Thought leadership

Growth in activity and hiring slightly softer of late but conditions still very positive Survey hintspace of Irish economic growth to moderate but remain healthy Irish businesses resorting to multiple responses to staff/skill shortages rather than simply raising pay Brexit, staff shortages and data protection the key concerns facing Irish business Irish business sentiment has slipped somewhat as companies reported a slightly slower pace of growth in their activity levels and hiring in the past three months. This doesn’t imply any marked weakening in the prospects for Irish business or the broader economy although it does suggest the rate of growth might ease compared to that seen in the past year. The KBC Bank/ Chartered Accountants Ireland business sentiment index slipped to 116.4 in the spring of 2018, largely reversing the previous quarter’s gains that took the index to a two year peak of 120.8 at end 2017. The sentiment index remains some distance below its 2015 peak (130.5) which implies that the pace of improvement in business conditions has moderated of late. The trend in business sentiment in early 2018 remains consistent with a strong Irish economic performance. On the basis of the historic relationship between the business sentiment survey and official GDP data, the current sentiment reading (if sustained) could be consistent with Irish GDP growth in the region of 5% in 2018.   Responses to supplementary questions in the survey suggest companies have taken a wide range of measures rather than simply resort to pay increases in response to staff/skill shortages. While increased pay has been an important element, it has not been the most prevalent response. The most widely seen response to staff/skill shortages, adopted by three out of four Irish based companies, has been to address the problem by internal training. Measures to increase flexibility of contracts, hours and work practices were introduced by just under half of the firms surveyed.  The openness of the Irish jobs market is reflected in the finding that as many 38% of companies resorted to overseas hiring in response to staff shortages. While Irish based companies have adopted multiple strategies to minimise the impact of skill shortages, a not insignificant 17% of firms have been forced to modify their expansion plans because of the constraint it imposed on their growth capacity. While Brexit remains a key concern, most companies are typically focussed on a range of concerns rather than a single specific issue at present. It appears that companies are paying equal attention to pay and data protection issues as they are to Brexit at present. The fact that data protection issues are regarded as broadly based a concern reflects the confluence of the introduction of the General Data Protection Regulation, some high profile cases around alleged data misuse and broader and quite fundamental questions about the gathering, storage and use of personal data by companies. The importance of data protection issues to Irish business at present is further highlighted by the survey finding that 80% of businesses had taken specific actions to address concerns in this area. Commenting on the survey, Barry Dempsey, Chief Executive, Chartered Accountants Ireland, said: The slight easing in business sentiment of late is partly a reflection of  severe weather through March but it also hints that while the pace of growth in business volumes and in the broader Irish economy should remain solid it may be somewhat slower than was seen in 2017 Companies have responded to staff and skill shortages in many ways reflecting the complexity of this issue. Perhaps surprisingly, internal training rather than higher pay has been the most common response and this was adopted by 76% of companies. Some 48% of companies have offered increased flexibility in work practices, about the same number as responded through pay increases.  While 38% of firms have hired from abroad, 17% say they have had to modify their expansion plans. These results suggest this is a wide ranging issue and there is no single ‘silver bullet’ answer to what is an important and continuously evolving issue in Ireland’s dynamic labour market.     Austin Hughes, Chief Economist, KBC Bank Ireland, said: The drop in business sentiment was driven by softer activity levels and hiring in the past three months but companies expect some pick-up in coming months and the general tone of the survey suggests a positive outlook remains firmly in place While business conditions are evolving positively, Irish companies are grappling with a range of concerns, with three issues to the fore at present.  Brexit is no longer the overarching focus as firms deal with what are seen as more immediate problems in the shape of staff/skill shortages and data protection issues. Regulatory deadlines and increased focus on data privacy issues led four out of five firms to say they had taken specific action in this area in the past six months.     The KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey reflects the view of Chartered Accountants working in senior positions (CEOs, MDs and FDs) in Ireland’s leading companies.  The spring 2018 survey was conducted from 6 to 16 April 2018 and the results presented are based on 302 completed responses. Read the full report here.

