Pace of construction activity growth slows in March

Pace of construction activity growth slows in March

The pace of expansion in construction activity eased in March, the latest Ulster Bank Construction Purchasing Managers Index shows.

The index eased to 55.9 in March from 60.5 in February, but Ulster Bank said this follows a very strong February performance and the still-robust level of the PMI signals that Irish construction continues to expand at a solid rate.

The index – which covers housing, commercial and civil engineering – shows that demand for construction workers continues to be underpinned by new business which continued to rise solidly in March.

For the third month in a row, the housing sub-category recorded the fastest rise in activity of the three sectors in March.

Commercial activity also increased solidly over the month, but growth eased notably from February.

But civil engineering activity declined for the seventh consecutive month and at the fastest pace since November 2018.

Ulster Bank noted that new order growth eased slightly in March from February with companies said they faced solid demand conditions for construction projects.

New business inflows among Irish construction firms have now increased in each of the past 69 months, the bank added.

Employment growth in the construction industry quickened to an eight-month high last month and Ulster Bank noted that the rate of job creation was steep amid reports that extra staff had been hired in order to keep up with customer demand.

Simon Barry, chief economist at Ulster Bank, said the demand for construction workers continues to be underpinned by new business which continued to rise solidly in March, though at a slightly slower pace than the very rapid rate recorded in February.

“Firms themselves remain optimistic about the coming year, with 43% of respondents anticipating higher output levels over the year ahead, with expectations of stronger customer demand cited as an important source of support,” Mr Barry said,

However, he noted that sentiment about the sector’s prospects did moderate slightly in March.

“This was amid reports from respondents that Brexit risks and uncertainties are weighing on perceptions of the construction outlook, albeit that the March PMI survey results indicate that construction continues to outperform both manufacturing and services where Brexit risks are more pronounced,” the economist added.

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Access to finance underpins upbeat era of acquisitions

Access to finance underpins upbeat era of acquisitions

Improved access to finance is underpinning business optimism in Munster, fuelling increased M&A activity along with a rise in the number of businesses willing to invest to support their growth, according to Deloitte.

Business leaders attending Deloitte’s ‘Scaling for Growth’ event in the River Lee Hotel in Cork this week heard that the mergers and acquisitions market in Munster is expected to remain buoyant this year, with the availability of funding options supporting ongoing transaction activity.

The keynote address by Ger O’Sullivan, chief financial officer of Fexco, outlined Fexco’s continuing growth, with over 20 acquisitions in the past decade and how having an agreed acquisition policy and strategy is key in providing the flexible platform to respond to opportunities in the market. The event also featured presentations by members of Deloitte’s financial advisory team.

The M&A landscape in Munster and the growth strategies available to businesses were among the main topics discussed by the 100+ attendees, who included business owners, CEOs and finance executives. They also discussed how management teams implement growth strategies, considerations relating to both acquiring and disposing of business interests, and why a best-in-class management team is vital for competing on an international stage.

“Despite the macroeconomic and political uncertainties, the level of activity in Munster remains encouraging, and the appetite for transactions continues to be strong,” said Ronan Murray, lead financial advisory partner with Deloitte in Munster.

“We have observed this through the work that we are doing with clients in the region as they increasingly look to us for M&A, debt and capital advisory and transaction services. Of course, clarity relating to the outcome of Brexit and whether the UK leaves the EU by way of a hard or soft exit will undoubtedly influence that prevailing optimism.”

Mr Murray said he believes that there is an energy and appetite in the business community in the region. Case in point is the level of construction activity. Recent and proposed developments such as the Port of Cork, Navigation Square and Horgan’s Quay in Cork, and the Gardens International development in Limerick, as well as the expected investments in infrastructure (M20 and N22) announced as part of the Ireland 2040 plan, indicate that our regional cities are quickly becoming a viable alternative to businesses outside of Dublin.

“At Deloitte, we see first-hand, the talent, drive and ambition that is present in companies in the Munster region,” said Mr Murray. “This is apparent not only through the projects that we are working with them on, but also through the strong Munster representation in the Deloitte Best Managed Companies network.

