Summer 14 generic newsletter

SUMMER 2014 EDITION

AVOIDING INHERITANCE TAX ECONOMIC OUTLOOK Constantin Gurdgiev

IN THE SPOTLIGHT Seán Óg Ó hAilpín

Top Tips from The Far Side of Finance Garvan Grant

Data Protection PJ Kiely

Gallery Photos from Recent Events

A RANGE RANGEOF OFSERVICES SERVICES THAT HELP YOU PROTECT, THAT HELP YOU PROTECT, CREATE, MANAGE YOUR WEALTH CREATE, MANAGEAND ANDPRESERVE PRESERVE YOUR WEALTH

Table of contents Inheritance Tax Relief .................................................................................... P3 Photo Gallery .................................................................................................... P5 Data Protection- PJ Kiely ...............................................................................P7 Top Tips from the Far Side of Finance- Garvan Grant ....................... P9 Positivity Corner ............................................................................................... P12 Constantin Gurdgiev ..................................................................................... P13 In The Spotlight- Sean Og O’Hailpin ....................................................... P16 Adverts ................................................................................................................ P17 CPD Events ......................................................................................................... P19

WELCOME Hi Everybody, And welcome to Manning Financials’ Summer 2014 Newsletter. I hope you are enjoying the summer as much as I am. I thought there was no chance of reaching the hazy highs of last year but its true, Ireland can experience two good summers in a row!

And isn’t a great time to be living in Cork, we’ve had it all this year. The major triumph that was the Irish Open held in Fota Island Golf Resort, really put Cork on the European Golf map. And then we had the annual success of Live at the Marquee and Il Divo in Musgrave Park. Maybe if Garth had his gigs down here, we would have pulled them off!

There are a lot of positives around at the moment jobs. Consumer confidence is gradually being restored thanks to employment trends and the stabilisation of the housing market, and a small positive contribution to growth from consumer demand has finally materialised. Let’s just hope the powers that be have a sensible budget in November.

Thanks for taking the time to read this an enjoy the rest of the summer.

Regards,

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Inheritance Tax Relief In the past “estate planning” was something we believed to be only for the elite, very few wealthy individuals and their families in our society. However, this is no longer the case. Despite the recent downturn in the economy, it is still important to protect estate values.

Reductions in the tax free thresholds, together with increases in the capital acquisitions tax rate, have resulted in more and more people who previously did not have to give consideration to this area now needing to do so.

RATES The rate of Capital Acquisitions Tax, both for gifts and inheritances, has increased from 20% in 2008 to 33% in 2013.

THRESHOLDS Thresholds have also been dramatically reduced. For example, the group 1 threshold from parents to children reduced from €521,208 in 2008 to €225,000 in 2013.

SECTION 72 Section 72 of the Capital Acquisitions Tax Consolidation Act 2003 introduced a relief on the proceeds of certain life assurance policies used to pay inheritance tax. The relief is sometimes referred to as ‘Section 60 Relief’, after the relevant section of the Finance Act 1985 which originallyintroduced this relief.

Group 1 €225,000

Where the person receiving the property is a child of the disponer.

Group 2 €30,150

Where the person receiving the property is a lineal ancestor, descendant, a brother or sister..

Group 3 €15,075

All other cases.

The net effect is that children

(beneficiaries)

can inherit less without paying tax and will have to pay a higher rate of tax.

The relief given is that the proceeds of policies affected under Section 72, are exempt from Inheritance Tax, in certain circumstances, to the extent that they are used to pay Inheritance Tax, arising from the death of the policyholder.

ARRANGING THE COVER Most Section 72 policies are issued on a joint life last survivor (second death) i.e. the sum assured becomes payable only on the 2nd death of a couple. Joint life last survivor Section 72 policies can only be affected by legal spouses. This type of policy is suitable where spouses have wills which will leave everything to each other on the first death and then onto their children on the death of the last survivor of them.

In this case the inheritance tax liability will not arise until both parents have died.

Any excess or surplus proceeds of the policy, not used to pay the Inheritance Tax are treated as a separate taxable inheritance in the hands of the beneficiaries.

