Irish Companies Report Slower Growth as Brexit Risks Persist - Construction Network Ireland - Construction Network Ireland

Back to News

Next Article

Published in Industry on 20/11/2017

Irish Companies Report Slower Growth as Brexit Risks Persist


CNI Editor reports

Irish companies continued to post solid gains in business volumes in recent months but the pace of growth in activity appears to have eased somewhat of late. The KBC Bank/Chartered Accountants Ireland business sentiment index edged lower to 116.6 from 118 in the previous quarter but the autumn 2017 business survey reading remains consistent with a relatively robust rate of growth in Irish GDP.

The slight easing in business sentiment was largely driven by modestly slower growth in companies’ own activity levels in the past three months. It remains the case that a majority of firms are reporting increased business volumes but, compared to the previous quarter, there was a small reduction in the proportion of companies reporting higher activity and a similarly small rise in the number reporting lower output levels.

This change was most pronounced among construction firms and hints at some easing in the pace of growth in building activity in recent quarters and the possibility that some firms in this area may already be experiencing capacity strains. However, several other elements of the survey suggest such problems are the exception rather than the rule.

The slightly softer pace of growth reported by Irish businesses in the past three months is expected to persist in the final months of 2017.

Healthy activity levels underpinning hiring

While there was a slight easing in the pace and spread of growth of late, it remains the case that Irish business conditions are very healthy at present.  This has translated into continuing strength in payroll trends in Irish companies. New hiring picked up slightly in the past three months but there was an offsetting increase in the number of firms reporting a drop in their headcount.

It is important to note that all sectors continue to report notably larger number of firms expanding their payroll than those seeing lower employment levels. The improvement in the Irish jobs market is now broadly based with firms in manufacturing, business services and consumer goods and services all reporting a pick-up in the pace of payroll gains in the past three months.

Companies were also asked what scale of average pay increase they envisaged making in 2018. Increases of less than 2% are most common followed closely by increases between 2 and 3%, with two-thirds of firms falling into this range. Only a very small fraction of firms see average pay increasing by more than 5% in 2018, with most of these concentrated in business services and property sectors. However, construction firms also tended to figure prominently in those companies expecting no increase in pay next year, emphasising significant variation across firms in this sector. Aggregating the responses to this question across all sectors, the survey suggests the average pay increase envisaged in Irish-based companies in 2018 is 2%.

Confidence gradually rebuilding after Brexit shock

The survey asked a number of questions to assess companies’ attitudes and actions in relation to the UK’s exit from the EU. We began by asking the direction and scale of impact they envisaged Brexit would have on their business. The responses suggest Irish based companies anticipate a significantly negative outcome overall although there are notable differences the effect of Brexit is seen having on individual businesses; one in two firms expect an adverse impact compared to one in six that expect a boost to their business. Only one in five firms expects no significant impact from Brexit on its activities.

The survey went on to ask whether companies’ assessments of Brexit impacts had altered much in the sixteen months since the UK referendum vote. The answers suggest that Irish business has become somewhat more pessimistic in regard to Brexit in spite of the apparent resilience of the Irish economy to the early currency related fallout.

Roughly one in three firms is more negative now than in the immediate aftermath of the UK vote while roughly one in five now takes a more positive view. Manufacturing and construction firms were more likely to have downgraded their assessments of late whereas upgraded views were more common among property and business services firms.

Read the full report HERE