I was really hoping to be writing my blog about something different, but it still seems necessary to set the record straight. It’s necessary because the Irish economy, and Irish jobs depend on it. We have seen a direct correlation between super negative reports and employment e.g. the day after such reports, jobs are pulled, or recruitment is put on hold. SMEs in Ireland are suffering exponentially because most SMEs service the domestic market and while Irish people are too nervous to spend (saving 13% against an OECD average of 7%) they will continue to suffer. The multi-nationals based in Ireland rely much less on the Irish domestic market for their income and so are less affected by the negativity… so thank goodness the multi-nationals are here!

Last week the media headlined some ridiculous reports that were completely misleading. People say that bad news sells, and perhaps they’re right, but they’re causing real damage to Ireland Inc by their cavalier attitude. The media’s constant excuse for their negative reporting is that in 2006 & 2007 they failed to highlight the impending fall, so now they’re going to hit us with everything… but they’re making exactly the same mistake! News is news. It shouldn’t be biased, it shouldn’t have an agenda and it’s not opinion-based (besides, even if the Irish housing bust could have been forecast, nobody could have forecast the simultaneous global economic collapse).

There’s a correct place for opinion and commentary, but it must be addressed as such. News should be balanced and without agenda. Frankly, to admit that you have an agenda “we’re not going to make the same mistake again so we’ll headline all the bad news / warnings” is shocking and incredibly irresponsible. Furthermore, I don’t think the newspapers in particular, are aware that they have lost credibility. We read the articles and we don’t believe them. We question and doubt what they have to say, but we have no choice but follow the stories (if we want to know what’s happening in the world) and we try to disseminate fact, from fiction. But make no mistake; even a story can affect you, particularly if it taps into your deepest fears (e.g. your personal or business finances). So below are a few facts, with a David (positive) commentary in an attempt to allay some of your fears and to set the record straight!

Today’s News (June 2nd): I’ve just read the Irish Times and the economic Headline says “University heads told courses and jobs at risk in funding cuts”. Page 18 has all the economic news, good and bad including: “Rise in output last month… Irish manufacturing output rose last month as employment in the sector increased for the first time in more than two years and new orders continued to grow… / Ryanair records €319m profit… / Unemployment to remain a significant problem… Ireland will return to growth next year, but… / Irish Consumer confidence steady / Insolvencies fall for third month in a row / Ratings agency says property in Ireland could be undervalued…” and on page 19 “Two firms to create 55 jobs in Tralee…”. So the news is pretty good, but the front page headline not… you have the idea!

Northern Ireland: While there are some significant worries in the North about the British Governments plans to cut public sector spending, it still seems that “Small firms are showing signs of steady growth…” Despite concerns of slow growth, I have been very encouraged by Northern Ireland’s new Secretary of State Owen Paterson’s 25 year grand plan. The nub of which is to make Northern Ireland an independent and successful business centre “I would like to see Northern Ireland as the most business friendly place in Europe”. I met with the INI (Invest Northern Ireland) a month ago and if they’re anything to go by, I’m sure it will happen.

Debt: Ireland going bankrupt? Has anyone really taken that seriously? Because if Ireland goes bankrupt then the whole of the single currency, the EU and most of the planet are finished and we might as well pack up now! Ireland’s debt to GDP ratio is still lower than the EU average… lower than France, Germany, Austria, Belgium… Canada, UK, Singapore, Japan… Exchequer returns for April show tax returns of 11.4% more than a year ago. However, to really make a dent in the debt we have to start growing again. In a recession tax receipts go down and welfare payments go up (ergo, debt)! But in a growing market the converse happens and you can repay your debts.

GDP: It seems we really are growing again, indeed the EU Commission, The Central Bank, the ESRI and others are predicting growth of 3% in Ireland next year, twice the EU average, and the 2nd highest in Europe.

Budget 2010: The Government concentrated on controlling public spending, rather than on raising taxes. This is smart, effective and frankly, is the envy of many. The fact we can control our expenditure sets us apart from so many, including Greece and the UK. Credit to the Irish people for their selflessness, and perhaps here the advantage of being a smaller country / community has helped.

Retail Sales: For the first time since June 2007 retail sales grew in February… and have continued to grow month on month.

Confidence: Confidence is returning with the confidence index remaining over 63% despite the recent stock market wobbles. The importance of confidence cannot be underestimated. Confidence creates sales, employment, wealth and security for people and countries.