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TRUST We would recommend that the Inheritance Tax Plan be arranged under Trust. The advantages of this are: It ensures that the plan proceeds are used only, in the first instance, to pay Inheritance Tax. Any surplus may revert to next of kin.

The proceeds will be paid immediately on death to the nominated Trustee. The proceeds would not go into the estate.

The Trust gives flexibility in determining which beneficiaries are to benefit from the plan, and in what proportions. The plan can be arranged under Trust by completing a Trust form along with the life assurance application.

INCOME TAX ON AN ARF The Section 72 relief referred to above was extended by Finance Act 2005 to cover the 30% tax liability on ARF monies inherited by a child over 21.

HOW INHERITANCE TAX RELIEF WORKS Gerry’s parents die in 2013 and leave him and his 3 sisters (4 children altogether) an estate valued at €2,000,000 or €500,000 per child.

The tax exempt threshold for a “parent – child” relationship is €225,000. Assuming Gerry and his sisters received no other gifts/ inheritances they are liable in total for capital acquisitions tax on the balance of the estate, ie €1,100,000. Since the tax rate applicable is 33% this amounts to an inheritance tax liability of €363,000.

Group A Mr and Mrs Kelly are aged 50 and their estate, valued at €1,000,000, is to be divided equally between their 2 children. Their children’s inheritance tax bill will be €181,500 - i.e. 18% of the estate will be taken in tax.

Solution Use a Section 72 plan with life cover of €181,500 to pay the tax bill. The premium (exclusive of the government levy) is c€115 per month or €1,400 per annum.

Group B Mr Murphy is a bachelor aged 50 and his estate, valued at €500,000, is to be divided equally between his 4 nieces and nephews. His nieces and nephews inheritance tax bill will be c€125,000 - i.e. 25% of the estate will be taken in tax.

Solution Use a Section 72 plan with life cover of c€125,000 to pay the tax bill. The premium (exclusive of the government levy) is c€140 per month or c€1,700 per annum.

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Benefits of the new Data Protection Regime for Businesses.

What is Data Protection?

Data is big business. In all likelihood, Data is your business. Whether you are a technology start-up, an insurance intermediary or an accountancy practice, if you accumulate personally identifiable information (“Data�) for your business, you cannot avoid dealing with Data Protection issues. Over the coming years, depending on the size of your operation and the manner in which you deal with the Data you hold, compliance with Data Protection legislation will become part and parcel of your operational costs, just like insurance, payroll and taxation.

Data Protection is here to stay, we all need to learn how to deal with it.

Compliance The Data Protection legislative landscape is set to change significantly over the next 12 to 24 months throughout Europe as the EU sets its sights on standardising Data Protection regulation. The impact will be felt by each and every one of the 508 million EU citizens.

The resulting knock on effect for business is that compliance will become an imperative, not just an option. There will be a requirement for businesses in excess of a certain head count to appoint a data protection officer, whose primary function would be to ensure their organisation complies with the law. We have already seen this happen in other regulated areas such as health and safety. Specialists will be required to grapple with put in place the compliance platform, as well as ensuring compliance. The impact and cost could be considerable unless pro-active, rather than reactive steps are taken by businesses. Businesses will be scrutinised and called to account for their failings in a standardised manner. This will apply to every business operating within the EU, as well as those dealing with Data from EU Data Subjects in the case of businesses from outside the EMEA. These are all issues which businesses need to take steps to address now, putting in place processes and procedures to assist them to take advantage of the new regime of Data Protection regulation, as well as utilising the lessons learned from these processes in other facets of their business or organisation.

Benefits of this new Regime Every cloud has a silver lining, or so they say. This is no different.

Data Protection, in a world where consumers and business people are more and more sensitive as to the manner in which their data is controlled, is big news. Businesses are using data protection and their undertaking of regular and rigorous data collection and retention audits, as well as security evaluation, as a key opportunity to promote themselves; to differentiate themselves from their peers and or competitors and to prove, via third party certification and scrutiny that what they say they do with their Data, they actually do. In a world where transparency and openness is treated as a commodity, these businesses are trading on their reputation and not simply on the strength of their promises.

