Irish business has made a solid start to 2013 and stronger conditions are expected to take hold in coming months according to the Spring 2013 KBC Bank Ireland/Chartered Accountants Ireland Business Sentiment Survey.
While companies remain cautious in their hiring, there are signs of greater confidence in the outlook for the Irish economy as a whole with the deal on national debt boosting business confidence.
Main Points
- Business activity posts solid growth in the first three months of 2013.
- Majority of companies see the deal on national debt helping their business volumes with improved sentiment and reduced austerity the key drivers.
- Business sentiment with regard to Irish economic outlook shows much greater recent improvement than companies’ own operating environment.
- Signs of rebalancing evident as domestic-focused companies report notably better conditions.
- Stronger improvement expected to take hold in second quarter but hiring plans remain cautious.
- Recent exchange rate developments have had only limited impact but firms regard currency movements as critical to outlook.
Speaking on the release of the survey, Mr Austin Slattery, President, Chartered Accountants Ireland said, “The majority of companies think that a deal to ease the burden of Ireland’s national debt will have a positive impact on their business within the next couple of years. Most feel this will occur through a general improvement in sentiment but 30% think that the easing in austerity that the deal will allow will be helpful to them while 12% think they will benefit through lower borrowing costs.”
Mr Austin Hughes, Chief Economist KBC Bank Ireland, who analysed the data, noted, “The Spring survey shows a gradual recovery in Irish business conditions is taking hold as companies report an improvement in activity levels. This appears to have spread to companies focused on domestic spending while export firms are continuing to report moderate growth. What seems to be happening is a gradual easing in the negative forces that have depressed activity in recent years. Although the ’headwinds’ restraining recovery are easing, there are few signs that stronger supportive ‘tailwinds’ that would generate a dramatic improvement in business conditions are taking hold.”
Mr Slattery also said, “The survey suggests that employment in Irish based companies has continued to increase in early 2013. However, firms appear to be taking a cautious view in their hiring plans. With the global outlook still somewhat uncertain and domestic spending power remaining under pressure, this is not entirely surprising and represents as favourable an outcome as could be expected. However, it means we can’t expect any dramatic improvement in domestic spending through 2013.”
Finally, Mr Austin Hughes concluded, “The survey underlines the importance of exchange rate developments to the business climate in Ireland. Nearly half of the companies surveyed indicated that currency movements were of importance to them. They also indicated that the impact of currency fluctuations is not entirely straightforward with significant numbers of companies citing the impact of cheaper imported materials (40%) and increased competition from abroad (22%) as well as the difficulties faced by exporters (37%). Encouragingly, very few companies felt that recent exchange rate movements had a negative effect on their business. While 36% felt there had been some slightly negative impact, these results show that most Irish companies are coping with recent Sterling weakness.”
The KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey reflects the view of chartered accountants working in senior positions (CEO’s, MD’s and FD’s) in Ireland’s leading companies. The survey was conducted between 12th and 19thMarch and the results presented are based on 333 completed responses.
