IMAGE HERE INTO GREY AREA.

By Elaine Sloan & John Clarke

J.3156

Behaviour & Attitudes Business Confidence Monitor 3rd Quarter 2011

2

Introduction

Given the state of the economy, and the uncharted waters businesses find themselves in,

Behaviour & Attitudes conduct a Business Confidence survey on a quarterly basis in tandem with

its Consumer Confidence survey.

A questionnaire has been developed for the business monitor which covers issues such as recent

business results, projected employment levels, profit margins and expectations for the

forthcoming year.

The quarterly survey is conducted via telephone amongst a sample of 350 Business

owners/Managers countrywide.

The sample is drawn from a ‘deduped’ mix of reputable business listings including Bill Moss, Data

Ireland, the Irish Times and Business & Finance Top 500 companies in Ireland

3

Sampling Approach

The chart below sets out the profile of business company size in Ireland (Source:

CSO and Bill Moss) compared with the achieved Behaviour & Attitudes Business

Confidence Monitor sample:-

No of employees % % %

1-3 42 43 42

4-9 28 28 28

10-19 14 14 14

20-50 11 11 11

50-250 6 5 6

250+ 1 1 1

The survey data is subsequently weighted to reflect the known universe profile.

A sample size of 350 will yield a dataset which can be deemed to be accurate to

within plus or minus five percentage points.

Known

Profile

(Bill Moss)

B & A

Business

Monitor

Sample

B & A

Weighted

Results

4

Sampling Approach

Interviewing was conducted through Behaviour & Attitudes Computer Aided Telephone

Interviewing Unit (CATI) at Milltown House in Dublin.

Interviews were conducted with the owner/Chief Executive of each selected company.

Fieldwork on the project was conducted between the 26th October – 2nd November 2011.

All interviewing was centrally supervised and quality control verification was conducted

on 15% of interviews undertaken.

5

Detailed Survey Results

6

Higher

The Same

Lower

Business Activity Looking back – short term analysis

compared with equivalent period last year

23 29 29

23 20 22

53 51 48

1st Qtr 2011

Vs

1st Qtr 2010

(353)

%

Gap (Pos vs Neg) -30 -21 -19

Q.1 Business activity may be measured by gross income, chargeable hours worked or any equivalent measure of volume of activity appropriate in

your business. How has your business performed in the second quarter of this year – from April to June. Were your results higher, lower or the

same compared to the same period last year?

2nd

Qtr 2011

Vs

2nd

Qtr 2010

(350)

%

3rd

Qtr 2011

Vs

3d Qtr 2010

(353)

%

Some minor improvement over the course of the year evident but even with that business activity continues to trend downwards.

7

22 28 28 28

33 32

24 20 22 23

22 22

54 52 50 48 46 46

Higher

The Same

Lower

Business Activity Looking Back – 3rd Quarter 2011

compared with equivalent period last year

Any Export

1st Qtr

(247)

%

2nd

Qtr

(244)

%

Indigenous Only

Gap (Pos vs Neg) -32 -24 -22 -20 -13 -14

3rd

Qtr

(230)

%

1st Qtr

(97)

%

2nd

Qtr

(103)

%

3rd

Qtr

(109)

%

Both indigenous and exporting companies continue to underperform and while those with

an exporting dimension looked like they were making some headway earlier in the year,

that now seems to have stalled.

8

28 23

28

34

30

32

38 47

40

Higher

The Same

Lower

Business Activity Looking Forward – short term analysis

compared with equivalent period last year

Looking ahead

to 2nd

Qtr 2011

vs

2nd

Qtr 2010

(353)

%

Q.4 And thinking ahead to the fourth quarter – October to December – do you think your performance will be higher, lower or the same as the

fourth quarter of 2010?

Companies believe

their performance

will be weaker for the

4th

quarter 2011

compared with last

year. The slight

easing apparent may

be simply seasonal

variations.

Looking ahead

to 3rd

Qtr 2011

vs

3rd

Qtr 2010

(350)

%

Gap (Pos vs Neg) -10 -24 -12

Looking ahead

to 4th

Qtr 2011

vs

4th

Qtr 2010

(353)

%

Factoring in Christmas activity (where we would anticipate a greater degree of

optimism), forecasts remain subdued.

9

Higher

The Same

Lower

Business Activity Looking Forward – 4th Quarter 2011

compared with equivalent period last year

23 18

25 26 23 27 36

31 34

35

27

30 32

29

32

34

33 33

42

54 45 42

47 41

30 36 33

Gap (Pos vs Neg) -19 -36 -20 -16 -24 -14 -6 -5 +1

Business confidence has marginally increased in anticipation of Quarter Four but

the negative sentiment pervades for the smaller companies.

