War, inflation and supply chain issues are taking their toll on business confidence.
Just 16% of business leaders are ‘more optimistic’ in respect of the economy, compared to 31% in Q4 2021 and 72% in Q3 2021, according to the latest Director Sentiment Monitor (DSM) research report published by the Institute of Directors (IoD) in Ireland.
In addition, almost 60% of business leaders believe the Government should review direct taxation to boost disposable income levels in the face of surging inflation.
“Business leaders are facing turbulent times, as business confidence plummeted in the first quarter of the year, no doubt impacted in large measure by the invasion of Ukraine by Russia and the many consequences of that war”
Furthermore, when asked if the Government should use the Covid contingency fund to assist businesses in dealing with inflation and supply chain issues, 50% of our respondents said ‘no’, while 37% said ‘yes’.
The IoD’s latest DSM research report reveals some positives for the Government with respect to consumer confidence.
Government performance
In Q4 2021, 36% of business leaders believed the effect of the Government’s performance to be positive. That has increased to 41% in Q1 2022.
With respect to directors’ decision-making, in Q4 2021, 32% of business leaders believed the effect of the Government’s performance to be positive, and that has increased by 6% to 38% in Q1 2022.
“Business leaders are facing turbulent times, as business confidence plummeted in the first quarter of the year, no doubt impacted in large measure by the invasion of Ukraine by Russia and the many consequences of that war,” said Thora Mackey, chief operating officer of the Institute of Directors in Ireland.
“The humanitarian impact has been immense, of course, but energy costs and resources, and supply chain issues, have been significant, as has wider geopolitical and economic instability. Uncertainty is a key factor at play here. It is no surprise, then, that just 16% of business leaders are ‘more optimistic’ in respect of the economy, a fall of 56% since the third quarter of last year.”
Worth highlighting, too, are the findings related to those who say the Government’s performance has had no effect on consumer confidence (27% in Q4 2021 but 38% in Q1 2022) and on their business decision-making (51% in Q4 2021 and 50% in Q1 2022).
“While a majority of business leaders feel the Government might look at initiatives on direct taxation to add impetus to the economy, they are also realistic in that an overwhelming majority of 92% believes there is a limit to measures the Government can take in relation to inflation and supply chain issues given that Ireland is a small open economy,” Mackey added.
“Business leaders will need to maintain a steady hand in navigating their businesses through this unsettled time.”
