Article:

BDO Optimism Index Q1 2019

02 July 2019

Optimism stalls as growth expectations among Irish businesses falls to the lowest levels since 2013.

BDO’s Quarterly Optimism Index has found:

  • The outlook for the next quarter is negative, with 17% of businesses expecting business activity to drop in Q2
  • Overall business optimism levels have plateaued
  • Brexit is having a negative impact on three out of five Irish businesses
  • The overall trend towards higher prices has continued with businesses charging higher prices year on-year
  • Businesses want Government to focus on investing in housing supply and education, with Brexit falling to third in the list of ‘top priorities’

28th June 2019: The business outlook in Ireland for the second quarter is more negative than in recent years with growth expectations falling to the lowest levels since 2013, according to BDO’s Optimism Index, a quarterly study that monitors business sentiment across Ireland.

The research shows that 17% of businesses are expecting lower levels of activity in quarter two, 6% higher than last year’s figure of 11%. It also found that 43% of businesses expect quarter two business levels to remain the same as this period last year.  Additionally, 40% of all businesses surveyed expect higher levels of activity (down 6% compared to last year).

Pessimism about growth amongst small businesses has been steadily building over the past four years from 9% in 2015 to a high of 20% this year. Mid/Large sized businesses are more optimistic, with the figures remaining at similar levels to last year with 54% of businesses expecting to achieve higher levels of activity in the next quarter.

Speaking about the findings, Michael Costello, Managing Partner, BDO Ireland, said:

“The latest BDO Optimism Index results show that many businesses are cautious about the future despite strong recent growth in the economy. Overall optimism levels have plateaued, with the outlook within the business community more negative than this time last year. And while there are some positives such as the strong employment figures, there are warning signs.

Brexit remains a clear challenge for all businesses, large and small, but we are seeing a shift in priorities with a focus on the infrastructural needs of the economy coming to the fore – from housing and education to transport infrastructure. Businesses are concerned about the deficit in our national capital spending and seeing it impact on their operations – a clear message to Government as we approach the Budget in the autumn, that investment in capital projects is necessary to underpin future growth and competitiveness.”

Overall optimism levels have remained static year on year

Overall optimism levels among Irish businesses for the quarter have remained static since the same period last year.  This flatlining of optimism levels is be likely to be a knock-on effect of the current political uncertainty in the UK, with the research finding that three out five Irish businesses are seeing a negative impact from Brexit.

This uncertainty is being particularly felt by businesses that export goods, with figures showing a decrease in the number of export businesses predicting growth activity for Q2 at 36%, down from a high of 55% reported in 2015.

The % of businesses charging higher prices has increased significantly

The overall trend towards higher prices continues, with figures showing a significant increase compared with the same period last year. Price increases appear to be happening across the board, irrespective of company size and where the company is located. The figures show that 32% of Irish businesses are now charging higher prices, with this figure jumping 10% compared to 2018. Prices have been steadily increasing since 2011, with the figures for this quarter showing the highest number of businesses charging higher prices year-on-year in the last eight years.

Housing and education should be the main areas of focus for the Government

The research also looked at which areas Irish businesses would like the government to focus on over the next quarter. Investing in housing supply (81%) and education (77%) were listed as the two main priorities, with Brexit back in third at 75% - despite being listed as the No.1 priority in the same period last quarter. Brexit is seen as a higher priority for businesses based in Dublin at 82%, with just 72% of businesses outside of Dublin listing it as a top priority for the Government.  

Two other areas that the business community would like the government to focus on are encouraging indigenous businesses to expand outside of Ireland (75%) and investing in transport infrastructure (75%).