Properly performed Data Protection audits will focus on issues such as staff training and the incorporation of key clauses in employment contracts and confidentiality. These opportunities should not be overlooked, as not alone are the information data banks developed by a business confidential from a Data Protection point of view, they are also proprietary to the business and should be protected as such. This can be crucial in fields where there is high mobility of staff and management between competing businesses.

biography Kiely Solicitors are a practical and commercially focussed law firm, based on Tuckey Street, in Cork City.

P.J. Kiely is a graduate of University College Cork and a Commercial Partner with the firm. P.J has a broad advisory practice primarily focussed on the provision of corporate and commercial legal advice to small and medium sized enterprises at home and abroad.

P.J. has significant experience advising in relation to the Data Protection regulatory and compliance matters, as well as in the area of intellectual property.

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The Basics Data Protection follows a common sense approach and is based on clear lines of consent and purpose which originate from the data subject, as well as clear security and disclosure obligations for the Controller – namely the business.

The Data Protection Acts 1988 and 2003 stipulate that a Data Controller must: 1.

2.

3.

4.

5.

6.

7.

8.

Obtain and process information fairly; Keep it only for one or more specified, explicit and lawful purposes; Use and disclose it only in ways compatible with these purposes; Keep it safe and secure; Keep it accurate, complete and up-to-date; Ensure that it is adequate, relevant and not excessive; Retain it for no longer than is necessary for the purpose or purposes; and Give a copy of his/her personal data to an individual, on request

These high level rules form the basis for compliance processes and procedures implemented following a Data Protection audits and compliance checks. The devil is always in the detail as to how these are analysed in each case, as well as the manner of subsequent procedural implementation. There are many helpful online resources that can be leveraged by businesses to assist them with their compliance processes such as: Irish Data Protection Commissioner Guide: http://www.dataprotection.ie/ViewDoc.asp?fn=/documents/guidance/Guide_Data_Contollers.htm&CatID=90&m=y UK Information Commissioner Website: http://ico.org.uk/for_organisations Take the opportunity now to achieve compliance, beat the crowd and use it to your commercial advantage.

P.J. Kiely is a commercial partner with Kiely Solicitors, Berwick House, Tuckey Street, Cork pj@kielysolicitors.ie or 021 2391110

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Top tips from the far side of finance There is great hope around at the moment that we are currently building our way towards another never-ending economic boom. This one will apparently be called ‘Tiger Two’ and will be based on easy credit and overpriced property. It is hard to see how this approach could go wrong.

Still, to ensure that you’re ready to make the most of the riches coming our way, Garvan Grant provides ten ‘alternative’ tips for saving money and making the most of what you have. Be warned though: don’t try these at home!

1. Real virtual savings We tend to spend money when we leave our homes, whether it’s on petrol, food or entertainment, so imagine if you never had to leave your house again. These days, you can do everything online, including working, entertaining yourself and hanging out with ‘friends’. All you need is a room, a computer and at least two working fingers.This will eliminate a lot of costs, but it will also help you to cut down on optional items such as food and new clothes, as you won’t need a lot of either if you never go out.

To avoid paying the property tax, you should consider living outdoors. Ireland is a beautiful country with a mild climate and it wouldn’t be too long before you became acclimatised. The water tax is easier to avoid as you just never use water from the taps in your home. Instead, collect rainwater, of which there is generally plenty, and use it for drinking and washing.

4. Invest in the future

2. Pay no bills One of the biggest wastes of money in the modern age is paying bills, particularly for things like electricity, gas and television.

Admittedly, you pretty much need all three of these things to survive. Imagine life without telly!

Financial advisers, moral guardians and people involved in law enforcement will undoubtedly tell you not to invest in ‘vice’ stocks.

This includes arms, illegal drugs, pornography and puppy-torturing. (That last one was just made up to fill space; as far as we know, you can’t actually invest in it)

However, a good tip for saving money is to never pay your bills.

When they arrive, either ignore them or open them up, laugh at the sum being demanded and then throw them out the front window.

What’s the worst that can happen? Court? A short spell in jail?

