Restoring consumer confidence key to recovery - Ireland’s CEOs

A lack of consumer confidence is the greatest single challenge facing Irish businesses, according to a pre-Budget 2010 survey of CEOs. The survey, carried out at Deloitte’s recent CEO Forum, also found that CEOs urgently want the Government to announce a detailed step by step plan for recovery.

One in three – 33% - of the 129 CEOs surveyed cited a lack of confidence as an even greater challenge to their business than access to credit (26%) and exchange rates issues (21%). Bad debts were cited by just 5% as the greatest challenge.

The CEO survey indicated that the Government could play a lead role in helping to restore consumer confidence with the formulation of a detailed State step plan for recovery the choice of 32% of respondents, slightly ahead of an improvement in access to credit (29%) and getting NAMA up and running (16%).

In the wake of this feedback from Ireland’s CEOs, Paul Reck, Head of Tax Policy, Deloitte, outlined some key points that should now be considered for economic revival in the run up to Budget 2010 (please note to editor below). The plan should include a detailed taxation strategy and step plan with a predictable tax burden for businesses in the period covered by the plan. In addition, tax reliefs to encourage employment and both foreign and domestic investment, which have proved so successful in the past, must be implemented.

Commenting on the survey, Reck said: “It is no surprise that CEOs have highlighted consumer confidence and the lack of a detailed Government step plan to drive recovery in the economy as the two most significant challenges to the recovery of their businesses. They are essentially two sides of the same coin.

“While the Government is to be commended for many of the steps it has taken to address our recent difficulties it could definitely do more to engender confidence that it has a clear strategy for recovery underpinning its actions, to properly set it out with its impacts and then to communicate it. A clear strategy and plan for its implementation with its implications for businesses will give much needed certainty to business and in turn generate confidence in consumers.”

Asked what others could do to improve their business prospects, one in four (25%) sought State support to retain current employment, 18% wanted a reduction in State charges and 14% cited exchange rate support.

“The CEOs in Ireland have identified the issues that business people on the ground are experiencing. We would encourage the Government to listen to this and act upon them. Business in Ireland need detailed communication on what the Government’s strategy will be. Only then will they be able to make plans for their own businesses, which are the foundations to Ireland’s economic recovery,” concluded Reck.

To follow Paul Reck’s comments on Budget 2010 on twitter, please visit http://twitter.com/IrelandBudget.

Note to Editor:

Budget deficit – communicate impact for business
The Government has set out how it intends to address the budget deficit and this has been agreed with the EU. It has not, however, translated this into its practical impact for business and consumers over the same time frame. Of significant concern to businesses in a difficult environment is unpredictable costs and obviously the level of taxation present and future is a key concern to them. Businesses need clear communication on this from the Government so they too can plan their future strategy.

Taxation System – Encouraging business will encourage employment
There is obviously a balance to be struck between the interests of the lower paid and indeed those who rely on social welfare in society and those with wealth. They are, after all, absolutely mutually reliant for success. Those running businesses require workers to expand and flourish and workers require those running businesses to employ them. This fact should determine that the primary purpose of the tax system. The driver of Government policy should be to encourage business and thereby provide employment to labour and to create an environment which encourages entrepreneurs by allowing them to retain a reasonable proportion of what they earn.

The danger for business is that the quid pro quo to inevitable public service pay cuts and possible social welfare cuts will be a customary compensating rise in taxes targeted at the better off and the removal of targeted tax reliefs on which struggling business are now more dependent than ever. Such a move, while always politically attractive, is likely to be counterproductive and should be resisted. Overburdening those who are already carrying a disproportionate burden in taxation will make Ireland a less attractive destination for foreign direct investment as it will become even less attractive for high earning multinational business leaders to locate here. This will adversely impact on jobs.

Ireland Inc – Focus on unique selling points, tax incentives work
In the face of competition from other countries there needs to be an absolute focus on what are Ireland Inc’s existing unique selling points. It will take us a number of years to fulfil the Smart/Knowledge Economy strategy. To cite just one possible example, Ireland had a very strong tourism product underpinned by our cultural heritage. Giving support in the form of grants or tax incentives to more tourism destination locations around the country would have the potential to create a greater ‘pull’ factor in the years ahead.

Many of the successes in Irish culture can be directly traced to progressive thinking in and use of the tax system. Film relief brought the production of major films to Ireland and generated a succession of world class achievements for artists and film makers alike. It also brought employment and employment taxes to the economy through production work and tourism. Similarly, the Artist’s exemption retained and brought talent to Ireland with its associated spending which would otherwise not have located here at all.

What’s more, the tax incentives for horseracing and breeding have made Ireland a world leader in both. This has brought significant employment in rural Ireland and wealth to the industry as well as local spending by those who would not otherwise locate here. While it has been criticised it remains the case that it has been a glowing example of how progressive and creative tax policies drive success and employment in this country.

About the survey

129 CEOs participated in the survey at the CEO Forum, sponsored by Deloitte and Enterprise Ireland at Dublin Castle on November 12 2009.

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