Irish business sentiment 'at nine-year high'

Activity levels across firms operating in the Irish economy continued to increase towards the end of 2015, although the pace of growth was only fractionally ahead of the previous quarter.

Two thirds of companies signalling increased business volumes and less than 6% indicating weaker activity.

Austin Hughes, Chief Economist, KBC Bank Ireland, who carried out the analysis, said: “Irish based companies report continuing increases in activity levels and employment at the turn of the year.

“With similar gains expected in early 2016, business sentiment has risen to a new nine-year high.

“Significantly, companies are reporting increases in their business volumes in 2015 that broadly tally with current estimates suggesting Irish GDP grew by close to 7%.

“So, the sentiment survey suggests that from corporate Ireland’s perspective, recovery is now both strong and broadly based.”

“More than half of the companies surveyed indicated that pay was the area of their costs showing the clearest upward trend of late.

“Roughly eight out of 10 companies expect to increase average pay rates in 2016.

“Slightly over half of these see average pay rising by less than 2% with the vast bulk of the remainder predicting increases of between 2 and 5%.”

Commenting on the results, Chartered Accountants Ireland chief executive Pat Costello said: “A further uptick in Irish business costs in this survey could reflect difficulties some companies might have in sharply scaling up their activity levels.

“It may also reflect a correction after a very sharp fall in costs through the downturn as well as possibly owing something to the impact of currency movements on import costs.

“It is important not to be alarmist about this development and businesses surveyed are confident about their future growth.

“However, in a world of very low inflation, a rising trend in Irish costs needs to be monitored closely.

“The survey found broadly based concerns about the impact of a possible UK exit from the EU.

“Some 67% of firms fear a harmful rise in economic uncertainty while greater currency volatility and an increase in the cost of doing business with the UK are also significant worries.

“Although just over half of businesses surveyed felt there would be no direct impact on their operations, some 42% envisaged some adverse effect from ‘Brexit’ while only 4% anticipated positive consequences.”

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 2015 survey was conducted in the first business week of January 2016 and the results presented are based on 440 completed responses.