BUSINESS ACTIVITY slipped in the final quarter of the year and Irish companies appear concerned that a failure to address the euro debt crisis could see their fortunes affected again in 2012.

A business sentiment survey by KBC Bank and Chartered Accountants Ireland showed that the business climate became increasingly challenging as 2011 progressed and that there was a significant division between the performances of individual firms.

Some 35.6 per cent of responding companies reported a decline in activity during the last three months of the year, compared to the 29.1 per cent who said things had improved. A year earlier, 31.2 per cent reported increased activity and 34.3 per cent said things were worse.

The report notes that responses from the business services area were the strongest recorded, while construction/property and consumer-focused business struggled – with firms experiencing a decline in business outnumbering those reporting an improvement by about two to one.

Conditions in the manufacturing sector declined in the fourth quarter, bucking a relatively positive recent trend, with one in three saying activity fell and a quarter reporting an increase.

“This recent weakening appears entirely consistent with a negative impact being felt in this sector as a result of worsening economic conditions across Europe,” the report says.

Respondents were divided about what would come in the first quarter of 2012, with 29 per cent expecting an increase in business and 28 per cent a decline. This was considerably more negative than three months earlier, when 33.2 per cent expected to do more business and 25.4 per cent to do less.

Employment rates were slightly more positive than in the third-quarter survey, with 25.3 per cent saying they cut staff (down from 27 per cent) and 17.1 per cent they grew it (up from 16.8 per cent).

More than half (57 per cent) of the firms surveyed said they felt less optimistic about Ireland’s economic prospects than three months earlier, with just 9 per cent feeling more optimistic.

About half (48.5 per cent) said the euro crisis was the pivotal issue facing Irish business in the coming year – nearly twice the number (24.9 per cent) who felt access to credit was the biggest obstacle. Some 16 per cent said the last budget would have the biggest impact on their businesses.