We’ve done what a lot of UK distributors have done to us for years. Those are the words of Peadar Dolan, business development manager at Asbis Ireland. He was describing the distributor’s success in growing its presence in Britain to the point where, he believes, in 12 months it could reach the same level as its Irish business.
That success has been quick in coming. The distributor started selling into the UK in earnest only in the past two years or so as it began to concentrate on the consumer sector. Its emphasis on “new and innovative products”, which it sells tactically on a one stock-keeping unit basis, has also proved to be a hit with UK retailers.
Of course, there’s a wider point in what Dolan says because over the past few years the Irish market has been targeted by UK distributors, most notably Westcoast and Computer 2000. In the current economic conditions, however, it would help indigenous Irish companies if they could reverse the trend and export to Britain and other countries.
The signs are there: a recent survey by IBEC, the Irish business and employers’ confederation, found business confidence was still in negative territory, and the same was true for expectations for domestic sales in the current quarter – but the picture was much better for export sales, with the fifth consecutive quarter of positive sentiment being recorded. The IBEC survey followed figures from the Central Statistics Office that showed Ireland had technically emerged from recession based on one quarter of growth in gross domestic product in the first three months of the year.
Finance minister Brian Lenihan claimed the jump in GDP of 2.7% was the fastest increase in the EU, and revised GDP forecasts for this year upwards from minus 1.3% to plus 1%. But he also conceded that the driving force for any uplift in GDP is, exports and it was pointed out that gross national product GNP, which doesn’t include profits from multinationals, was down 0.5% in the quarter. The government expects GNP to contract by 0.75% this year.
IBEC senior economist Fergal O’Brien says the CSO and IBEC surveys figures pointed to a two-speed economic recovery: “The exporting sectors rebounded strongly in the first half of the year, but companies operating mainly in the domestic sector are facing a much tougher environment . . . The continued weakness in the indigenous sectors of the Irish economy highlights the need for government initiatives to underpin domestic demand.”
O’Brien’s comments are unlikely to surprise many in the IT industry here. The difficulty for many will be that the options for exports are limited, given that the products and services they provide are already available in other markets. And, while the recent decline in the value of the euro against sterling will help companies in a position to export goods or services to Britain, it is likely to further hamper businesses dependent on the domestic market as prices are increased on imports – which means most IT equipment).
So what can be done about domestic demand? O’Brien suggests a “well targeted public capital investment programme and an approach to the fiscal adjustment process that promotes consumer confidence and encourages a return to more normal spending and saving patterns.” But there is little if any evidence that the Government is contemplating anything along these lines. The jobless total is still rising and the next “austerity” budget, set for December, seeks another EUR*3 billion in cuts and tax rises – which is likely to dent consumer confidence even further.
Quite a few people I’ve spoken to in the trade say that things may have bottomed out, and some even say they are picking up. They suggest trends such as virtualisation and the adoption of Windows 7 will help to push customers to invest in IT even if times are tough, particularly if it’s framed in terms of helping them to dramatically reduce costs or the ability to do more with less. It also helps that Ireland plays host to quite a few multinationals, given that these businesses are likely to be buoyed by the stronger export market.
On the domestic front, however, things could well be different. As Peadar Dolan pointed out, if Asbis had been wholly dependent on the domestic market in 2010, its business would have fallen by 20%. The luckiest companies will be those with a strong export business or customers who rely on exports. For the rest, it’s a question of trying to get the balance right to negotiate their way through the “two-speed” recovery. Perhaps the best news at the moment is that, whatever speed it’s going at, it’s still being referred to as a “recovery”.
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