Apr 27, 2018
Brexit

KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey Winter 2017 Irish business sentiment reaches strongest level in two years Broadly based pick-up in activity levels as 2018 begins Number of firms reporting weaker conditions at lowest level in survey’s eleven years New hiring strengthens but costs on the rise 87% of companies report faster growth in Dublin than elsewhere in Ireland   Business outlook positive for 2018 but firms cite diverse range of risks Brexit the most common concern but only cited by 17% of companies Pay and personnel issues as well as global uncertainty also notable worries Irish business sentiment has improved to its best level in two years as companies report a strong end to 2017 and expectations of continuing growth in activity levels in early 2018. With confidence in relation to Irish economic prospects continuing to grow, new hiring also gained momentum. The only blemish evident in the survey was a significant and broadly-based pick-up in costs. The KBC / Bank Chartered Accountants Ireland business sentiment index rose to 120.8 at the end of 2017 from 116.6 in the previous quarter. The survey was taken in the middle weeks of January. So, the three-month comparison straddles end-year and sheds some initial light on business conditions in the Irish economy at the start of 2018. Momentum in Irish business activity is very positive at present. Importantly, the number of firms reporting weaker conditions in the past three months was the smallest in the eleven-year history of the survey. The survey also asked companies to rank the pace of growth across geographic areas of Ireland.  There is near unanimity that growth in the Dublin region continues to markedly outpace that in other parts of the country.  Some 87% of respondents felt their business was experiencing faster growth in Dublin than elsewhere in Ireland.   Some element of ‘catch-up’ growth might have been expected outside the capital of late as the upswing in domestic spending broadened (in much the same way that a ‘catch-up’ element is currently being seen in Euro area growth relative to that in the US). However, this is not the case. These results point towards the persistence of a marked divergence in pace in what is clearly a two-speed recovery in the Irish economy. Business conditions fall somewhat short of the outsized 10.5% GDP growth rate reported for the third quarter. The sentiment survey implies that the environment facing the majority of Irish based companies would be consistent with an underlying economic growth rate of the order of about 5% in late 2017. With the general tone of the survey underlining the strength and spread of the improvement in business conditions, it is worth examining Irish based companies’ views as to their sense of the nature of the risks to their activity levels in 2018.  The survey asked companies to identify and rank the areas of concern to their business in the coming year from a long list of issues. The responses show it is clear that Brexit stands out as the most notable concern, being cited by 17% of respondents as the key risk to their business. It assumed even greater prominence when account is taken of the top four or five risks cited by all respondents. Significant as worries about Brexit are, the survey implies that more than 80% of companies feel other specific concerns are more pressing. These results suggest a diverse range of concerns are occupying senior management in Irish based companies at present.  In that respect, the survey highlights the large number of ‘known unknowns’ that cloud the business outlook. The broader positive tone of the survey suggests such concerns are now regarded as an inevitable feature of the current environment. It is notable that 10% of respondents cited domestic wage pressures as the key risk facing their business in 2018. A further 9% highlighted the availability of suitable staff. So, the number of Irish based companies that see pay and personnel issues as the key risk facing them in 2018 is broadly similar to the number focussed on Brexit. Significantly, only 2% of companies regard overheating in the Irish economy as their key concern. So, issues in relation to staff costs are seen as specific rather than a symptom of more generalised cost pressures. The pick-up in activity levels reported by Irish based companies has fed through to a stronger jobs market trend of late.  The proportion of companies reporting increased headcount in the past three months was the largest in nine quarters.  