Over half of Irish firms not worried about ‘Brexit’

Over half of Irish firms do not foresee a direct impact on their business if Britain were to exit the EU.

According to the latest quarterly business sentiment survey, from KBC Bank Ireland and Chartered Accountants Ireland, 54% do not see themselves being affected.

However, only 4% see positive consequences from a so-called ‘Brexit’ scenario and 42% fear negative effects.

In recent months, economic think-tank the ESRI has warned that a Brexit could reduce bilateral trade flows between Ireland and Britain by at least 20% over the long-term, while the Institute of International and Economic Affairs has valued at €6bn the amount that could be wiped off the annual value of Irish exports.

The latest sentiment survey shows that Irish firms are not ignorant of the consequences of the UK leaving the EU, with 67% of those responding to the KBC/ICAI citing increased economic uncertainty and 54% citing an increase in the cost of doing business with Britain as chief concerns.

Irish business confidence reached a nine-year high in the final quarter of 2015, according to the survey, with business volumes and employment showing continued growth as the year drew to a close.

An increase in the index reading from 130.8 in the preceding quarter to 131.1 was marginal but enough to push sentiment to its highest level since 2006.

Positivity among firms focused on the domestic economy has increased and less than 6% of companies are seeing weaker activity levels.

Also, 80% of firms are set to increase wages this year, although a further uptick in the number of firms reporting an increase in costs has emerged.

This, according to ICAI chief Pat Costello, could reflect difficulties in sharply scaling up activity levels and/or a correction after very sharp falls in costs during the recession.

“Significantly, companies are reporting increases in their business volumes in 2015 that broadly tally with current estimates suggesting Irish GDP grew by close to 7%,” said KBC chief economist Austin Hughes.

“So the sentiment survey suggests that from corporate Ireland’s perspective, recovery is now both strong and broadly based.”