Unemployment: Ireland’s unemployment is less than the UK, USA and most of Europe and it has gone down a bit since January. In real terms it has remained about 7.6% since August last year (not the 13.4% Live Register figure that we bizarrely pretend is the same as unemployment (see previous articles).

Cost of Living: Has come down to early 2007 levels which in competitive terms (versus other countries) means a significant drop and helps to restore Irish competitiveness NB The weakened Euro also helps us compete internationally.

Employment Growth Sectors: Brightwater’s job flow has increased dramatically since the 2nd half of 2009 with growth areas including: IT (particularly at the senior level), Pharmaceutical (Quality & Regulation), Supply Chain (all areas as process improvements lead to cost reduction), Banking and Financial Services (especially regulation & compliance) and Insurance.

I could go on, but suffice it to say that the truth is that Ireland has dealt with the crisis in an incredible and impressive way. The world is watching and indeed, copying Ireland. If we can keep working, fighting and being brave over the next 12 months, I think it will lead to an incredible future for Ireland. I think everyone in the country (barring the few… bankers, media and a few economists to be sure!) can be really proud of the role each and every one has played in surviving the worst recession in modern history. Few countries (perhaps none) could have coped better.

It is my belief that the recession has given the Irish media their best story in decades.  They have explored the horror from every angle.  The story is so powerful:  A poor country that rose high and like the Greek character Icarus, believed in their own hype, got too close to the sun and tumbled down to earth.  That’s the story; all you need now are a few statistics to “prove” that it’s true.

Every day new statistics are released, whether it’s the CSO, IBEC, the ESRI, innumerable stockbrokers, economists, company accounts, stock markets, international markets… there’s always a statistic to be found that “proves” your story.  The media are the storytellers of Ireland and they have unashamedly told their story and still do.  The trouble is it’s just not true.  Ireland is a well respected country that has continually outperformed its competitors.  Even through the recession, Irish Government bonds were snapped-up by international investors who recognised the underlying strength of the Irish economy.

Every week I read the International Herald Tribune, The Wall Street Journal and The Financial Times and there’s barely a mention about Ireland, except in praise.  So let’s be clear, the trouble with statistics is that they mean nothing.  It is the story that gives the statistics meaning and its past time the media found a new story, lest they lose the last shred of credibility they still hold with the people concerned with Ireland Inc.   What’s that saying? “You should never let the facts get in the way of a good story”?!  Below is a tale by William Bastland that illustrates my points exactly:

“Once upon a time, Orkney had one of the highest teenage pregnancy rates in Scotland. Scotland itself is high in the international league. So health workers in Orkney tried something new. They began talking to young people about sex in terms of relationships, not only mechanics. They also made condoms easily available because in a small community the shopkeeper might just be your auntie. Then came data showing that Orkney’s teenage pregnancy rate had dramatically halved.

All this was widely reported last summer. Convinced of the happy ending?

Let me introduce you to a radical and highly complex, story-wrecking mathematical insight. Ready? Numbers go up and down. All right, I lied about the complexity. I also lied about the maths. This is not really mathematics, it is everyday life. In life, things do not happen with perfect regularity. Some days, or years, there are more, sometimes fewer. And it’s not radical either. Everyone knows it. Until then they tell themselves stories. The truth in the Orkney case is that the number of teenage pregnancies goes up and down, and ups and downs may have nothing to do with the stories told to explain them. When new data came out since last summer, it was not reported. Or at least I can’t find any reference to it. Perhaps it didn’t fit the story. Here is the data in a little more detail.

The figure reported last summer, the most recent then available, really was lower than in 1994. But it’s clear that the numbers go sharply up and down, much more so in a small community than the larger one of Scotland as a whole. What happened when more recent data came out? This:

The same as usual. What had gone down, briefly, went up, just as what sometimes jumps up often tends to come down. You can talk about life, relationships, morality – and so we should. But there’s another knowledge of life that statistical thinking sees and other mind-sets often miss. This second kind of thinking relies not particularly on maths, but imagination, imagination for what can go wrong with narratives that describe the way one thing leads to another. This is the best kind of story-telling; story-telling wise to the ways that stories might mislead. I’m quite sure that no-one lied in telling the story in Orkney. I think they were just wrong. I suspect that all concerned, including journalists, found the story of relationship advice and condoms plausible enough to convince them that the numbers they looked at in those two salient years – a beginning and an end – told them something important. And the data does not prove that their new approach to sex education is wrong. It might have benefits that these statistics don’t capture.

