confidence, alongside increasing access to credit and adopting policies designed to stimulate domestic demand.

“Many firms have taken various steps to realign their business to the current economic climate by meticulous analysis of their cost base, however, domestic demand remains weak and consumers remain frightened,” McNally observed.

She continued:

“Government must address this by providing clarity to consumers on the economic situation and in particular provide as early as possible the likely impact of the budgetary adjustments. Businesses must also play their part and examine ways to stimulate a greater activity and encourage consumer spending. Increasing investment will remain a difficult with firms still experiencing difficulties in accessing credit.”

According to the SFA's findings, around a quarter of the SMEs questioned are continuing to face shrinking working capital, making the government's commitment to introduce a loan-guarantee scheme for small businesses a pressing issue upon which lawmakers must swiftly deliver.

“There has to be a greater understanding in the banks of the environment in which small firms are trading, banks normally appraise future credit risk on the last few years of a companies financial performance, given the current situation, this type of system is unlikely to provide a full picture of the overall viability of a business and this has to be taken into account if many viable businesses are to be given the credit they so critically require,” explained McNally.

Late payments from clients (and the consequent cashflow issues created), and domestic inflation increases (especially with regard to fuel prices and mortgage interest costs) were also cited as factors in the current squeeze on small businesses in Ireland.

With regard to job creation, and the high levels of long-term unemployment currently being faced in the Republic, the SFA Assistant Director observed that:

"Ireland appears to be experiencing a classical labour market mismatch situation, with significant skill shortages in some areas such as IT and specialist’s sales coupled with an oversupply in other occupations. The task the Government faces in re-skilling and retraining is daunting, but necessary, if Ireland is to avoid a long period of structural unemployment.”

She concluded:

“While we strive to be confident about the economy there are still signs of concern – housing prices are still falling; consumer confidence and spending remains weak; an uncertain labour market and further cuts in Government expenditure.”

“While Ireland’s fate will be influenced by external forces, it is incumbent that Government take action in addressing the issues that are within our control, to ensure business survive.”