Prisons these days are not as bad as you might imagine, particularly if you’re extremely tough and handy at defending yourself. The positive thing is that you’ll have a roof over your head, three meals a day and no more bills to pay.

3. Non-taxing times As we have seen over the last few years, the government seems determined to make us pay for the bare necessities of life. They have already introduced taxes if you happen to live in a house or apartment and if you like drinking water or merely need it to survive. It also looks as if they’ll introduce an air-breathing tax in early 2015.

There are two main reasons people will advise you against vice stocks: one is because it’s not very nice; the other is because they’re already involved and don’t want to share the profits with anyone. However, if you want to make money and have no morals, they can be very lucrative.

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5. DEY

7. Freedom of choice

You’ve heard of do-it-yourself (DIY), but the new money-saving trend sweeping the world is do-everything-yourself (DEY). (Note: When we say ‘sweeping the world’, we mean ‘made up a few seconds ago’.) It basically means you live a very cheap life as you never pay for anything. For example, instead of buying potatoes, grow them in your garden – or in a local park if you don’t have a garden.

While we all like to go out and have fun, that can cost alot. A better, money-saving idea is to only do free things. For example, instead of going to the cinema, go trainspotting or birdwatching. If your favourite band is playing, just go and stand outside the venue instead of paying in. You’ll be able to hear the songs in the distance, which is more or less the same as being there. And instead of going out for dinner, just stay in and watch a posh cookery show while eating white bread and crisp sandwiches.

If something breaks, just fix it yourself. If you don’t know how, look it up online where there’s bound to be a handy guide. Failing that, there is very little that can’t be fixed using a measuring tape, a screwdriver, some glue and a strong cup of coffee.

Once you’ve mastered DEY around the house, you can also save on medical bills by diagnosing yourself online, ordering drugs from dodgy websites and even doing minor surgery on loved ones using a helpful online video.

6. Give it up A lot of the things we do are just unnecessary and if we gave them up, we would save a lot of money. Are three meals a day necessary? Do you really need a phone? Do you have to wash your hair every month? Examine the areas of your life where you are spending a lot of money and just cut back as much as possible.

Also, learn to haggle. If you buy €20 of petrol, just tell the guy the behind the till that you’ll give him a tenner for it. After a bit of arguing, you could get him down to €15. Also try this in the pub, at the bookies and at your GP’s. Remember: everyone loves a bit of haggling.

8. Cheap holidays One of the biggest outlays for families is the annual holiday, but do you really have to go abroad? Do you even need to leave your house? A new concept called the ‘fakecation’ entails you and your family making a fuss about going abroad with friends and neighbours. However, when you head off loudly and happily towards the airport, double-back, climb over your garden wall and sneak in your backdoor. Then, for the next two weeks, stay in with the curtains pulled watching telly, eating frozen food and fighting.

At the end of your ‘fakecation’, cover yourselves in ‘fake’ tan (or cheap orange juice if you’re really broke), sneak out the back door, head around to the front of the house, make lots of noise and start singing ‘Torremolinos’ at the top of your voices.

9. Crime does pay Contrary to what you may have heard, crime does actually pay.

Just look at the Mafia in Italy and the US. They’re loaded. We’re not for a moment suggesting that you get involved in crime at that level, as it’s pretty well-organised and takes years of hard work, networking, intimidation and murder.

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10. Emigrate If all else fails and you still aren’t able to make ends meet, you can always use that old Irish fallback: emigration. For years, if not centuries, it has been the ‘best’ solution for so many of Ireland’s problems, including famine, the English and unemployment.

It can be a big step to move away from your own country, but then again, wherever you go, you are bound to find sun, work and lots and lots of other Irish people!

However, if you stick to nicer crimes, like buying alcohol for teenagers and holding up your local bank, you should be able to make a bit of extra cash on the side. One important tip: try not to get caught!

Garvan Grant is the author of The Trueish History of Ireland and writes tailored content for social media.

He has written a regular funny column for In Dublin and wrote the hugely popular PostMortem column in The Sunday Business Post from 2004 to 2014. Garvan's writing/editing company will be called GrantEd.ie.

