Irish business sentiment kept weak by inflation and supply chain pressures

Irish business sentiment remains subdued as companies face the twin challenges of high inflation and a weakening European economy against a backdrop of ongoing war in Ukraine, supply chain difficulties and a looming winter energy crisis.

That’s the finding of the Accenture/S&P Global Ireland Business Outlook survey, based on the responses of about 600 companies across manufacturing and services in October, signalling that a challenging business environment is likely to remain in place for the next 12 months.

The outlook for profits remains negative, the survey found, with confidence levels among the weakest on record since the survey began in 2009.

Although sentiment was relatively weak overall, Irish companies the most upbeat in Europe in relation to hiring plans.

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The October survey pointed to a slight pickup in hiring intentions since the summer, with the employment net balance registering a positive 26 per cent in October, up from 24 per cent in June, in advance of France on 15 per cent, the UK on 11 per cent and the euro-zone average of 2 per cent.

High inflation was identified as a key threat to business, with prices rises expected from energy, labour, food, fuel and raw materials. The inflationary environment is also expected to weigh on spending power, increasing recession risks in Europe.

Shortages of raw materials and electronic components, as well as skilled staff, remain concerns, while financial service firms highlighted rising interest rates and regulatory burdens.

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“It is no surprise that this survey shows that inflation and rising costs remain a significant cause for concern for businesses in Ireland. As we face the potential likelihood of a global recession, it is clear that this will only amplify inflationary pressure and compound the strain on supply chains,” said Alastair Blair, country managing director at Accenture in Ireland.

“Businesses need to be agile in the face of this uncertainty and be able to move at speed to respond and be competitive. Such agility, coupled with a flexible and highly productive workforce, will be critical for Ireland’s success going forward.”

Ongoing investment in digital and technology skills will also be “imperative to keep a positive trajectory going”, he added.

The Irish study is part of a global business outlook survey of around 12,000 manufacturers and service providers worldwide.

Opportunities reported by Irish companies included productivity drives, a focus on renewables and sustainability, business consolidation and new markets.