Innovation long-fingered as business copes with cost pressures - report

Irish businesses are putting innovation on the back boiler as they contend with cost pressures, according to a new all-Ireland report.

The InterTradeIreland All-Island Business Monitor says 43 per cent of companies across the island said they had not undertaken innovation activity in the past two years, nor do they plan to start. The agency describes the figure as “worrying”.

“While business performance appears to have returned to pre-Covid levels, a lack of forward momentum in innovation is likely to impede future growth,” said Martin Robinson, the agency’s director of strategy, adding: “Innovation is key for future profitable growth.”

He noted that businesses that export across the Border were more interested and aware of the importance of innovation than peer companies that were not exporting.

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Brexit and the British government’s Windsor Framework, which was designed to overcome some of the difficulties Brexit created in relation to trade between Northern Ireland and the rest of the UK and between Ireland and Britain, also feature in the report.

Just over a quarter (27 per cent) of businesses identify Brexit as a continuing issue, down from 35 per cent a year ago, the report says.

But the number of businesses saying they have adapted largely or in full to the new trading conditions that Brexit brought with it has dropped from over half to 34 per cent, the lowest in the last four quarters.

“This suggests a degree of uncertainty about the new trade rules forthcoming under the Windsor Framework,” InterTradeIreland said.

“It would be unwise to read too much into one quarter of data but it is reasonable to assume that the ongoing implementation of the Windsor Framework has prompted more businesses to examine its practical implications,” Mr Robinson said.

Overall, more than half of businesses surveyed reported an uptick in sales and profitability during the second quarter in a sign that cost pressures are softening.

“It seems that the uncertain economic backdrop has led many firms to focus on stability and maintaining their current position,” said Mr Robinson. “Encouragingly, some of the pressures faced by businesses appear to be easing, with concerns about energy costs falling back from recent levels.

“Cross-Border trade remains buoyant and presents significant growth opportunities for firms of all sizes,” he said.