Most managers feel less confident and firms believe conditions will worsen

Confidence among the State's business managers has fallen sharply compared to the second half of 2001, with 60 per cent reporting a loss of confidence in general business conditions, according to a new Deloitte & Touche survey.

The majority of firms believe conditions are set to get worse in the remainder of the year. Of the firms surveyed, 38 per cent said they expected the environment to deteriorate slightly in the next four months, with 15 per cent expecting a significant deterioration.

Most downbeat were managers working in consumer businesses such as retailers, wholesalers and manufacturers. Among that group, 74 per cent said they were expecting a further deterioration in the economy before the end of the year.

Mr Pat Kenny, Deloitte & Touche managing partner, said there was little doubt the Irish economy was much slower than 12 months ago.

However, he said the fundamentals of the economy were "very strong and we are well positioned to benefit from the expected upturn in 2003.

"We can sustain short-term downturns which we could not have sustained 10 years ago, but it is important that this downturn is not prolonged.

"Apart from the external threats to the economy, such as the US economic slowdown and the rising value of the euro, there are internal factors which we can control that affect business [such as\] inflation, particularly pay inflation, public expenditure, insurance costs, getting paid by customers and increasing regulation."

He added these factors must be controlled while investment must be continued in infrastructure, science and technology, education and health.

"This is a precondition to participation in the global economic recovery," he said.

The survey, conducted by Amarach Consulting for Deloitte & Touche in the first week of August, also found that 65 per cent of Irish business people feel the State is becoming a more difficult country in which to do business.

Manufacturing companies were most concerned with pay inflation.

Financial services groups were worried about the impact of the US slowdown and also Government regulation.

Many technology companies expressed concern about the prolonged US downturn and said slow payment by customers was a key issue for their businesses.

In employment, the survey's findings were mixed with 29 per cent of firms saying they employ less workers now that they did six months ago. But 32 per cent said their staff count had risen in the period and 38 per cent reported no change in the numbers employed. The outlook for employment in the next six months is positive, despite falling business confidence, with 35 per cent of groups expecting to hire more workers and 45 per cent expecting no change.