Small and medium sized firms have seen business conditions improve this year but manufacturers are lagging behind, increasing the risk that a two speed economy is emerging, a survey shows today.
ISME, the representative body for small and mid-sized firms, said in its quarterly business trends survey that general indicators have improved albeit from a low base.
Service and distribution firms are the most optimistic that the economy has turned the corner but conditions remain grim in manufacturing.
But the survey found 35 per cent of Irish manufacturing companies have considered outsourcing part or all of their business to cheaper locations, including Eastern Europe.
The emergence of a two-speed economy will require a major change in State policy in order to protect manufacturing from permanent decline, ISME warned.
ISME said the increase in confidence could be explained by a significant increase in consumer confidence in the last number of months, a reduction in the inflation rate and positive soundings from certain world economies, particularly the US.
Employment prospects are relatively positive, with an expected net gain of 5 per cent in employment numbers by the SME sector over the next 12 months, the survey shows.
The anticipated increase in employment levels bucks the trends of the last 12 months when SMEs shed staff in the downturn.
A net 26 per cent of companies plan to increase their level of investment in the next 12 months double the number in the two previous quarters.
The survey confirms that companies' turnover levels have increased this quarter with 45 per cent of respondents indicating an increase in turnover. But manufacturing is still lagging behind with no net increase in turnover.