BDO is delighted to share the findings from our latest quarterly optimism index. The index, a continuous survey carried out for the last seven years, tracks business performance and the views of business leaders across Ireland.
Only 1 in 8 Irish businesses believe a Brexit deal will be struck between the EU and Britain by the October deadline. Of the 400 Irish businesses surveyed as part of the BDO quarterly Optimism Index, 88% believe a final agreement on Britain’s withdrawal from the EU will not be reached by the October deadline.
The news was revealed as part of BDO’s quarterly Optimism Index which monitors business sentiment among Irish companies. The survey found that exporters reported a fall in business activity in the third quarter of this year.
Commenting on this finding, Carol Lynch, partner of the BDO Customs and International Trade Services department said:
‘The majority of Irish businesses do not believe the EU will reach a Brexit deal on time. This is understandable given the amount of work that is still to be done on Northern Ireland, Border checkpoints and the future trade agreement. It is also prescient taking into account Donald Tusk’s comments from Salzburg requiring clear progress on the backstop in order to continue talks, mean we are left with a short window of less than 20 days to secure results. We are now close to the wire with a high risk of a no deal Brexit happening by default. It is becoming vital that businesses continue to prepare for Brexit or immediately start if they have not done so.
There are resources available to support businesses with their Brexit preparations; including several Brexit funding options such as the Brexit Loan Scheme, the Enterprise Ireland Be Prepared Grant, Bord Bia’s training and preparation programmes. It cannot be emphasised strongly enough that businesses need to consider every element of Brexit including border delays supply chains, contracts and price changes.’
The Salzburg summit has resulted in increasing pessimism that a deal can be reached in the requisite time frame. Theresa May misjudged the meeting and in particular the requirement to clearly resolve the Irish question. The EU leaders also re-emphasised that there will be no division of the four freedoms and, where there was hope of a further special summit in November to allow time to resolve Brexit, this has now become conditional on absolute progress in October. There is also a hardening of tone and, again, a clear statement that Michel Barnier negotiates on behalf of the EU.
Optimism levels are the highest they have been since the survey began at 70.3; this is a 37% improvement in optimism levels since 2011. Companies outside Dublin (70.69) are more optimistic than those based in the capital (69.49).
Brexit is having a real impact on Irish businesses, as the number of indigenous companies reporting higher levels of business activity rose above exporters for the first time since 2012. However, despite Brexit uncertainty exporters are notably more optimistic, with 60% saying they expect business levels to be better in Q3, up from only 41% this time last year. In contrast, less than half of non-exporting companies expect their business to perform better next year with 46% predicting this outcome.
The number of companies who recorded an increase in operational profit in Q2 2018 compared to the same period last year has increased to 42%, an 11% increase from last year.
Irish businesses also reported a significantly higher amount of business activity this year with 48% experiencing an increase in business activity in comparison with the same quarter last year at 39%.
Employment levels have remained stable, with the majority of firms maintaining the same employment levels as last year. Employment in micro firms has improved slightly and is consistent for large companies. However, medium sized companies stated that their employment levels have decreased since the same period last year. Employment levels continue to be higher in the capital than in the rest of Ireland.
Most companies are maintaining price levels with just one in five charging higher prices compared to this quarter last year. However, the proportion of firms charging lower prices is at its lowest level since before the survey began in 2011.