Nevertheless, a plausible explanation for change helps convince people that the change really occurred. A plausible story for why it happened persuades us that it did. The explanation becomes the story. But “it happened because…” can disguise the fact that it didn’t really happen at all, or at least not the way we think it did. The truth is that we still don’t really know if there is an underlying change in the pattern of teenage pregnancies in Orkney. There might be. But it’s not evident yet. Another recent example appeared in an editorial in a serious national newspaper – which had better remain nameless – about the revival of marriage, with a reflective account of why this had happened deduced from a short run of recent data. Five weeks later the same newspaper found itself reporting that marriage had in fact, according to new data, fallen to its lowest level in one hundred and eleven years.

Horizontal tennis

Another is the way that both sides in the climate change argument have seized on single-year fluctuations to the extent of arctic sea ice as “proof” that trends are going further, faster, or in the other direction, or whatever. Anyone might guess that such numbers go up and down. But even serious people ignore or forget this in the haste to tell a story. The real difficulty in almost all these cases is to work out how long you have to look at the data before being confident that change is sustained.

Observing the excitability at life’s natural yo-yo, you might wonder if parts of politics, journalism, even sometimes science, resemble nothing so much as an insane commentary on a game of (horizontal) tennis, in which it is assumed that whatever just happened tells us all we need to know, as if whoever just hit the ball must be winning. The underlying trends and often slow nature of real change are lost in a frantic effort by all sides to grab at any short-term snippet of data and claim support for their beliefs or policies, to tell stories with an instant moral”.

I call on the Irish media to start telling us a new story (you’ll find plenty of statistics to back you up), because I’m really tired of the Icarus story!

We’ve often read about famous people complaining about being misquoted.  This morning I read an article by Caroline Madden in The Irish Times titled “Things that make an entrepreneur get out of bed every morning”.  Caroline explained that I’d said that Bill Cullen was an insecure entrepreneur whose drive stems “from the grinding poverty of his childhood in the inner-city slums of Summerhill in Dublin”.  I said nothing of the sort!

I asked the question “what makes Bill tick” because all the Apprentices were absolutely adamant that they wanted to work for Bill, and I wanted to know why?  Because in my opinion, if you’re going to work for someone, you should at least be considering the individual you’re going to work for.  I assure you that Bill was thinking hard about what made each and every one of the aspiring apprentices tick… because he wanted the right person!  In my opinion, upward management is just as important as downward management.  This is particularly true in Ireland where there is not the same power-gap that exists in some cultures.  For example, if ‘your superior’ asks you to do something in Korea, you comply!  Not so in Ireland where we question and challenge as a matter of course, so the relationship between Employer and Employee must be symbiotic to function well.

I feel happy with posing the question “what makes Bill tick”, but I wish I hadn’t answered it in the You’re Fired Show.  Clearly some people like Caroline Madden feel free to adapt the story as they see fit.  What makes an Entrepreneur tick?  Well I could guess, but I’m not qualified to answer.  What I am qualified to answer is what makes a driven person tick, and that’s insecurity.  I’d say I’m a pretty confident person, but there’s still that little demon on the shoulder asking those questions  It drives me on every day and I’m sure it drives Bill too.  However, just having insecurity isn’t enough to be successful; in fact that’s the trick.  Coupled with that insecurity is the courage, determination, intelligence, stamina, integrity, work rate and humility to overcome and succeed.

Bill Cullen is a star and to sum him up with the word ‘insecure’ is ridiculous and somewhat rude, because there’s so much more to it than that.  I’ll be much more careful about what I say on live TV again… no wonder TV people (politicians, sports people et al) master the art of saying nothing!

I feel like I’m the one who’s being negative, but I just don’t understand why the media don’t shout the Good News from the rooftops?!

The Irish economy has emerged from recession.  The RTE website was so depressing, starting with the headline…

‘Recession over’ suggestions rejected

Thursday, 17 December 2009 17:53

New figures show signs that the Irish economy remained weak in the third quarter of this year, even though gross domestic product actually grew slightly during the three-month period.

This sparked a debate about whether the country had come out of recession, as the technical definition of a recession is two quarters in a row of falling GDP.

The Central Statistics Office said the economy, measured by GDP, shrank at an annual rate of 7.4% in the third quarter, slightly less than the 7.9% drop in Q2.

