Confidence at its strongest since 2015

Business confidence in Ireland is at its strongest in six quarters as fears surrounding Brexit and possible US policy changes haven’t materialised, according to a report.

The KBC Bank Ireland/Chartered Accountants Ireland business sentiment index found that business confidence has risen to its highest level since late 2015.

The index rose to 118 in the summer quarter, up from 110.6 three months earlier. The report says that while “sentiment remains notably softer than the recent series peak of 131.1 recorded in late 2015”, it recovered to levels seen before the Brexit vote or the increase in uncertainty about US policy intentions.

More than three-quarters of those surveyed said Brexit would likely impact on their business but more than half of that number have taken measures to prepare themselves.

“The improvement seen in business sentiment in summer 2017 is really encouraging in that the details of the survey suggest the recovery is now reaching a notably wider range of companies, and that earlier fears of a speedy and substantial hit to activity from Brexit have not materialised,” said KBC Bank Ireland chief economist Austin Hughes.

“Instead, activity has increased and is expected to grow further in the coming quarter.”

The report says that the fact only 8% of companies reported declining output of late “suggests a further widening of the basis of the recovery across Irish businesses”.

It hints that any adverse impact from currency movements or uncertainty related to Brexit has been reasonably contained.

Responses from the more than 350 businesses surveyed did not suggest that Irish business is currently experiencing any marked strains that might warn of overheating threats, states the report.

“While 12% of firms cite what might be termed ‘hot’ operating conditions, a slightly larger number report a cooling of late, with the vast majority of businesses suggesting their activity levels are normal at present,” said Mr Hughes.

“Similarly, 86% of companies say their costs are stable or increasing modestly, although many note that wage costs have increased of late.

“These responses suggest the economy may face specific issues but these do not fit the picture of the traditional ‘overheating’ narrative at present.”

There was both a rise in the share of companies reporting higher output volumes and a decline in the share of companies reporting weaker conditions.

However, firms remained cautious about hiring, according to the survey.