You can contact him on garvangrant@hotmail.com and follow him on Twitter @garvangrant

Dublin House Prices Rising House prices in Dublin have soared by more than €6,600 a month since the start of April, according to a study, as CSO figures show prices to be 24.4% dearer than a year ago.

The cost of homes nationally rose 12.5% in the year to June, the CSO said, as experts predict nationwide increases of 20% by the end of the year.

A study by estate agents Douglas Newman Good shows that the price of some starter homes in west Dublin rose by 36.6% in the past 12 months.

The CSO figures reveal that residential property prices nationally rose by 2.9% in June alone. This compares with an increase of 1.2% in June of last year.

Average property prices have increased by almost a quarter since this time last year in Dublin with the key issue is the shortage of new properties, last year, Ireland built just 8,301 new houses when we should be building up to 25,000 per annum to meet demand.

The CSO figures bear out these concerns. Dublin residential property prices, including apartments, grew by 3.3% in June and were 23.9% higher than a year ago.

The average cost of a Dublin home now stands at €349,000, a rise of €6,666 per month since the beginning of April, or €71,000 since June 2013.

Houses in west Dublin increased at almost twice the rate of houses in the north and south of the city at 9.6% versus 4.1% and 5.6%, respectively.

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Business and Legal Briefs Aldi Promises School Uniforms for less than €6.50 Schools have barely closed their doors for the summer and already there is talk of back-to-school basics, with Aldi first out of the traps with a promise to sell cash-strapped parents a complete primary school uniform for less than €6.50.

The German discounter’s school uniform range features what it says are high quality, hard wearing staples including trousers, polo shirts, jumpers and skirts.

The price tag will be attractive to many parents faced with spiralling costs. Each year the National Consumer Agency (NCA) publishes estimates of how much parents need to spend on sending children to back to school.

Last year its research estimated that back-to-school costs were €487 for each child attending primary school, with the cost of uniforms including shoes for a year put at €190.60.

Aldi’s offer would see parents spending less than 20 per cent of that total.

Aldi’s boys’ school uniform is made up of a €1.99 pair of trousers in a choice of navy, black or grey; plain blue or white polo shirts at €1.99 for a two-pack, and a round neck sweater for €2.49 in navy or red. Girls can get a navy, black or grey pleated skirt for €1.99, with the polos and jumpers costing the same as the boys’.

Aldi said the clothes were all independently quality tested by a worldwide testing laboratory and the trousers and skirts are coated in Teflon to help protect against common classroom stains and water.

Aldi will also sell other back-to-school items including short sleeve shirts at €3.49 for two, pinafores at €3.99 and shoes for €7.99.

The school uniform range will be available in stores on Thursday, July 24th.

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Moodys Delivers Upbeat Report on Irelands Recovery The Irish economy is set to grow by at least 3 per cent a year over the coming years, or at twice the European average, according to the latest report on Ireland by ratings agency Moody’s.

Employment growth is expected to be robust and the level of economic growth will help ease the Government’s fiscal consolidation drive, it said in a generally positive note on the economy, although it says difficulties with non-performing bank loans and a shortage of credit will continue to act as a drag.

Growth in the industrial, service and construction sectors imply that Government revenues will continue to grow faster than nominal gross domestic product, according to the report.

It said Ireland’s economy has been growing steadily since mid-2012, as measured by employment growth, and that barring global event risks, the growth is likely to continue.

Consumer confidence is gradually being restored thanks to employment trends and the stabilisation of the housing market, and a small positive contribution to growth from consumer demand has finally materialised.

The economy will also benefit from less onerous fiscal consolidation after 2015, when the deficit will be reduced to 3 per cent of GDP.

Pension Funds Report Strong Growth in First Half Pension funds have reported continuing strong growth in the first half of the year, with the average managed fund delivering an investment gain of 6.1 per cent.

That puts Irish pensions on course for another year of double-digit returns. The average fund added 15.8 per cent last year, with the top performer, Standard Life Investments, reporting a gain of 18.2 per cent in the 12 months.

