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@ As we approach the end of 2013 and look forward to what next year might bring, the recently quoted words of the Nobel prize winning economist Joseph Stiglitz spring to mind, when he commented on Ireland’s economic recovery, and I quote: “Will you get back to where you were with maybe a lost decade? Yes, I think you will. But it will be a lost decade, at least”. While signs were on that the economic wheels were buckling from late 2007, it was in the period September ...
As we approach the end of 2013 and look forward to what next year might bring, the recently quoted words of the Nobel prize winning economist Joseph Stiglitz spring to mind, when he commented on Ireland’s economic recovery, and I quote: “Will you get back to where you were with maybe a lost decade? Yes, I think you will. But it will be a lost decade, at least”. While signs were on that the economic wheels were buckling from late 2007, it was in the period September to December 2008 that they truly came off in spectacular fashion. Five years on, the question is are we in fact half way through this recession? Even Solomon himself would kick for touch when answering that one but ever since my father pushed a book into my hand when I was a spotty faced young lad and said “Here - read that!”, I have subscribed to the power of positive thinking! The book, “The Power of Positive Thinking” was penned by Norman Vincent Peale over 60 years ago – I did not receive a first edition I hasten to add - but it still enjoys a place on my shelf. The sales blurb says that “This book is written with the sole objective of helping the reader achieve a happy, satisfying, and worthwhile life". Find a copy if you can, it continues to be an international best seller, a simple workable philosophy of living and a treasure trove of methodologies for implementing a positive mental approach. So with that theme in mind, what observations can we see which give us cause for hope for business activity and the economy generally for 2014? Here are a few, based on my own recent experiences and those of my professional colleagues in our firm:
- We have never seen anything before like the number, size and diversity of foreign funds, investment houses, distressed equity players and high net worth individuals as there are currently circling in the Irish marketplace looking to invest in property opportunities, mainly residential and commercial, but also encompassing hotel/leisure, and other areas. The “new money” players are now expanding their sights beyond completed and performing property into the purchase and development of partially completed residential and commercial developments. I also predict more REIT type investment vehicles will be launched in the Irish market.
- The search for investment opportunities is now expanding beyond property, into investment in the rescue and recovery of trading entities and SMEs, which is a very positive development.
- The strategy of certain of the foreign banks to exit some sectors or indeed, entirely, from the Irish market is providing opportunities for the new funding providers and the pillar banks to get involved, and thus fuel market recovery with much needed capital and working capital for struggling business, which in turn is preserving employment. This trend will accelerate in 2014.
- Despite the fact that a recent study has shown that Irish businesses are paying interest rates far higher than what is charged in German businesses, interest rates are at an all-time low, which means that it is not the current price of money, but the overhang of historical debt, that has to be tackled once and for all. Along with the foreign banks, signs are on that the Irish banks have restructured internally to address the “overhang” issues in the trading and personal sectors as we head into 2014. The outcome should see the restructuring of many struggling SMEs where the owners are also heavily under water with personal debt, using sustainable work out solutions.
- The advent of the Personal Insolvency legislation, (while not particularly user friendly), and the forthcoming changes to the Examinership legislation to make it more available to SMEs as a rescue mechanism, will also contribute to the “can do” culture we need to restore business and personal balance sheets.
- Talk to anyone in the commercial property services sector and they will confirm that in all the major cities, but particularly Dublin and Cork, we are seeing a real shortage of quality office accommodation due to absence of new builds for the last five years. As a result, you will see the commencement of significant refurbishment projects on well-located office buildings in Dublin 2 and 4, the traditional business locations, again providing opportunities for the long suffering construction sector.
- Add in the combined effect of the stimulus package for employment included in the last two budgets, the favourable FDI (Foreign Direct Investment) climate (caused not just by the competitive tax environment, but also by our good Irish attitude to hard work) and our robust education systems producing bright young graduates and we begin to see traction. One of my tax partners is just back from a trip to the States, meeting our Baker Tilly International member firms and some of their clients, and the message is clear- Ireland is centre stage for FDI in the period ahead and based on leads generated, we anticipate more new FDI, (and hopefully new clients!) , in 2014.