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News : Irish Economy Last Updated: Nov 30, 2010 - 12:22:12 AM

Less than a third of businesses in Ireland believe that the Government’s four-year plan will work
By Finfacts Team
Nov 30, 2010 - 12:15:43 AM

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Minister Eamon Ryan, Taoiseach Brian Cowen and Kevin Cardiff, Secretary General of the Department of Finance at the press conference in Government Buildings, Dublin, Sunday, Nov 28, 2010, anncouncing the EU-IMF bailout terms for Ireland.

Less than a third of businesses in Ireland believe that the Government’s four-year plan will restore competitiveness and increase job growth in Ireland, whilst more than half (52%) believe that the plan actually has the potential to damage Ireland’s recovery.

These findings were released Monday by Ernst & Young, following a survey of 200 Irish business leaders who attended a briefing in Dublin, to discuss the business and economic impact of the plan.

The European Commission said on Monday in its autumn forecast that the EU recovery is taking hold but progress in uneven and despite the Irish debt crisis, it has almost doubled the forecast for Eurozone growth in 2010. However, the Irish economy will grow by just 0.9% next year.

The Irish economy will grow by just 0.9% next year compared with a target of 1.75% of GDP in the Government's four-year plan which was published last week.

The Commission is predicting a growth rate of 1.9% for 2012, compared with the Government's projection of 3.25%. The peak year will be 2012, where the Department of Finance sees growth of 3.2%, falling back to 2.75% in 2014.

There was some positive news for the Government from the Ernst & Young survey. 83% of respondents expect the 2011 Budget, which is to be announced on  December 7, to be passed by the Dáil when presented by Minister for Finance.

Banking and liquidity remains top concern

The survey also revealed the main areas of concern currently facing Irish businesses in light of the plan, which was published last Wednesday.

Half of the respondents confirm that liquidity remains their number one concern following a review of the plan’s details. But, nearly two thirds (64%) of these same business leaders said they do not have confidence that the bank bailout package on offer will improve bank liquidity, or allow Irish businesses greater access to credit in the near future.

In addition to liquidity, around one quarter of all surveyed said their other top concerns were, the impact of changes to PRSI, and details around proposed VAT increases.

The Government’s four year plan outlined that consumers will face higher taxes on spending over the next four years, with the top VAT rate set to reach 23 per cent by 2014. The standard rate of VAT, which is charged on most goods and services in Ireland, will rise by 1 per cent to 22 per cent in 2013 and to 23 per cent in 2014.

Over half of those surveyed (51%) by Ernst & Young, consider that the proposed increases in VAT will slowdown the potential for economic growth in the domestic economy.

Commenting on today’s results, Kevin McLoughlin, Head of Tax Services with Ernst & Young in Dublin confirmed: “Restoring confidence is a key priority right now - businesses are crying out for stability. The Plan is a step in that direction, only time will tell if it will be successful.”

The findings also confirmed the reaction of many individuals to the massive changes planned for pensions announced in the Government’s plan, which will make it far more unattractive for people to invest in their retirement. 75% of those business leaders questioned believe that the changes announced will alter how they plan for retirement.

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