The survey is pointing towards solid momentum in new hiring as 2018 begins. The pace of hiring activity was similar across most sectors, supporting the sense of a widely felt pick-up in business conditions. However, there was some variation in the number of firms reporting reduced payrolls with relatively few firms in areas such as business services and consumer-focussed activities reporting lower headcount. Firms in these areas also reported a marked decline in the availability of suitably qualified employees of late. So, staff retention may have become an increased focus for many businesses of late. Barry Dempsey, Chief Executive, Chartered Accountants Ireland, said: “The sentiment survey suggests Irish business conditions look very positive at the beginning of 2018. Encouragingly, it finds the lowest number of companies-just 5% of respondents, reporting weaker conditions in eleven years. So, the economic upswing is now being felt very broadly across business from both a sectoral and regional perspective. “While the survey suggests a very positive business outlook for 2018, companies cited a large and wide range of risks from Brexit to wage costs that could weigh on their prospects. The diversity of these responses emphasises the large number of ‘known unknowns’ that are clouding even a relatively favourable economic environment at present.” Austin Hughes, Chief Economist, KBC Bank Ireland, said: “Just 17% of companies felt that the completion of phase 1 of Brexit talks made them more optimistic about the likely impact of Brexit on the Irish economy. A similar number (18%) felt more unsure while a slightly larger group (24%) are now less optimistic.      “Although the survey found the upswing in the Irish economy is now being broadly felt, some 87% of companies say their market in Dublin is growing faster than elsewhere. This suggests the persistence of a two-speed economy with little sign of catch-up growth outside the capital. “        The KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey reflects the view of Chartered Accountants working in senior positions (CEOs, MDs and FDs) in Ireland’s leading companies.  The winter survey was conducted from 15th to 19th of January 2018 and the results presented are based on 344 completed responses. Read the full report. ENDS For further reference contact: Christine Walsh, Gibney Communications, 01 661 0402 / 085 157 7127 Austin Hughes, Chief Economist KBC Bank, 087 669 6972 Brendan O’Hora, Director, Communications & Marketing, Chartered Accountants Ireland, 01 6377298

Jan 26, 2018
Press release

Chartered Accountants Ireland / KBC Bank Ireland Business Sentiment Summer 2017 Summer 2017 business sentiment survey strongest for six quarters Details suggest recovery is continuing to broaden and reaching more sectors and companies   Firms cautious on new hiring but headcount reductions at record low Rebound in confidence suggests slowdown fears about Brexit and possible US policy changes haven’t materialised   Little sign of broadly based overheating concerns or capacity strains as business conditions ‘normalise’ Survey suggests Brexit planning has been to the fore in Irish business thinking of late   77% of firms have a sense of likely Brexit impact on their operations with more than half of these already taking action     Irish business sentiment improved notably in summer 2017 to its strongest reading since late 2015. The pick-up was driven by stronger business activity levels of late and a further easing in concerns about the outlook for the Irish economy.  The KBC Bank Ireland/Chartered Accountants Ireland business sentiment index rose to 118 in the summer quarter from 110.6 three months earlier. The latest increase marks the fourth consecutive quarterly gain which means the index has recovered to levels seen before the UK Brexit vote or the increase in uncertainty about US policy intentions but sentiment remains notably softer than the recent series peak of 131.1 recorded in late 2015. While fears have eased, continuing uncertainty means companies remain cautious.  The increase in Irish business confidence in the past three months is largely a reflection of a healthier trend in business volumes and in the broader Irish economic backdrop than might have been feared. The trend in the sentiment survey tends to reflect the broad contours of Irish GDP data (with the understandable exception of the 2015 step-shift). In this respect, the data suggest that positive momentum is still building. However, the details of the summer survey, particularly in relation to job creation, suggest that companies are responding to still elevated levels of uncertainty by adopting a relatively cautious approach to expansion plans. The summer survey suggests there has been a clear pick-up in Irish business activity levels in the past three months.  