Irish businesses least likely to see economic uncertainty as a barrier to growth globally, according to international study.
Irish mid-sized firms appear bullish despite troubling geopolitical headwinds and economic uncertainty being felt across the world.
The latest Grant Thornton International Business Report (IBR), which provides insights into the attitudes of 10,000 mid-market businesses across 28 economies, has singled out Ireland as the business community that has the least concerns about economic uncertainty impacting future growth.
“Perhaps buoyed by the state’s healthy finances, this stands in contrast to our international peers, but we remain remarkably optimistic despite some concerns in relation to increased labour costs as a constraint on future business growth”
Only 24% of Irish mid-market firms surveyed registered it as a concern, compared to almost double their European (47%) and global (52%) peers who expressed higher levels of caution.
Inflationary pressures
This lack of concern appears to be driven by the continued belief that geopolitical disruption is unlikely to bring any negative headwinds, despite the upcoming US presidential election in November.
Only 16% of Irish business surveyed saw it as a potential constraint, compared to a global average of 43% across the 10,000 firms that took part in the research.
These attitudes influence the level of optimism held by medium sized Irish firms about the outlook of Ireland’s economy for the next 12 months, with almost seven in ten (66%) companies surveyed envisaging a positive twelve months ahead.
Despite this, there has been a slip in confidence, with the Q3 IBR report seeing a slight fall from 73% in the Q2 edition of the research. While economic optimism amongst Irish organisations has slipped since last quarter, it still ranks above the Eurozone average of 63%.
A key factor impacting the level of optimism is a 16-point spike in the number of Irish firms seeing labour costs (44%) as a constraint on growth.
Companies are potentially still grappling with inflationary pressures from the cost-of-living crisis, with almost three quarters (74%) of Irish mid-market firms expecting to pay salary increases over the next 12 months. With the Irish economy effectively at full employment and skills shortages evident, it comes as no surprise that almost three fifths (56%) of the firms surveyed stated that they plan to invest in upskilling their existing workforce.
On a related note, just under half (44%) of Irish medium sized businesses plan to invest in AI over the next twelve months, with almost a third (29%) of those doing so as a cost saving measure. 60% of those investing in artificial intelligence see AI technology as a means of improving internal workflows.
Despite many Irish mid-market firms highlighting investment in AI as a priority, overall Irish companies remain laggards compared to their international peers in terms of technology investment.
Only half (50%) of Irish mid-market firms plan to increase investment in IT over the next 12 months compared to the global average of 69%. Similarly, there is a marked gap in terms of planned investment in R&D, with just under a third (31%) of Irish companies surveyed confirming it as a priority compared to 61% of the 10,000 firms across 28 markets that participated in the study.
“The latest Grant Thornton IBR report paints a unique picture of Ireland, with our medium sized firms paying relatively little heed to potential economy uncertainty or geopolitical disruption over the months ahead,” said Grant Thornton Head of Deal Advisory Patrick Dillon.
“Perhaps buoyed by the State’s healthy finances, this stands in contrast to our international peers, but we remain remarkably optimistic despite some concerns in relation to increased labour costs as a constraint on future business growth.
“The research also reveals that Irish mid-market companies are eager to explore leveraging AI to bring about efficiencies and reduce costs. While a significant proportion of firms plan to invest in technology and R&D over the coming twelve months, the level still lags behind the global average. Considering the benefits for the economy if more medium sized companies were to flourish, particularly in terms of international expansion, it would be wise for Irish businesses to double down on growth strategies now when the going is good.”
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