Irish businesses increasingly concerned about economic outlook

Irish businesses are increasingly concerned about the economic outlook for the country as optimism levels plummet, a new study has found.

The Grant Thornton International Business Report (IBR) said only 56 per cent of Irish businesses are optimistic about the outlook of Ireland’s economy for the next 12 months, down from 85 per cent a year earlier. The report questioned 10,000 mid-market businesses across 28 economies, including Ireland.

The fall in sentiment is matched by a decline in the number of businesses who expect an increase in revenue in the coming 12 months. According to the survey, only 56 per cent expect to see revenue rise.

However, overall Irish optimism is still higher than the EU reading, which stands at 43 per cent.

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“As we emerged from the shadow of the Covid-19 pandemic, most businesses had hoped for a period of relative stability and recovery,” said Grant Thornton Ireland, managing partner Michael McAteer. “However, the latest IBR data shows the impact that the war in Ukraine and associated increases in energy costs as well as market volatility has had on business sentiment and confidence. This extended period of uncertainty has caused optimism levels to dip significantly as global economic instability shows no sign of abating and pressures mount in the economies of some of our biggest trading partners.”

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Companies are also less optimistic about international trade, with fewer businesses expecting to increase their exports in the next 12 months, and less than a quarter expect to increase revenue from non-domestic markets.

Costs are becoming a growing concern for Irish companies, with almost 70 per cent citing energy costs as a key constraint, with labour costs a concern for 58 per cent of businesses.

“The cost of doing business is a big concern for Irish business leaders as energy costs and inflationary pressures continue to have an impact on levels of confidence and investment plans for many companies,” said Grant Thornton chief economist Andrew Webb.

“As the war in Ukraine continues fuel prices will remain top of mind for many companies, while others are also facing challenges in meeting costs around talent attraction and retention. These concerns are reflected in the IBR report in relation to a reduction in planned investment in talent. Concerns around the costs of doing business will inevitably affect businesses plans for growth, but Irish businesses have in recent years proven their resilience and agility in the face of crises. The challenge will be how to sustain this resilience in a protracted period of uncertainty.”

Less than 60 per cent of businesses expect to increase investment in talent in the coming year.