September 9th Lunchtime: The Recession Diaries
You’d think from listening to the employers of the land that every business in every sector is in danger of bankruptcy, liquidation or receivership. They are all teetering on some ill-defined brink whose location is undisclosed - but it is real nonetheless, or so we are told to believe. This poor-mouthing can be so passionate, almost persuasive, that I’m inclined to take up a collection in my street for Irish enterprise (’please give generously’).
But not often. And certainly not when I read newspapers which almost daily report how well some companies are doing.The owners of Penneys and Primark predicted that their sales will be well ahead of last year; Irish Press took a loss but is still paying out dividends; and though EBS saw their profits drop, the Chief Executive is still upbeat because they are still coming in at a reasonable €27 million in the first six months of the year, which is over €38,000 profit per employee; and all this with the ISEQ making strong gains on foot of the nationalisation of American financial institutions (god, that feels good to write). And that’s just in this morning’s papers.
But still the poor-mouthing goes on. If anything it is becoming more extreme. Take, for example, the SFA’s Patricia Callan, writing in the Irish Times a few days ago:
But with the fall in surplus cash and domestic demand, all businesses throughout the economy are suffering and now have to focus on reducing their cost base.
Did you catch that? ‘All businesses’. Not some, not many, not most, not ‘confined to the construction/property sector’. All. Simple and all-encompassing. Let’s see how some companies are doing - and this was a quick run-through of stories on Finfacts.com, not a comprehensive trawl through all media stories in the last couple of weeks. These are the profit declarations for the first half of the year (though some are for periods of between six months and a year up to end of March this year).
Irish Continental €17.5 million • Irish Life and Permanent €300 million • FG €9.5 million • Paddy Power €47.1 million • Kingspan €83 million • Independent News €96.6 million • Glambia €44 million • United Drug €33 million • NIB €3 million • Norkom €7.2 million • Anglo Irish Bank €647 million • AIB €1.3 billion • Ryanair €490 million • Greencore €30 million • DCC €181 million • Smurfit Kappa €173 million • Bank of Ireland €1.9 billion • NTR €40 million • IAWS €73 million
This handful of companies employs approximately 5 percent of the private sector workforce, and accounts for thousands more jobs in supply and service companies.
Now each one of these companies has a particular story. Profits might be falling with indications that profits will fall further. Some of these profits are earned overseas and don’t rely on the Irish economy. Some of these are continuing operations (e.g. NTR made €40 million but earned an extraordinary profit of over €400 million on the sale of interests). Some are in the exposed sectors, some are slightly sheltered. The point here is that there is no common thread that links ‘all businesses’.
Are there businesses doing badly? You bet. That happens in the best of times, so how much more so is that going to happen when both domestic and international markets are taking a hit? But that only gets us so far - it still begs the questions: how many? how much? in what sectors?
I previously quoted from a series of business surveys that were completed in the last few weeks. All pointed to the majority of companies being optimistic about their futures.
So let’s be clear about what is happening here. Employers’ organisations are using the recession, which was initially rooted in one sector - construction - to argue for real wage cuts across the board. And for many of the companies they represent, the Irish recession makes no difference whatsoever. For instance, a company that exports their entire production is not terribly interested in whether Irish businesses and consumers can afford to buy their product.
In the business world, the recession really matters to companies which rely primarily on the home market and, in particular, sell to individual consumers. If IBEC gets their way, these companies will suffer even more. Why? Reduced purchasing power. IBEC, on the other hand, want to maintain and increase profits - in many cases for companies whose markets are a long ways away from Main Street, Ireland.
If I were a business relying on the home market I would support ICTU’s wage demands. More people with more money is the best way to maintain sales revenue. And I would know that there is a safety net - if a business can’t afford the wage rise, they can go to the Labour Court and make their case.
If I were such a business I wouldn’t allow myself to be used by those IBEC clients who don’t care about the home market and who are quite capable of granting wage rises. If I were such a business I would read the business pages of Irish newspapers. If I were such a business I would refuse to be a patsy.
And I would cancel my subscription to the SFA.
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Comment by: Shout it from the rooftops… the public debate on the national finances is built on misrepresentation. « The Cedar Lounge Revolution
Sep 10th 2008 at 17:09
[...] Michael Taft has some very useful thoughts on precisely this in his continuing and very impressive deconstruction of the current recessionary [...]