Performance in 2014 has been skewed towards the second quarter, when funds added 4.1 per cent on average. The recovery from the property crash has been reflected in pensions with sustained growth in recent years. The average managed fund return has been 11.5 per cent per annum over the past three years and 11.9 per cent over each of the five years from July 2009.

However, the effects of the crash are still evident in the 10-year figures, which show a more modest annual growth of 5.4 per cent.

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Economic Outlook

The dynamics in the economy to-date are signaling stabilisation with low upside to growth. As the domestic economy continues to trend flat and exports are showing signs of strain, we are now in the third stage of the crisis. Following rapid deceleration of activity in 2008-2011, and a flattening out trend in 2012-2013, this year we are entering a period of low growth in real economic activity consistent with the ongoing long-term deleveraging and the financial crises of the recent past.

During the Celtic Tiger years of 1996-2000, the Irish economy grew at an average of 9.6% per annum across GDP, GNP and Domestic Demand. This slowed down to 4.6% average in 2001-2005. In 2011-2015, we can expect, based on data through 2013 and IMF forecasts for 2014-2015, this economy to grow at around 0.68% per annum. In simple terms, we are in a structurally slower growth period.

ment, public investment, and net indigenous exports (exports less imports) of goods and services. The remaining bits - such as foreign investment, MNCs-driven trade, and inflows of payments on Irish investments abroad net of outflows of payments on foreign investments in Ireland – all relate to the external drivers. The first four components of the national accounts, taken together, form what the economists term Final Domestic Demand. This is the measure of economic activity that takes place in the country, absent our trade balance. As such, this measure is independent of the fortunes of the MNCs, including the beleaguered pharma sector. A simple statistical fact is that final domestic demand rose in Q4 2013 by €630 million compared to Q4 2012, although for the full year 2013 it was down €366 million, once we adjust for inflation. This means that 2013 was the sixth consecutive year of declines in domestic demand. But it also means that some growth, albeit fragile, in domestic economy is still feasible.

Looking at the composition of our demand, both public and private consumption fell in 2013. These declines were moderated by a rise in gross domestic capital formation (or in more simple terms, investment) - up €710 million year on year. This is despite the fact that during 2012-2013 we kept hearing about the huge successes of Nama and IDA attracting foreign investors to Ireland, and we heard about the property boom sweeping across Dublin, both in residential and commercial markets. And still, with all this activity rumoured, investment managed to grow by a tiny 4% from a historically low base. The good news is that the investment is picking up. Bad news is that most of it is going to acquisition of property assets and not on business capacity expansion.

The key questions this raises, from an Irish business point of view, are: When will we see the reversal of the domestic economy’s fortunes? What sources for sustainable growth in demand can we expect in the next few years? And how can Irish indigenous enterprises move out of the self-preservation stage of the crisis and into the growth phare?

In very broad terms, our domestic economy can be broken into private consumption, Government consumption, private invest-

While on the topic of property: the building and construction sector activity picked up in 2013, with index of activity by value of construction up from 94.3 in Q4 2012 to 105.4 in Q4 2013 and volume up from 95.7 to 106.2 over the same period. Residential construction posted shallower pick up than non-residential building, while civil engineering activity contracted strongly year on year on foot of continued cuts to public investment. Here's the kicker, however: much of the above activity related to completions of already started projects and retrofits. Planning permissions for new construction, stripping out alterations, conversions and renovations fell year on year in Q4 2013 and were down over the full year. This trend will have to be reversed soon if we are to see some serious recovery in the sector.

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In the entire 2013, contribution of building and construction sector to GDP rose by a meager EUR242 million. In contrast, industry, excluding building and construction, was down EUR1.1 billion.

While the numbers are bleak, there is some hope for Irish manufacturing sector: stripping out pharmaceuticals, some of Irish industrial production is likely to start recovering with improving global demand. In particular, companies working in modern sectors (such as medical devices) and those trading outside of Ireland (such as a number of smaller firms exporting building and construction technologies, and specialist capital equipment) are likely to feel some easing in the markets in second half of 2014, especially if the ECB moves to weaken the euro.