“What’s more, the Deloitte Technology Fast 50 ranking, which celebrates innovation and entrepreneurship amongst indigenous technology companies, is equally stocked with exceptional Munster companies. Last year, it was great to see i3PT (Cork), DesignPro (Limerick) and Mobacar (Kerry) joining an illustrious list of Munster and national companies in the winning enclosure for the first time.”

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Revenue officials meeting hauliers in Brexit preparations

Revenue officials meeting hauliers in Brexit preparations

Revenue officers have begun engaging with hauliers at ports in Dublin and Wexford as part of preparations for a no-deal Brexit.

Concerns have been raised about the number of companies trading with the UK that have not yet registered for customs.

Lynda Slattery, head of Revenue’s Brexit unit, said that before Christmas they identified 84,000 companies that may be impacted by Brexit.

However, less than half of those have registered for customs so far. Speaking at Dublin Port this morning, Ms Slattery said they are “really concerned” by these figures.

Revenue officers were at Dublin Port and Rosslare Europort providing information to truck drivers on the impact of Brexit.

Officers are also on board some ferry sailings between Ireland and the UK offering information on the documentation that truckers will be required to have before arriving at ports, as well as the customs routes that they will have to take.

Speaking to RTÉ News, a number of truck drivers at Dublin Port said that this is the first time they have been provided with this information.

One driver, who works for what he said was a small UK firm, said “because we are so small we can’t really afford to just put things in place”.

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Eurozone releases debt relief to Greece

Eurozone releases debt relieft to Greece

Eurozone finance ministers have released long delayed debt relief to Greece, saying the government had implemented reforms promised during the massive bailout that ended last year.

Greece exited its third and final international bailout in August, a turning point in its progress out of the catastrophe that engulfed the country during the debt crisis.

However the Greek government had failed to complete politically sensitive reforms such as changes to housing foreclosure rules that spooked families struggling with mortgages on their homes.

“All in all, Greece has done what was necessary to respect its commitments. The decision gives a new, very strong signal to the markets,” said EU Economics Affairs Commissioner Pierre Moscovici after talks with ministers in Bucharest.

In a statement, the Eurogroup of eurozone finance ministers accepted the view that “Greece has taken the necessary actions to achieve all specific reform commitments.”

This meant that the “conditions are in place” to unlock debt relief measures worth €970m, the statement said.

The debt relief measures are mainly profits made by the European Central Bank and other EU central banks on Greek government bonds during the bailout period.

The decision comes as hopes rise that Greece has turned the economic corner. Last month Athens issued a ten-year bond, the first major borrowing effort since its debt crisis.

The country hopes to raise a total of around nine billion euros in the markets this year to boost investor confidence in the Greek economy.

Growth is expected to reach 2.4% in 2019 after an estimated 2.1% in 2018, according to the latest International Monetary Fund projections.

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Relief as property tax changes delayed for a year

Relief as property tax changes delayed for a year

Local Property Tax (LPT) rates for householders are to be frozen for another year the Government decided late last night.

Homeowners won’t see any change in their LPT bills until 2021, and tens of thousands of householders who currently benefit from exemptions will continue to do so for another year. The decision means any changes to LPT will be pushed beyond the next general election which is expected by summer 2020 at the latest.

Fianna Fáil’s finance spokesman Michael McGrath argued it’s “a classic example” of “kicking the can down the road”. He claimed it was “about the electoral cycle” and was a sign of “weak government”.

Finance Minister Paschal Donohoe briefed Cabinet on his department’s long-awaited review of the LPT. At present LPT rates are based on 2013 valuations.

There have been fears that the tax will increase significantly due to rising house prices if the way LPT is calculated is not changed. It was due to be re-evaluated in November.

The department’s review group presented five alternative methods of calculation to the current regime, each of which would have different ‘winners’ and ‘losers’ in terms of how they would affect households. Mr Donohoe is referring the group’s report to the Budgetary Oversight Committee for its consideration in a bid to get cross-party consensus. He last night said his aim was that any increases “should be modest, affordable and fair”.

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Central Bank slightly reduces estimates for economic growth this year

Central Bank slightly reduces estimates for economic growth this year

The Central Bank has slightly reduced its estimates for economic growth this year, amidst an ongoing weakening of the international trading and economic environment.

In its latest Quarterly Bulletin, the Central Bank expects GDP growth of 4.2% this year, down 0.2% since its January forecast.

