Growth Slowing But Not Stopping

20 Nov 2017 | 09.53 am

Growth Slowing But Not Stopping

KBC/CAI business sentiment index

20 Nov 2017 | 09.53 am

Business growth among Irish firms slowed somewhat over the last three months but the bigger picture is positive, according to a KBC Bank/Chartered Accountants Ireland survey.

The Ireland business sentiment index compiled from this quarterly survey edged lower to 116.6 from 118 in the previous quarter. However, the autumn 2017 business survey reading remains consistent with a relatively robust rate of growth in Irish GDP.

The KBC Bank Ireland/Chartered Accountants Ireland survey reflects the view of 448 chartered accountants working in senior company positions.

The slight easing in business sentiment was largely driven by modestly slower growth in companies’ own activity levels in the past three months, according to the publication.

A majority of firms are reporting increased business volumes but, compared with 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 possibly reflects an easing in the pace of growth in building activity in recent quarters, as well as the possibility that some firms in the sector may already be experiencing capacity strains.

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.

The survey found that 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. 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. The survey suggests the average pay increase envisaged in Irish-based companies in 2018 is 2%.

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. Irish-based companies anticipate a significantly negative outcome overall, although what effect it is expected to have differs significantly from business to business.

One in two firms expect an adverse impact, compared with one in six that expect a boost to their business. Only one in five companies expect no significant impact from Brexit on its activities.

Based on the survey’s findings, roughly one in three businesses are more negative now than in the immediate aftermath of the UK vote, while roughly one in five are taking 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.

Commenting on the quarterly survey findings, Barry Dempsey, chief executive of CAI, noted the slowing pace of business growth. “This seems to reflect a variety of influences, ranging from capacity constraints facing some construction companies to currency movements affecting companies in food and manufacturing but, in each instance, this is seen slowing rather than stopping growth,” he said.

Austin Hughes, chief economist with KBC Bank Ireland, said that it was surprising that Brexit preparations have not picked up among Irish businesses, given that pessimism is growing concerning its consequences.

 

Photo: Barry Dempsey (left) and Austin Hughes (Pic: Iain White Photography)

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