GDP compared with the second quarter showed a small rise of 0.3%. But as GDP includes profits made by US multi-nationals based here, many economists prefer to focus on gross national product (GNP). This showed a quarterly fall of 1.4% and an annual drop of 11.3% in the third quarter… and so it continued, explaining how disastrous the Irish economy was!

RTE News last night failed to say anything, The Indo and Irish times carried snippets on the side, addressing the issue in similarly depressing terms… can anyone explain to me why?

To get a balanced view I switched across to Sky News where the first thing I saw on the ticker-tape at the bottom was “Irish economy emerges from recession”.  The BBC website didn’t confuse us with 7.4% drops, they simply said the Irish economy grew by .3% (1.2% annualised) in Quarter 3 and had emerged from recession ahead of the UK economy.

Nobody is trying to say we don’t have problems.  Goodness knows we are aware of the national debt, unemployment and the rest, but what’s wrong with at least telling us the truth… good and bad?

My article (at the bottom) was printed in the Irish Times and I got a great response from our business colleagues who rang, emailed and told me face to face.  I understand the IDA posted it on their intranet.  These people clearly have an interest in the economy doing well, and an interest in Ireland Inc looking good to international companies and investors.  However, some readers seemed to prefer the constant negative take that the media constantly runs…  As a business leader, I’ve learned that it’s important to encourage others to keep a balanced view of the bad AND good news and I’m telling you now that:  Ireland came out of recession Quarter 3, Quarter 4 will be even better, and the future for Ireland Inc is rosy!

The Media insist on only highlighting the bad news, and even spinning the Good News to make it seem bad.  The truth is that Ireland is doing well and the future looks very bright indeed.  For example, on October 7^th, Ireland’s Q2 GDP figures (April to June) were announced and Ireland recorded no fall in GDP (0.0%) coming 10^th in the EU (ahead of the UK, Holland, Spain, Denmark… also the USA), why wasn’t this announced?  Why wasn’t it headline news?  Why are we only being told the bad news?  Why only give airtime to those predicting our demise?

In September, Brightwater asked our clients (nearly 28,000 companies ranging from SMEs to large multinationals) the simple question; “When will Ireland get out of recession?” and the results were: encouraging.

When will Ireland get out of recession?

October 1^st the ESRI predicted Ireland would be out of recession by Q1 2011, Davy’s stockbrokers predicted Q1 2010 and NCB predicted Q4 2009… I think I’ll go with NCB!!

Ireland’s economy can be simply divided into the external market (exports) and the internal market (spending).  The external is the country’s wealth-creator and the internal is where it’s spent – thus keeping the country (and exchequer) buoyant.

Exports

Ireland has continued to outperform the entire EU manufacturing and export wise.  From 2000 to July 2009 Ireland’s exports grew by 43.9% versus the EU15 average of under 10%, but what’s even more impressive is from July 2008 to July 2009 (recession) Ireland’s exports dropped just 2% versus the EU average drop of 25%.  Our Manufacturing and Service sectors have massively outperformed our competition.  This is seriously great news and should be highlighted!

Ireland’s problems are internal, where the stats are not good.  The nub of the problem is property… which has led to banking problems and beyond.

Property

In Ireland, home ownership is about 85% where in most European countries it is nowhere near this e.g. France, Italy and Germany where home ownership is about 40%.  Then, since the early 1990s Ireland’s population aged 20-40 has gone up by over 50% (due to higher birth rate, returning Irish and immigration), while, in the EU as a whole, the population aged 20-40 has fallen by almost 10% and, in some countries, such as Germany, has fallen by as much as 20%. The above points led to massive house building and supply & demand price inflation. Then the recession came… fear stopped people buying houses, the credit crunch made buying difficult and the global recession slowed everything. The effect on Ireland was devastating.  However, the effects are temporary and in the long run having a younger, growing, home-owning population will be of great benefit to the country.

Spending

Confidence has been eroded by the above points, and by the media’s constant negativity.  For example, The Irish Times chooses to headline the ESRI’s gloomy predictions above Davy’s or NCB’s – and that has led people to save, save, save!  BOI & AIB are awash with money, but little investment.  In 2007 Ireland, the US and UK populations saved about 2% of their annual income.  Recessionary fears have led the US and UK populations to save about 5.5% of their income, but Ireland’s people are now saving about 12% of their income.  This is too high.  There’s no money-go-round, no buying, investment or development.  The country has frozen and must be unfrozen. The fear and negativity must stop now… tell people the Good News… tell them THE TRUTH and explain the effects the stats like the ones outlined below will have on them directly!