There was both a rise in the share of companies reporting higher output volumes and a decline in the share of companies reporting weaker conditions. Encouragingly, the drop in negative responses exerted the larger influence. The fact that only 8% of companies reported declining output of late suggests a further widening of the basis of the recovery across Irish businesses and also hints that any adverse impact from currency movements or uncertainty related to Brexit has been reasonably contained.    The survey attempted to gauge whether companies judged that either their current level or the pace of growth was particularly strong. The responses do not suggest that Irish business is currently experiencing any marked strains that might warn of overheating threats. About 70% of Irish companies feel that their current operating levels are normal and not developing in a manner that would suggest an unsustainable pace of growth in their output. Consequently, current conditions might be described as a ‘normalisation’ of activity as the recovery after a severe downturn becomes more mature.  The survey also included a question on Brexit to establish how business responses to this issue are evolving. Responses suggest that there continues to be some variation in companies’ assessments of the impact but the large majority of firms-some 77% of those surveyed now feel they have a strong or some sense of what Brexit may mean for them.  Just over half of those reporting a strong or some sense of the impact - some 36% of respondents to this question indicated that they have already taken what they deem to be appropriate action. Of the balance, it may be that some envisage no material impact while others may feel that they can’t take action until the UK leaves the EU or there is greater certainty about the precise form the UK’s post exit relationship with the EU will take.  Austin Hughes, Chief Economist, KBC Bank Ireland, said: “The improvement seen in business sentiment in summer 2017 is really encouraging in that the details of the survey suggest the recovery is now reaching a notably wider range of companies and that earlier fears of a speedy and substantial hit to activity from Brexit have not materialised. Instead, activity has increased and is expected to grow further in the coming quarter.” Barry Dempsey, Chief Executive, Chartered Accountants Ireland, said: “The survey finds that 77% of companies have at least some sense of the likely impact of Brexit on their operations and more than half of these have already taken action in this regard. This is positive in that it suggests Irish business has been proactive in assessing and implementing a response to Brexit rather than being lulled into complacency by limited signs of progress in the formal Brexit negotiations thus far or the possibility of a significant ‘transition’ period after 2019 when the UK is scheduled to leave the EU.”       Barry also said: “While Irish business conditions have continued to strengthen of late, ongoing caution in the face of significant uncertainty has meant there has not been a corresponding step-up in new hiring. That said, the number of firms reporting a reduced headcount fell to the lowest level in the eleven years of the survey. Again, this suggests that the recovery in the Irish economy is broadening further and being felt by an ever-increasing number of companies.” Austin Hughes commented: “The survey shows little signs of business strains that might suggest the presence of significant overheating risks in the Irish economy.  While 12% of firms cite what might be termed ‘hot’ operating conditions, a slightly larger number report a cooling of late with the vast majority of businesses suggesting their activity levels are normal at present. Similarly, 86% of companies say their costs are stable or increasing modestly although many note that wage costs have increased of late. These responses suggest the economy may face specific issues but these do not fit the picture of the traditional ‘overheating’ narrative at present.”   ENDS For further reference contact: Karen Jones, Gibney Communications, 01 661 0402  Brendan O’Hora, Director, Communications and Marketing, Chartered Accountants Ireland, 01 6377298 Notes for editors:  The KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey reflects the view of Chartered Accountants working in senior positions (CEOs, MDs and FDs) in Ireland’s leading companies.  The Summer 2017 survey was conducted from July 31 to August 8 2017 and the results presented are based on 354 completed responses.  The full Business Sentiment Report for Summer 2017 is available here. 