For the domestic economy excluding external trade, however, the next 6-12 months are likely to remain tough. Personal Expenditure on Consumer Goods and Services shrunk 3% in the tenure of this Coalition, falling at an annual rate of 1%, Net Expenditure by Central and Local Government on Current Goods and Services is down 6.9% (annual rate of decline of 2.4%).

sector earnings, and with this trend, new hiring is still off the agenda for Irish retailers. This sector is still in survival mode and to extract any growth, retail businesses must rely on increasing productivity, cutting costs and shrinking margins. After 5 years of the crisis, this is easier said than done.

Meanwhile, on the exports side, growth in global demand is yet to translate into indigenous exports expansion for a number of reasons. One core reason is that trade growth is no longer focused on flows of goods and services between the advanced economies and the developing ones. Instead, growth in trade stays within the regions where economic growth is concentrated. This pattern of trade dis-favours Ireland, as our own exporters have a hard time getting a strong foothold in these merging markets. In 12 years since 2002, Irish exports to markets outside the EU and North America stagnated, as a share of our total exports, at a miserably low 15-17%.

Still, there are some positive signs on the led-grey economic horizon.

Little as they matter in the current environment, the Purchasing Manager Indices for Manufacturing and Services continue to trend well in the growth territory. Business confidence is trending up.

Investment remains sluggish, with credit in the economy continuing to shrink and cost of loans continuing to rise gradually. But non-traditional sources of funding - investment funds, private equity and even some direct lending, including across various companies, are showing signs of growth.

As banks shift defaulting mortgages into 'restructured' portfolios of loans, lending for house purchases is starting to show some signs of potential life. Mortgages approvals, although volatile, are on a gentle upward slope in terms of the number of loans. However, average value of mortgages approved continues to trend down.

And as banks deleverage out of troubled SME loans, new business lending should start picking up around Q4 2014-Q1 2015.

The key lesson of the crisis, however, is that the banking channel for raising business funding is likely to remain impaired for some time into the future. Thus, business equity and direct business-to-business lending will have to take up the slack.

Retail sales are faring much worse than the rest of the economy: value of retail sales in Q1 2014 remained static on Q4 2013 and is up only 0.6% y/y. Volume is up 0.2% q/q and is now 2.6% above Q1 2013 levels. Which means that deflation is still cutting into retail

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For the trickle-down effects of improved global demand to feed through to a tangible expansion on our exports side requires serious rebalancing of our sales and marketing efforts to facilitate our exporters expansion into the markets outside our familiar geographies.

Good news is that we have in place the basic building blocks for continuing to push some of our domestic sectors toward exporting. We have some good competitive advantages in sectors where proximity to MNCs resulted in Irish indigenous startups gaining experience, intellectual property and access to early stage supply

contracts. Good examples here are auxiliary services in international finance, ICT and biotech.

The real challenge, however, is to continue generating exportsoriented startups, while forcing more indigenous firms to export.

The former requires financing and business development supports that are very scarce on the ground, especially for companies not clients of the Enterprise Ireland.

The latter is a challenge no one has been able to tackle to-date. The majority of companies operating in the Irish economy are engaged in reselling foreign goods and services without any serious value added to them. In order to push into exporting, these firms need to identify potential ways for adding value to imported goods and services and then access the markets where this value-added can generate sales.

Parallel to this, domestic firms are facing an uphill battle to increase productivity of their capital and workforce to make certain that any value added is not consumed by internal inefficiencies. While during the crisis, The Irish economy regained some share of its competitiveness lost during the Celtic Garfield years of 2001-2008, these gains were achieved predominantly through two channels: productivity growth due to the arrival of large-scale ICT services providers (Google, Amazon, etc), and due to massive jobs destruction in less-productive sectors, such as construction and retail, and other domestic services. Which, incidentally, shows that our Government’s claims of competitiveness gains are barely scratching the surface in terms of revealing

the underlying trends in this economy. Stripping out the MNCs with their tax arbitrage, The Irish economy is more competitive today than it was in 2004-2006 only because we are no longer employing builders and not adding more convenience shops to every street corner of every town. This is hardly a form of productivity gains that can make our products more competitive on supermarkets’ shelves in Canada or Indonesia.

