Manufacturing in Ireland is "on the ropes" due to cost increases, and measures must be taken in the Budget to address the issue before there are company closures, the business lobby group Isme has said.
In its quarterly business trends survey published today, Isme said that as other sectors were showing increased employment, turnover and investment, a reverse was being reported in the manufacturing sector. The decline was taking the gloss off an otherwise positive outlook, Isme added.
Isme quarterly business trends survey
Isme's survey, which had almost 500 respondents, found 39 per cent of companies are more optimistic about business prospects over the next 12 months in comparison to 17 per cent who are less optimistic.
Isme said the net 22 per cent, represents a 9 percentage point increase on the corresponding figure last year.
"Today's results confirm that in the main there is still a significant amount of confidence in the business environment, with many SMEs planning to increase employment and investment over the next number of months."
"Sectorally, however, there are worrying signs, with the manufacturing sector in particular showing evidence of a significant drop in confidence levels, with only a net 5 per cent of companies more optimistic about business prospects in comparison to a net 20 per cent in each of the previous three quarters," Isme said in the bulletin.
"This dramatic reduction in confidence by manufacturers is as a consequence of the exorbitant increases in energy costs, particularly electricity and gas and a huge concern over increasing labour costs."
Labour costs were the biggest concern for 28 per cent of companies, followed by erosion of competitiveness, which was a worry for 15 per cent of firms.
The services sector is the most optimistic, with a net 38 per cent of companies more confident about their business prospects, up by 15 percentage points on the previous quarter, mainly on the back of buoyant consumer spending.
Some 39 per cent of companies employ more staff than in the corresponding period last year, with 17 per cent cutting jobs.
The manufacturing sector again went against the trend, showing a small net reduction in jobs.
Isme said the upcoming Budget provides an opportunity to implement initiatives to slow down the rate of price increases in order to enhance competitiveness and in the process save what is left of the indigenous manufacturing sector.
The body called for the immediate establishment of the high-level manufacturing group, which is to investigate and address the concerns of the sector.
"Any further delays in setting up this group will result in further job losses and company closures," it said.
