CFOs favour completion of IMF/EU programme over quick return to bond markets
Published 15 November 2012
Increase in optimism post EU agreement to decouple bank and sovereign debt
Three out of four Irish CFOs in large companies would prefer Ireland to see out the current IMF/ECB bailout deal to conclusion in November 2013 rather than an early return to the bond markets, according to the latest findings in the Q3 Deloitte CFO Survey.
Asked if the Government should push for a quick return to the bond markets or if Ireland should remain within the IMF/ECB framework and avail of lower rates and guaranteed funding, 76% of respondents favoured the certainty of the current programme.
The results of the survey also show a significant increase in optimism amongst Irish CFOs, from a net 0% in Q2 to a net 31% in Q3, in the wake of the agreement with EU partners in July that bank and sovereign debt should be decoupled. While the exact nature and structure of a deal is yet to be determined, there is a general belief among CFOs that a deal of some description will emerge to enable Ireland reduce the burden of the bank debt.
Overall a clear majority of CFOs believe the Government is having a positive impact on the fiscal stability of the country (71%), while 68% believe the Government has had a positive impact on encouraging Foreign Direct Investment (FDI) into Ireland.
However, 73% say Government policies have had a negative impact on taxation. In particular, there is overwhelming concern about potential hikes in Pay Related Social Insurance (PRSI) in the forthcoming Budget 2013. A massive 95% of CFOs stated that PRSI increases would have a negative impact on employment creation, while 85% indicated that they believe businesses will struggle with any additional PRSI rate rises. Overall, 76% expressed concern that the next Budget would have a negative impact on their business.
Commenting, Shane Mohan, Partner in Deloitte said:
“It is clear from the findings, by a ratio of three to one, that Irish finance directors continue to be nervous about the future funding of Ireland Inc and would prefer the State to avail of the certainty of the current IMF/ECB deal over a pre-emptive attempt to regain full market access. Remaining in the current programme provides a clear path for the country’s businesses to plan ahead for 2013 and discount some of the uncertainty emanating from the Eurozone. In addition, it provides the discipline necessary for the Government to continue to lower the deficit towards 3% of GDP.”
“Separately, the average CFO is clearly focused now on Budget 2013. Most businesses have spent the last four years cutting costs and reducing pay to protect jobs and improve competitiveness, so any attempt to increase PRSI will increase the cost of employment and have a negative impact on the jobs market.”
These are some of the findings of the latest Deloitte CFO Quarterly Survey, which seeks to provide a barometer of business trends and economic outlook among publicly quoted companies, large private companies, and Irish subsidiaries of multinational companies.
For full details of the Deloitte Q3 2012 CFO Survey, please visit www.deloitte.com/ie/cfo-survey.
About the survey
This is the 13th in a series of quarterly surveys by Deloitte of Chief Financial Officers of major Irish based companies. The survey was conducted in September 2012. The Deloitte CFO Survey is the only survey that seeks to establish the views of CFOs in relation to relation to the financial markets, economic outlook and business trends on a quarterly basis.
Many of the charts in the Deloitte CFO Survey show the results in the form of a net balance. This is the percentage of respondents reporting, for instance, that bank credit is attractive less the percentage saying bank credit is unattractive.
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