It is all just a little bit weaker than even three months ago.

The forecast for both output and exports is down 0.2%, while consumer spending is forecast at just over 2% this year and next, compared with 3% last year.

It is due to a mixture of a weakening of the international trading and economic environment in which Ireland trades, and softer sentiment in the domestic economy, fueled by concerns over Brexit.

“This is mainly due to heightened uncertainty surrounding the global economy, including the risks in relation to trade disputes, higher protectionism, more stresses in international financial markets and already growth has slowed in the major economies,” said Mark Cassidy, director of economics and statistics at the Central Bank.

“Over recent years unemployment [in Ireland] has been gradually falling… and as the economy gets closer to a position of full capacity then there is diminishing scope for output growth due to less labour supply.”

Mr Cassidy also said some of the softness in the economy at present may be due to companies and individuals holding back on spending, as they wait to see what the outcome of the ongoing Brexit negotiations are.

Still the economy is set for strong growth this year of just over 4%, with unemployment set to average 5.4% for the year, dropping to 5% next year, and wages rising over the two years by 7%.

But that is based on Brexit being an orderly affair, with a deal and two year transition period.

In a disorderly no deal scenario, economic growth would be just 1% this year and next year.

“I would emphasise the inherent uncertainty surrounding any estimates in relation to a no-deal Brexit. It would be an unprecedented event,” Mr Cassidy said. “Our estimates indicate that economic growth could be of the order of 4 percentage points lower in the first year, and a further 2 percentage points lower in the second year.

“That would leave some positive growth, perhaps 1% to 1.5%, over those two years.”

Part of the Central Bank’s no-deal calculations include a significant further depreciation in the value of sterling, which it sees falling by 10% against the euro should Britain leave the European Union without a deal.

That would see one euro buy somewhere in the region of 97p – which represents an extremely unfavourable exchange rate for exporters.

“We think financial markets are currently pricing in a reasonably strong likelihood that a deal on Brexit will be agreed; it would be a shock to financial markets if there was no deal,” Mr Cassidy said. “Tariffs would come into effect also in the event of a no deal, and you would also get other disruptions to trade – difficulties in moving goods into and out of the country.

“All of those on top of each other would underlie the negative consequences for growth and employment across many parts of the economy.”

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Exchequer ahead of target in March as income tax, VAT improves

Exchequer ahead of target in March as income tax, VAT improves

Exchequer returns for March have come in ahead of forecast; as income tax, VAT and Corporation Tax take were all higher than expected.

Almost €4.69 billion was taken in by the State during the month, €207m (4.6%) above target and €550 (13.3%) higher than in March 2018.

It brings tax take in the first three months of the year to almost €12.8 billion – €157m (1.2%) ahead of target and €843m (7.1%) higher than the same period of last year.

During March over €2 billion was received in VAT – €104m more than anticipated. This went a long way towards undoing the shortfall in expected VAT take during January and February.

Income Tax was €8m ahead of target in March at €1.5 billion. It remains €171m behind target in the year to date, but is €305m higher than in the first three months of 2018.

Meanwhile Corporation Tax was once again well ahead of expectations with €354m received in March; €72m (25.7%) more than forecast.

That brings Corporation Tax take to €524m in the first quarter; more than twice what was anticipated for the period after Budget 2019. The Department of Finance said this was largely a timing issue, with the figure likely to move closer to expectations later in the year.

On the spending side, the Government’s net voted expenditure stood just below €12 billion in the first three months of the year – €809m (7.2%) higher year-on-year but €321m (2.6%) lower than forecast after Budget 2019.

Meanwhile non-voted expenditure rose €188m (6.4%) year-on-year to €3.14 billion, largely due to an increase in the country’s European Union contribution.

That left the Exchequer with a deficit of €966m for the first three months of the year – compared to €1.11 billion in the same period of 2018.

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Euro zone retail sales stronger than expected in February

Euro zone retail sales stronger than expected in February

Euro zone retail sales, an indication of domestic demand, were stronger than expected in February, led by a jump in sales of non-food products, data showed today.

The European Union’s statistics office Eurostat said retail sales in the 19 countries sharing the euro rose 0.4% month-on-month for a 2.8% year-on-year gain.