1st Qtr

(148)

%

Number of Employees

2nd

Qtr

(122)

%

1-3 1

st Qtr

(91)

%

2nd

Qtr

(73)

%

4-9 1

st Qtr

(114)

%

2nd

Qtr

(155)

%

10+ 3

rd Qtr

(150)

%

3rd

Qtr

(87)

%

3rd

Qtr

(116)

%

10

26 28 25

36 33 36

36

19 33

29

22 24

38

52

42 36

46 40

Higher

The Same

Lower

Business Activity Looking Forward – 4th Quarter 2011

compared with equivalent period last year

Exporting companies are more positive overall and demonstrate even greater confidence as

they move into Qtr 4.

1st Qtr

(97)

%

2nd

Qtr

(103)

%

Any Export

1st Qtr

(247)

%

2nd

Qtr

(244)

%

Indigenous Only

Gap (Pos vs Neg) -12 -24 -17 = -13 -4

3rd

Qtr

(109)

%

3rd

Qtr

(230)

%

11

Optimism?

12

Business Environment – Optimism for 2011 as a whole?

14 15 14 16

58 61 56

59

28 26 30

24

Jan

(205)

%

Very optimistic

(8-10)

Neutral/Not sure

(4-7)

Very worried (1-3)

Q.5 And looking forward to 2011, how optimistic are you for a favourable business environment by end December 2011. Lets use

a scale of 1-10 where 10 means you are very positive about prospects and 1 means that you are very concerned or worried.

On this scale, how optimistic are you?

Aug

(350)

%

May

(353)

%

Gap (Opt vs worried) -14 -16 -11 -8

The jury continues

to be out on how

business will fare

by the end of the

year. However, still

more companies

are worried than

are positive (albeit

with some easing

over the year).

Oct

(353)

%

13

15 11

15 12

25 18

60

56 54 64

56 64

25 31 29

26 19 18

Business Environment – Optimism for 2011 as a whole?

Evidence of further entrenchment among indigenous only businesses despite the marginal

increase in optimism.

Any Export Indigenous Only

Gap (Pos vs Neg) -10 -20 -14 -14 +6 =

Very optimistic

(8-10)

Average

(4-7)

Very worried (1-3)

1st Qtr

(97)

%

2nd

Qtr

(103)

%

1st Qtr

(247)

%

2nd

Qtr

(244)

%

3rd

Qtr

(109)

%

3rd

Qtr

(230)

%

14

Employment

levels

15

Employment Levels Compared to Last Year

0 10 10

15

59 61 57

31 29 28

Higher

The same

Lower

Gap (Pos vs Neg) -21 -19 -13

Net employment is still negative, albeit easing, indicating that unemployment is

continuing to rise into the fourth year of the recession.

Q. 7 Could you indicate whether your employments levels are higher, lower or the same compared with the first quarter of last year?

1st Qtr 2011

Vs

1st Qtr 2010

(353)

%

2nd

Qtr 2011

Vs

2nd

Qtr 2010

(350)

%

3rd

Qtr 2011

Vs

3rd

Qtr 2010

(353)

%

16

Prices and profits

17

Operational Profit – Year on Year

19 19 22

25 25 27

56 56 52

Higher

The same

Lower

Over 50% of companies report lower levels of profit than last year.

Gap (Pos vs Neg) -37 -37 -30

Q.8 Could you tell us whether operational profit is higher, lower or the same compared with the first quarter of last year?

1st Qtr 2011

Vs

1st Qtr 2010

(353)

%

2nd

Qtr 2011

Vs

2nd

Qtr 2010

(350)

%

3rd

Qtr 2011

Vs

3rd

Qtr 2010

(353)

%

18

Prices Charged – All Businesses

9 8 6

46 42

51

45 49

43

Higher

The same

Lower

There is no doubt that pressure on pricing continues despite evidence of some

companies having hit their ‘floor’.

Gap (Pos vs Neg) -36 -41 -37

Q.9 Could you tell us whether prices charged are higher, lower or the same compared with the third quarter of last year?

1st Qtr 2011

Vs

1st Qtr 2010

(353)

%

2nd

Qtr 2011

Vs

2nd

Qtr 2010

(350)

%

3rd

Qtr 2011

Vs

3rd

Qtr 2010

(353)

%

19

Eurozone

20

Confidence in a lasting/durable solution to

Eurozone Crisis Base: All companies – 350

5 4 8 2 5 4

26 27 19 32 27 23

42 39 42

47

39 49

27 30 31

19 28

24

Very confident

Fairly confident

Not very confident

Not at all confident

Total

%

1 to 3

%

4 to 9

%

10+

%

Any

export

%

Indigenous

Only

%

Q.12 How confident are you that a lasting and durable solution to the Eurozone crisis will be found by the end 2011?

