Private Irish Business Leads European Neighbours in Innovation, says KPMG/IBEC Survey 1 February 2010

Private and family-owned businesses in Ireland score higher than our European neighbours in planning for innovation and new products, according to Opportunity Knocks? – a new pan-European business survey from KPMG and IBEC.

Key Findings

• In 2010 almost two thirds of Irish businesses (65 percent) plan on developing new products or innovating vs. a European average of 55 percent.
• However, only 27 percent of Irish companies surveyed plan on moving into new markets.
• Just under half (49 percent) of Irish participants have international business as part of their strategy when compared with the European average (60 percent).
• Cost reductions have been the main focus of almost three quarters (73 percent) of Irish businesses.
  

The survey, carried out in November 2009 in eight EU states (including Ireland, the UK, France and Germany), canvassed the views of 3200 senior business people. 65 percent of private Irish businesses cite innovation and new product development as a key business driver over the next two years – the joint highest score along with Italy.

According to Colin O’Brien, partner with KPMG in Ireland, “The last 18 months have been very tough for business, so it’s positive to see innovation as a priority for so many Irish companies. However, it is a concern that many of those surveyed in Ireland don’t appear to see export-led growth as part of their strategy.”

Commenting on the survey findings, Danny McCoy, Director General of IBEC said, “While exports of merchandise have remained relatively flat over recent years, exports in traded services have performed well. The survey shows that there is further scope to build on these successes and avail of the new markets that are opening up for Irish-based firms.”

For many European businesses, there appears to be light at the end of the tunnel with 44 percent of respondents predicting economic recovery in 2010. Significantly for Ireland, however, a greater number (44 percent) predict 2011 as the likely year of recovery compared with only 37 percent expecting recovery this year.

Cost Reductions Have Helped Competitiveness
The survey also indicates that Irish businesses have been focussing relentlessly on cost reduction, with 73 percent of them taking this as their primary action compared with the European average of 60 percent. Almost two thirds (64 percent) of Irish respondents believe that such actions have helped restore competiveness in their business. Colin O’Brien comments, “It’s encouraging that Irish companies have acted quickly on cost competitiveness. We see this as vital to recovery and the starting point in looking at what else needs to be done to achieve long term, sustainable growth for private Irish businesses.”

Export-Led Growth
On average across Europe, over 60 percent of respondents see international business as part of their strategy. In smaller markets, such as Belgium (69 percent) and Denmark (68 percent), this figure is higher than average. In contrast, only 49 percent of Irish respondents see international business as part of company strategy. Ireland also scores lowest of the countries surveyed in terms of likely pursuit of new markets in foreign countries, with just 27 percent planning such moves compared with 43 percent in the UK, 38 percent in Spain and 36 percent across Europe.

Colin O’Brien recognises the continued challenges facing many businesses. “A lot of companies in Ireland have been in basic survival mode for the past year and the Irish figures reflect this. However, with tentative signs of emerging growth in some countries, this is the time to be looking for opportunities in international markets.”

Employment Prospects
On the jobs front, 71 percent of Irish companies surveyed plan on maintaining their current headcount with 10 percent looking to recruit new employees whilst 19 percent are considering reducing the current workforce. In comparison, the European survey average is 22 percent planning new hires, 62 percent planning no change and 16 percent looking to reduce headcount. Colin O’Brien notes, “There are some signs of stability emerging in terms of jobs. Unfortunately there will be more redundancies but it is reassuring to see that four out of five respondents are likely to either maintain or, in some cases, actually increase headcount.”

The Timing of Recovery
Spanish respondents are most pessimistic about the timing of recovery, with only 29 percent expecting recovery in 2010, and as many as 25 percent predicting an improvement in 2012 or later. Italians are the most optimistic with 60 percent expecting recovery this year, whilst in Ireland the figure is 37 percent, with the greatest number (44 percent) expecting recovery in 2011.Danny McCoy of IBEC says, “Ireland doesn’t vary significantly from the European average, which is encouraging given the speed and impact of the recession here, and it’s notable that the vast majority of companies see some form of recovery within the next 12 to 18 months.”

Prospects for Business
When asked about the prospects for their own business in the next 12 months, Irish companies were very similar to the European average, with 22 percent expecting prospects to be “fairly poor” (European average 23 percent). However, 70 percent of Irish firms expected them to be “fairly good” – almost the same as the European average of 68 percent. According to Colin O’Brien, “There are clearly businesses that will continue to struggle despite the best efforts of their owners. This survey is a snapshot in time, but there is evidence that many private Irish businesses are incredibly resilient and see some hope emerging from all the doom and gloom.”
Colin O’Brien concluded by saying, “Our survey shows that other markets see exports as key to their future, and we suggest that many Irish companies should put greater emphasis on exporting by looking at other possible opportunities overseas.”

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Download a copy of "Opportunity Knocks? – Views from Private Business across Ireland and Europe" and watch a related interview with Colin O'Brien (Partner, KPMG in Ireland).

Notes to Editors

• KPMG in Ireland has 80 partners and 1900 people in offices in Dublin, Belfast, Cork and Galway.
• KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 144 countries and have 137,000 people working in member firms around the world.
  

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