The Irish business community is among the least concerned about the prospect of economic uncertainty impacting future growth, despite stalling across Europe and potential geopolitical disruption in the months ahead, a report by Grant Thornton has found.
This report comes following the ECB’s decision last week to cut interest rates by 0.25% as inflation continues to slow down.
However, the ECB noted that several economic indicators across the eurozone were weaker than anticipated with Germany in particular struggling at the moment.
Despite the pessimistic outlook, ECB president Christine Lagarde said she does not see the eurozone heading into recession and they are “still looking at a soft landing”.
According to the latest international business report from Grant Thornton, which surveyed 10,000 mid-market businesses across 28 economies, just 24% of Irish companies see the ongoing economic uncertainty as a concern which could impact future growth compared to the average across Europe of 47% and globally 52%.
Only 16% of Irish firms have concerns over geopolitical disruption — which was the lowest rate among the economies studied — compared to a global average of 43%.
The report notes that the lack of concern among Irish businesses appears to be driven by the belief that geopolitical disruption is unlikely to bring any negative headwinds, despite the upcoming US presidential election in November.
Donald Trump has promised to introduce significant tariffs on imports should he win.
These tariffs could have a big impact on Irish exports considering the US is a major market.
Grant Thornton’s head of deal advisory, Patrick Dillon, said this report paints a “unique picture” of Ireland with medium-sized firms paying relatively little heed to “potential economic uncertainty or geopolitical disruption over the months ahead”.
“Perhaps buoyed by the State’s healthy finances, this stands in contrast to our international peers, but we remain remarkably optimistic despite some concerns in relation to increased labour costs as a constraint on future business growth,” he said.
However, despite this, the report found a drop in the number of companies reporting a positive outlook for the Irish economy over the next 12 months.
Of the Irish firms surveyed, 66% reported a positive outlook down from 73% recorded in the previous report from the summer.
A key factor in this change was an increase in the number of companies seeing labour costs as a constraint on growth, 44% up from 28%.
Almost three-quarters of these firms are expecting to pay salary increases over the next 12 months.
The report found that 44% of firms plan to invest in AI over the next year, with 29% saying they are going to do so as a cost-saving measure.
Of those already investing in AI, 60% see it as a means of improving internal workflows.
Only 50% of Irish mid-market firms plan to increase investment in IT over the next 12 months compared to the global average of 69%.
Similarly, there is a marked gap in terms of planned investment in research and development, with just 31% of Irish companies surveyed confirming it as a priority compared to 61% of all other firms surveyed.
Mr Dillon added that the research shows that Irish companies are “eager to explore leveraging AI to bring about efficiencies and reduce costs”.
“While a significant proportion of firms plan to invest in technology and research and development over the coming 12 months, the level still lags behind the global average,” he said.
“If more medium-sized companies were to flourish, particularly in terms of international expansion, it would be wise for Irish businesses to double down on growth strategies now when the going is good.”