Size

There is a distinct lack of confidence that the Eurozone Crisis can be solved by year end, perhaps not

surprisingly exporting companies showing more concern than their indigenous only counterparts.

21

Summary of key findings

22

Behaviour & Attitudes Business Monitor Summary of Main Findings

Business Confidence:

The current business confidence monitor reveals that the distinctly tough business

environment that has endured during 2011 has not seen any significant uplift in the

third quarter.

Given that Ireland is arguably in its fourth year of recession, the situation for

businesses is Ireland and prospects for short/medium term growth remains subdued.

The majority (48%) of all companies have seen lower levels of business activity in the

third quarter by comparison with the same period in 2010. This trend of lower

activity has persisted across the year to date, with some easing apparent. One might

hope that this is an indicator that the ‘floor’ has been reached.

Only 29% of companies have seen an improvement in their activity compared with

this time last year. 22% indicate that their activity level has remained the same

against the benchmark period (Q3 2010) while the balance are performing less well.

Taking everything into consideration, any indicators of any rejuvenation across the

Irish business community are minimal.

23

Behaviour & Attitudes Business Monitor Summary of Main Findings

Business Confidence:

Looking ahead, 7 in 10 Irish businesses believe that their company performance in Q4

of 2011 will be at a similar level (32%) or worse (40%) than for the same period of

2010. Taking into account year end and the festive season, this provides further

evidence of the lack of confidence impacting on Irish businesses. Only 28% of

companies believe that they will perform better than last year over this period.

Among companies that are exporting (exclusively and in combination), the third

quarter was at best on a par with last year, which was not a good year.

This is a key concern as export driven growth is a key cornerstone of the current

economic policy for a return to economic growth.

The impact of the ongoing Eurozone Crisis and the foreshadowing of a further global

recession appear to be having a credible and volatile impact in business confidence.

This, added to further retrenchment levels of domestic demand post the December

budget, does not inspire short term confidence for the Irish business environment.

24

Behaviour & Attitudes Business Monitor Summary of Main Findings

Business Confidence:

It must be borne in mind that the survey was conducted prior to any leaking of

information around an increase in the level of VAT on goods and services. One

expects this is likely to hit all businesses hard.

Perceptions of the prospects of the Irish business environment as we close the year

out, as a whole, are being undermined by uncertainty. 60% of all companies are

unsure of how to gauge the business environment. Only 16% are optimistic and the

remaining 24% pessimistic – not a great way to end the year.

To an extent, the level of business confidence is mirroring that currently being

experienced by consumers, with the vast majority of key variables (international

demand, export potential, consumer domestic demand, input cost & budgetary

impact measures) outside of their control.

This level of uncertainty is underpinning subdued confidence levels as it does for

consumers.

25

Behaviour & Attitudes Business Monitor Summary of Main Findings

Employment

Employment has marginally increased for companies this quarter in comparison to Q3

2010. Still the net impact remains negative, with more companies having less staff

when compared with the equivalent period for 2010.

While the overall impact is continued shrinkage of employees at a macro level, it

may also be an early indication that the rate of decline is slowing down.

Pricing

Pricing structures remain under significant pressure among Irish companies, with 43%

of companies now selling at lower prices than for the same period last year and a

further 51% of companies working to the same price level.

Essentially we can see that margin reduction (a key element of employment

reduction) had remained a constant into the fourth year of a recession.

26

Behaviour & Attitudes Business Monitor Summary of Main Findings

Profits:

The only positive, and a narrow positive at that, is that the negative trend in

reduced operational profit has declined for the first time this year in comparison to

its benchmark quarter.

Yet over half of companies (52%) are still recording lower operating profit in Q3 2011

than in Q3 2010.

27

Behaviour & Attitudes Business Monitor Summary of Main Findings

The Eurozone Crisis/Durable Solutions

Only 3 out of 10 Irish companies are in any way confident that the Eurozone Crisis

will be resolved before the end of 2011 with exporting companies marginally less

confident.

The fragility of each new measure to resolve the crisis has continued to expose, with

ever growing rapidity, that no solution (as of yet) has had a decisive impact on

market perceptions of Eurozone stability and growth potential.

Unfortunately the interrelationship of Ireland's export led growth policy and the need

for a stable international economic environment has placed Ireland’s potential for

economically sustainable growth in question until a final resolution is achieved.

The impact on the Eurozone of the poor performance of the German sovereign debt

auction, the fragility of Belgian bonds and the continued crisis in currently stressed

Eurozone counties (including Ireland), in particular Spain and Italy, have placed

considerable pressure on Irish export prospects and the prospects of the Eurozone as

a whole.

28

Thank you