Aug 23, 2017
Press release

Chartered Accountants Ireland / KBC Bank Business Sentiment Survey, Winter 2016   Irish business sentiment stabilises in 3rd quarter after sharp 2nd quarter fall. Some easing in the pace of activity growth and new hiring may reflect Sterling impact as well as a more cautious Irish consumer. Broader than expected Brexit effects may be suggested by slowdown at a range of consumer-focussed companies. Businesses cautious but pessimism about Irish economy eases slightly as immediate Brexit impact less traumatic than feared. Surprising cost uptick may reflect firmer energy and payroll costs. Could pricing policies be throwing up unexpected results? Brexit and uncertain global outlook seen as key business concerns for 2017.   Tuesday, 1st November, 2016.  After a sharp pull-back in Irish business confidence in the summer survey that significantly reflected the influence of the UK vote to leave the EU, the KBC Bank/Chartered Accountants Ireland business sentiment index was effectively unchanged in the most recent three-month period to late October. The October reading reflects notable but largely offsetting movements in various elements of the business sentiment survey. As such, the details of the survey hint at notable changes in the Irish business climate of late. A clear, if contained, slowdown in the pace of increase in activity and employment was reported by companies responding to the survey, particularly by those selling consumer goods and services. We interpret this as highlighting the pervasive natureacross Irish economic sectors of the difficulties posed by Brexit. Acting in the opposite direction was a partial reversal of the sharp drop in business confidence in the broader Irish economic outlook that had followed the UK referendumvote to leave the EU. While companies remain cautious, the absence of a more immediate and more widely seen deterioration in Irish economic conditions may have eased some more extreme fears. It might be suggested that the previous reading of the business sentiment survey captured the knee-jerk reaction of companies to the UK ‘Brexit’ vote in that it emphasised emerging concerns but didn’t report any instant impact on activity levels. Perhaps, surprisingly, the most notable easing in business growth came in the area of consumer goods and services which reported quite a marked stepdown in growth from particularly buoyant responses given to the previous survey. This result seems broadly consistent with a more cautious tone to recent consumer sentiment readings as well as somewhat softer retail sales and spending tax data of late. Commenting on the results, Chartered Accountants Ireland Chief Executive Pat Costellosaid: “The broadly stable business sentiment index reading may be a little misleading in that the details of the survey suggest notable but broadly offsetting changes in the business climate affecting Irish based firms; growth in activity and hiring has clearly moderated of late and while Brexit is a major concern, companies are also signalling some relief that the immediate fallout of the UK vote has not been as severe as some of the more apocalyptic predictions had envisaged.” Austin Hughes, Chief Economist, KBC Bank Ireland, who carried out the analysis, said: “One slightly surprising aspect of the survey is that firms supplying consumer goods and services reported the most notable pull-back in growth of late. This probably owes something to a cautious Irish consumer but it may also reflect some Brexit related issues in areas such as retailing or the hospitality sector stemming from current Sterling weakness. If we are correct in this interpretation, the survey suggests that adverse Brexit impacts may be felt much more widely across the Irish economy than is sometimes suggested.” Pat Costello also said: “While companies are focused on a wide range of concerns in an increasingly uncertain global economic environment, the survey clearly signals that Brexit is seen as the major external influence likely to affect business outcomes in the year ahead. Importantly, such views are common across sectors rather than concentrated on a few specific areas. The survey also suggests that vulnerability to, and readiness for, the impacts of Brexit varies widely, even across firms in the same sector.” Commenting further, Austin Hughes said: “In marked contrast to the frequently painful experience of the austerity years, very few companies see the recent Budget materially altering their business prospects for the coming year. A small number of firms see the Budget enhancing the outlook for Foreign Direct Investment, increasing the likelihood that they will take on additional employees, but the economic and fiscal progress of recent years means the Budget is no longer a ‘make or break’ event for Irish business.”  The KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey reflects the view of Chartered Accountants working in senior positions (CEOs, MDs and FDs) in Ireland’s leading companies.  The Autumn 2016 survey was conducted from 14th to 21st October 2016 and the results presented are based on 330 completed responses. Read the full report here. Ends. For reference: Sinéad Healy, Gibney Communications, 01 661 0402 / 086 061 2441 Austin Hughes, KBC Bank, 087 669 6972 Brendan O'Hora, Marketing Manager, Chartered Accountants Ireland, 01 637 7298

Nov 01, 2016