A survey recently published by Ireland's Small Firms Association has shown that despite a multitude of factors seemingly working against them, business confidence in Ireland is increasing amongst the small business community.

According to the results of the poll, undertaken in September, and covering 636 companies employing 13,750 people, 50% of respondents rated the current overall business environment as ‘poor’ or ‘very poor’, representing a drop of 9% on Q2 2010, and a drop of 17% when compared to 12 months ago.

19% of respondent companies rated the overall business environment to be either ‘very good’ or ‘good’, an increase of 6% on the previous quarter, and a 12% increase on Quarter 3 of 2009. Almost three in ten companies (29%) said that they expected their business to be ‘very good’ or ‘good’ in three months time, an increase of 10% on this point in 2009.

Breaking the results down by sector, the SFA revealed that 56% of distribution companies rated the overall business environment in Ireland currently as either ‘poor’ or ‘very poor’ (down from 70% in Q2 2010); although this was higher than respondents from the manufacturing sector (44%) and services sector (50%). The proportion of respondents that rated the overall business environment as either ‘very good’ or ‘good’ varied between the service sector (17%), manufacturing (26%) and the distribution sector, which was less positive at 13%.

However, when looking at the prospects for their own operations going forward, small business owners were less positive.

According to the Small Firms Association, almost three in ten respondents (29%) said that they were ‘less confident’ in their own business, a slight increase of 5% on the last quarter. While 19% of companies indicated they were ‘more confident’ about their own business, this is a fall of 2% on Q2 2010, but an increase of 3% on this time last year.

“While the figures show sentiment improving for small firms, they still face many challenges – Government need to assist by providing clarity about budgetary impacts,” observed Avine McNally, Acting Director, Small Firms Association.

The survey additionally revealed that access to credit continues to be challenging for small businesses, with the cost of working capital having increased for 21% of respondent companies in the last three months and the cost of investment finance having increased for 13% of respondent companies. 18% of companies have seen the availability of working capital decrease in the last three months, with some 13% indicating that investment finance availability has decreased.

The Association went on to make the following recommendations:

• That all Government agencies pay their own bills to small businesses within 10 days, including local authorities and the HSE, which will assist small businesses with their cash-flow.
• That employers’ PRSI be reduced, in order to incentivise companies to keep people in jobs.
• That action be taken to reduce the Republic's "excessive" cost-base.

The Irish Small and Medium Enterprises Association (ISME) Credit Watch Survey for autumn 2010 supported the call for prompt payment of bills, arguing that smaller enterprises are being placed under "severe pressure" by deliberately delayed payments.

ISME, Chief Executive, Mark Fielding explained that:

“Late payments have always been a problem for small businesses and this has intensified as State bodies and accountancy led big business take longer and longer to pay during the current recession. When smaller businesses are not paid on time, they cannot in turn pay their suppliers and the vicious circle ends with the smallest and most vulnerable being forced to close down. The law does the exact opposite to what was intended, in allowing powerful large customers to abuse their dominant position and dictate unreasonable credit terms to their smaller suppliers”.

The ISME revealed that, according to its poll of around 500 small businesses, the average payment period in Ireland for SMEs is 73 days, representing a slight improvement from 76 days in the summer survey, but 44% are experiencing payment delays of 3 months or more. Interestingly (and perhaps in the case of struggling businesses, fatally), smaller businesses are often obliged to wait longer for payment than their slightly larger counterparts (74 days on average in the case of the former, versus 56 days on average in the case of the latter).

The Association called on the Government to introduce a mandatory payment period, guaranteeing payment within 30 days from the end of month of invoice or delivery, as was initially intended by the current rules in place in this area, the Late Payments in Commercial Transactions Regulations 2002, which provide for the imposition of penalty interest if payments are not made for commercial transactions within 30 days.

“With the deterioration in late payments across the board, cash flow in the entire sector is drying up and this, coupled with the lack of available, affordable credit from the banks, is putting many small businesses at risk, with the resulting threat of closures and job losses,” Fielding warned.

In terms of access to credit, there was further bad news earlier this month, when it appeared that Taoiseach Brian Cowen was wavering on previously announced plans to introduce a loan-guarantee scheme to boost the access of small businesses to credit.

Accused by the opposition Fine Gael party of stalling on the planned scheme, which was first announced in January of this year, and was confirmed to be under development in September, Mr Cowen announced, according to an Irish Times report, that the introduction of the scheme has to be looked at "very carefully", as the government has "already given credit lines from the banks to ensure, on the basis of their successful recapitalisation, that they’ll be in a position to have credit lines to business”.

He reportedly added that “the issue of the State being further guarantor in respect of loans to business in addition to what security business is already providing is something that has to be very carefully considered”.