Irish Business Enters 2015 Confident But A little More Cautious

Jun 17, 2016
Winter 2014 KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey

Winter 2014 KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey

Main points

  • Irish Business Sentiment Index steady in late 2014.
  • Activity up strongly but firms slightly less upbeat about broader economic climate.
  • Rising output also boosting employment at end 2014.
  • Two thirds of firms to raise pay in 2015 but increases set to be modest.
  • Four out of five firms see themselves in recovery mode in 2015.
  • Roughly half of firms to boost capacity in 2015 with one in ten planning cutbacks.
  • Almost half of businesses expect a modest boost from lower oil prices.
  • Sluggish global economy and domestic uncertainty may be restraining upturn at present.

Irish business sentiment held broadly steady in the final months of 2014, however, this doesn’t signal unchanged conditions, according to the latest KBC Bank Ireland/Chartered Accountants Ireland Business Sentiment Index. Instead, this outturn reflects two contrasting influences that largely offset each other in the past three months. Companies report increased activity and employment levels but this was countered by increasing caution about the general economic climate.  As a result, the KBC Bank Ireland/Chartered Accountants Ireland index edged down to 124.3 from 124.8 in the third quarter. 

A movement of this limited magnitude effectively signals no material change in the business sentiment index as a whole. However, the details suggest some interesting and contrasting developments of late that again emphasise the unusual and uneven contours of the emerging upturn even if domestic spending is now showing clearer signs of recovery.

Speaking on the release of the report, Mr Pat Costello, Chief Executive, Chartered Accountants Ireland noted:

  • “Irish business turned the year on a very strong note with activity levels at their strongest since 2006 and employment trends improving significantly. Further output gains are envisaged through 2015 but companies sounded a slightly more cautious note about the general economic climate, perhaps reflecting greater global nervousness as well as some increased domestic political uncertainty of late. These circumstances as well as the legacy of the recent crisis mean that while a solid recovery is underway it is not simply a case of onwards and upwards for all businesses.”

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

  • “The pick-up in activity over end-year was particularly notable in businesses focussed on domestic spending such as construction and consumer activities. Overall, recovery is clearly broadening but the survey suggests that the overall rate of growth may be easing somewhat from the breakneck speed suggested by GDP data for the first half of 2014. So this year may see improvements across a broader range but possibly at a more modest pace than last year.”  

Mr Costello also noted:

  • “Four out of five companies consider themselves to be at some stage of a recovery cycle. So, roughly half expect to increase either output capacity in 2015 by adding to staff or infrastructure but nearly one in ten are still making cutbacks of one form or another. This suggests the recovery across the Irish economy is still quite uneven. Some assistance is expected from lower oil prices with almost half of firms envisaging a modest positive impact on their businesses but these results also imply little expectation that falling oil prices will lead to markedly stronger spending.”  

Mr Hughes said:

  • “Two in three companies are planning pay increases in 2015 with most of these set to be under 2% and broadly similar to the pattern of 2014. Only a very small number of companies envisage large pay increases. Intense competition in a disinflationary global environment, continuing uncertainty and a caution born of the recent crisis are all acting to constrain average pay growth.”

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 2014 survey was conducted between Monday 5th January and Friday 9th January and the results presented are based on 460 completed responses.

The full survey report is available here.

For further information contact:

Austin Hughes, Chief Economist, KBC Bank Ireland         

T: 01 664 6889

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

T: 01 6377298

Mark Leech, Gibney Communications

Work 01 661 0402