Employment

Another example (and close to my heart) is employment and I have two points.  The first point is, let’s be clear, the rate of unemployment has dropped every month from a loss of 31,400 in January, to a gain of 16,500 in September.  The media may explain the September fall as seasonal, but so was the increase in July and that wasn’t mentioned.  The media may explain it as mass emigration, but again that’s not true.  September 22^nd the CSO reported that of ½ million non-nationals living here the net outflow was just 7,200 people (not 100,000 as has been reported!) and there has been zero net Irish emigration (as many Irish have returned as have left). Either way, the employment outlook is getting better and better. It is too soon to know if September marks the end of rising unemployment. Most economic forecasters think it will rise a bit more over the winter. But, almost all of them have now revised down their forecasts for peak unemployment next year from around 17.5% to around 13.5%.

The second point is known, but not well publicised. It is well reported that in Ireland there are about 430,000 on the live register. In Ireland we count every person on the live register as ‘unemployed’, so this includes casual workers, people working part time, on maternity leave pay, sick leave pay, disability, now on ‘3 day weeks’, and this is about 180,000 people, leaving around 250,000 as fully unemployed. In most other countries, including the US and the UK, they do not count the 180,000. In their measurements Ireland has around 250,000 unemployed (7.3%), not 430,000. It has

been estimated that if the US calculated unemployment in the same way as the live register in Ireland, the unemployment rate there would be almost 17%. Things are getting better!  Indeed, at Brightwater we’ve just had our best month of the year thank goodness, I see some light at the end of the tunnel!

Gross Domestic Product

GDP is another statistic often bandied about and we all know how all the predictions were of Ireland being the worst affected in the EU (some media channels were actually trumpeting that Ireland would record the largest fall in GDP ever recorded).  Frankly, this is rubbish!  Predictions of a 12% – 15% fall in GDP have recently been updated to 8% – 10%.

However, the truth is still that our GDP has slumped, but why?  One reason is property where there is little building going on – and because of our young, home-owning population the GDP slump is exacerbated.  Germany and others didn’t have the same building growth so never got the reverse swing either!  But of course, when the economy returns, our GDP growth will also grow disproportionately to everyone else’s.  Secondly, confidence in Ireland is eroded by 24/7 bad news reporting (don’t you sometimes feel “get me outta here”)?!  Retail sales are an important indicator of confidence and while they have fallen off remarkably since 2007, since January 2009 the indices have risen by the month from 84.3 to 93.3 by June.

Finally, and most importantly Ireland is part of the global economy which is why all the major parties called for a ratification of the Lisbon Treaty.  In Ireland, a remarkable 90% of our GDP comes from exports versus an average 40% for the EU as a whole.  As such, when there is a global crisis, Ireland’s production is hit hard, but when the global economy rebounds, we rebound further and faster.

The Facts

Ireland suffered during 2008 because of housing, but we are again outperforming our competition:

EU GPD Q1 2009 and Q2 2009

When will we get out of recession?

To paraphrase Henry Ford:  If we believe we’ll get out of recession next quarter, then we’re probably right; and if we believe we’ll get out of recession in 18 months, then we’re probably right again!  After all, the housing-related problems will eventually go.  Sooner or later the global credit crunch will end, mortgages will become more widely available and house prices will stop falling.  In the long-run, it will be the performance of the manufacturing and service exports that will have a far more decisive effect on the economy than temporary housing-related problems.

The Future

The future looks even brighter.  Davy’s predict GDP growth of 4% in 2010 and the ESRI predict Ireland’s growth to be 4%-5% from 2011 to 2020 – far above the EU average of 2%.

Conclusion

Ireland has a dynamic and internationally woven economy that has suffered exponentially as part of a global recession.  We also have a young, home-owning population that are not currently buying and finally, we are gripped by a negative media that delights in eye-catching, misleading headlines about the demise of the country, giving us confidence problems. For my part, I call on the media to help boost confidence with more balanced and positive reporting of the economy.  For example, if everyone was properly informed about how well our exports have performed in comparison to other EU countries, then they’d realise that, notwithstanding temporary housing-related problems, the long-term outlook for the economy is fantastic… and far better than what we’re being told!