Improving business sentiment suggests better than expected early 2017 for Irish firms even if significant risks remain

Apr 24, 2017
  • Business activity continuing to grow albeit at a slightly slower pace in Q1 2017
  • Hiring a little more cautious of late  but this may also reflect some areas of skill shortages
  • Companies slightly less worried about Irish economy but still quite cautious
  • Brexit awareness varies widely across firms - 21% of companies have strong sense of likely Brexit impact on their operations but 27% have little sense as to how it will affect them
  • Sterling weakness now having widely differing impacts across Irish businesses; hurting 31% of firms but helping 13%
  • 40% of companies already taking Brexit related action in many instances because of FX effects
  • Brexit and weak demand key concerns but some firms prioritise  staff and building constraints
Irish business sentiment improved through the spring of 2017as the Irish economy has thus far defied fears of a marked slowdown while companies report ongoing and healthy growth in their own activity levels.

The details of the KBC Bank/Chartered Accountants Ireland business sentiment survey do hint at some easing in thepaceof increase in output and hiring of late,as well as ongoing challenges in a number of areas.However,the broad message is that while significant risks to Irish business prospects persist,the reality of early 2017 has not been as difficult as was feared. As a result, companies are now marginally more positive about the coming quarter.

The KBC Bank/Chartered Accountants Ireland business sentiment index climbed to 110.6 in spring 2017 from 104.6 in the previous quarter. This marks the third successive increase in the index following a sharp likely Brexit related weakening last summer. As major uncertainty persists in regard to the global and indeed the domestic economic outlook, producer confidence remains some way below the levels seen in late 2015 (131.1), but the spring survey shows Irish business sentiment is now on an improving trajectory.

The survey revealed significant differences in companies’ understanding of the implications of Brexit for their businesses.Just 21% of companies believe they have a strong sense of the consequences of Brexit for their activities. While a further 53% of companies report they have some sense of what Brexit might mean for their operations, a substantial 26% say they have little sense of what it will mean for them.

Some 31% of firms noted that Sterling weakness was already having an adverse effect on their business while 13% indicated it was having a positive effect. In this way, the surveyhighlights the complex nature of our economic links with the UK andunderscores the major risks in a ‘one approach fits all’ policy in relation to Brexit even at the sectoral level.

Commenting on the results,Chartered Accountants Ireland Chief Executive Pat Costello, said:

“The survey suggests 2017 has started positively for Irish business with broadly based improvements in activity and employment. While the pace of growth has eased slightly and firms remain cautious about an uncertain environment, early 2017 has been notably less difficult than they had envisaged. The rise they are seeing in their own business volumes, allied to better than expected news on the broader Irish economy, is now translating into improving confidence.”

Austin Hughes, Chief Economist, KBC Bank Ireland,who carried out the analysis, said:

“Although Brexit concerns are felt widely, both the expected impact and the level of preparedness for Brexit vary widely between companies even in the same sector. Only 21% of firms say they have a strong sense of the likely impact of Brexit on their business, but it is concerning that 27% have little sense of the potential effects. While 40% of companies have already taken action, this includes those reacting to the impact of Sterling weakness on their 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 Spring 2017 survey was conducted from 28 March to 3 April 2017 and the results presented are based on 352 completed responses.

Read the full report here.


For further reference contact:

Sinéad Healy, Gibney Communications, 01 661 0402 / 086 061 2441

Austin Hughes, Chief Economist KBC Bank, 087 669 6972

Brendan O’Hora, Director, Communications and Marketing, Chartered Accountants Ireland, 01 6377298