Yet, with domestic economy stuck in zero growth mode, bouncing from quarter to quarter along the flat line, exports is the only sustainable source of new business for Irish firms. Skill sets required to achieve this growth are, however, predominantly resting outside the current pool of the unemployed. This means that indigenous enterprises should look to bring in fresh talent, including talent from abroad and with experience of working in countries outside our comfort zone of UK, Western Europe and North America.

All of the above problems as well as opportunities are closely interlinked and reach across all groups and segments of our society and all sectors of our real economy. They require not just a policy response, but a coherent, long-term and comprehensive strategy. So far, such a strategy remains wanting. The Coalition might deserve credit for doing the hard thing over the last three years, but it still an open question whether it has done enough to deserve the credit for doing the right thing. The elections might have given it a kick in the teeth to start thinking outside of the Troika box of policy tools.

Dr. Constantin Gurdgiev is the Adjunct Assistant Professor of Finance with Trinity College, Dublin, and serves as a co-Founder and a Director of the Irish Mortgage Holders Organization, Ltd and the Chairman of Ireland Russia Business Association. He holds non-executive appointment on the Investment Committee of Heinz Global Asset Management, LLC (US).

In the past, Dr. Gurdgiev served as the Head of Research with St Columbanus AG (Switzerland), the Head of Macroeconomics with the Institute for Business Value, IBM, Director of Research with NCB Stockbrokers, Ltd, and Group Editor and Director of Business & Finance Publications. He also held a non-executive appointment on the Investment Committee of GoldCore, Ltd (Ireland) and Sierra Nevada College (US).

Born in Moscow, Russia, Dr. Gurdgiev was educated in the University of California, Los Angeles, University of Chicago, Johns Hopkins University and Trinity College, Dublin.

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In The Spotlight In an inter-county playing career that spanned three decades, Sean Óg played for the Cork senior hurling and football teams, winning major honours with both. He also enjoyed much success with club side Na Piarsaigh and represented Munster in the inter-provincial championships.

Sean Óg has won three All-Ireland medals, five Munster medals and one National Hurling League medal. Ó hAilpín's three-year career with the Cork senior football team saw him win one Munster medal and one National Football League medal.

At club level Ó hAilpín is a two-time county hurling championship medalist with Na Piarsaigh.

Sean Óg has a number of personal achievements, including three consecutive All Star awards. In 2004 he made a clean sweep of all the top individual awards, winning the Alln Star, Texaco and GPA Hurler of the Year awards. Four years later in 2009 he was chosen on the Munster team of the past twenty-five years.

Q. What are the main responsibilities of your job?

A. Develop new business from customer & non customer base.

Q. What motivates you in your job?

A. Pay day ! Ok on a serious note, I strive every day to be the best that I can be. Somedays it happens and other days it doesn't but the fact that I try gives me no regrets.

Q. How would you describe your work style?

A. Very very structured & organised bordering on regimental. I go into the office every morning with a list of 'To Do' stuff that has to be completed by the end of the working day no matter what.

Q. What is the most valuable professional lesson you have learned so far?

A. To make an informed decision on anything, it's critical that full facts & information is obtained beforehand. Also don't over promise and under deliver.

Q. In Ireland, whose career do you most admire and why?

A. Liam Griffin - former All Ireland winning hurling manager with Wexford and successful hotelier. He has been successful in a sector that is tough to make it in. I've had the pleasure of meeting him and I was taken back by his passion and people skills. All his former players speak volumes of him which is another hallmark of the person.

Q. Based on your experience, what is the most valuable career advice you can give others?

A. They say 'success is a moving target'. Continue to upskill in your profession and strive for further qualifications. It's getting more and more competitive in the job market so ensure you give yourself every chance.

Q. In terms of doing business in Ireland, what do you think is the biggest challenge?

A. Having the 'belief' & 'self confidence' to go for it. Sometimes our fear of failure is still greater than our will to win.

Q. What is your ultimate professional goal at this point?

A. Progress as far as I can in the organisation and not look back in time and say I didn't give it 100%.

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