Economists polled by Reuters had expected a 0.2% monthly increase and a 2.3% annual rise.

Eurostat said sales of clothes and shoes rebounded from a 0.6% slump in January to a 1.9% month-on-month rise in February and were 2% higher than a year earlier.

In year-on-year terms, sales over the internet showed the strongest gain, up 8.8% in February and accelerating from a 6.8% increase in January.

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Jobless rate falls to 11 year low of 5.4% in March

Jobless rate falls to 11 year low of 5.4% in March

New figures from the Central Statistics Office show that the unemployment rate fell to an 11-year low of 5.4% in March from a rate of 5.6% in February.

The CSO said the seasonally adjusted number of people who were unemployed stood at 131,300 in March, a decrease of 6,200 when compared to March last year.

Today’s figures show that the unemployment rate for men was 5.4% in March, down from 5.9% the same month last year, while the the jobless rate for women was 5.5% – down from 5.7% last year.

Meanwhile, the seasonally adjusted youth unemployment rate was 13.4% last month, a decrease from 13.8% in February.

The jobless rate has fallen from a financial crisis-peak of 16% in 2012, when the country was midway through a three-year international bailout.

It had provisionally dropped as low as 5.1% last year but the series has since been subject to a series of quarterly revisions by the CSO.

The unemployment rate is now almost two-and-a-half percentage points below the current euro zone average of 7.8%.

Employment increased in 10 of the 14 economic sectors over the year in the fourth quarter of 2018.

The largest rates of increase were recorded in the administration and support service activities with employment levels rising by 12.6%, while numbers employed in construction rose by 7.9%.

Commenting on today’s figures, Pawel Adrjan, economist at global job site Indeed, said the trend in unemployment is continuing on its downward trajectory and means that employers are going to find it increasingly challenging to recruit talent.

“The country is also drawing on inward migration to fulfill open roles with 57% of employment growth in the past year coming from non-Irish nationals, and nearly half of that coming from outside the EU,” the economist said.

A review of the top 10 jobs searched for by non-EU nationals on Indeed looking to come to Ireland shows a strong interest in opportunities in the technology sector.

Tech roles accounted for six out of the ten most popular jobs, with positions for civil engineers and doctors also making the list.

“If the trend in unemployment continues then inward migration will become an increasingly important source of talent to supplement the domestic labour supply,” Mr Adrjan said.

He also noted that low unemployment and high demand from employers for staff is helping support solid growth in pay. Pay growth has now accelerated to around 4% a year.

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AIB to sell €1 billion non-performing loan portfolio

AIB to sell €1 billion non-performing loan portfolio

AIB has agreed a deal to sell a €1 billion portfolio of non-performing loans to Everyday Finance, as part of a consortium with Everyday and affiliates of Cerberus Capital Management.

The portfolio consists of about 2,200 non performing loans, with around 95% over two years in arrears and 80% over five years in arrears.

AIB said the portfolio is mainly underpinned by investment asset properties, and also includes limited agriculture loans.

But family homes have also been included in about 10% of the non-performing loans.

The bank said that “extensive and renewed efforts” were made to engage with the customers in all of the cases involved in the loan sale. It said this resulted in some customers being excluded when they decided to avail of the opportunity to be restructured.

It added that the portfolio excludes performing restructured customer loans.

AIB said the average balance per customer loan is €0.5m and the portfolio extends across about 5,000 assets.

The bank said the deal was another important step in its non-performing exposure (NPE) deleveraging strategy, adding that it remains on track to reach about 5% of total loans by the end of the year.

AIB said it had reduced its non-performing loans from €31 billion in 2013 to €6.1 billion at the end of last year.

It noted that over 90% of this reduction was achieved through case by case restructuring and working with customers to “rightsize sustainable debt based on customer affordability”.

The bank has about 1,500 staff members working with customers who are in difficulty and it repeated that its preference remains to provide solutions through customer engagement on a case by case basis.

AIB said it will receive about €800m from the sale of the loans, with the proceeds being used for general corporate purposes “including the continuation of support for customer restructuring”.

In a note, Davy said the €1 billion non-performing exposure (NPE) portfolio sale so early in the calendar year gives it confidence that AIB will achieve its 5% NPE ratio target by the end of the year.

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