Businesses and consumers less confident as Covid and Brexit fears remain elevated, new surveys show

Mounting Covid uncertainty is rapidly diminishing consumer positivity, while Brexit issues and supply chain bottlenecks are causing hardship for businesses
Businesses and consumers less confident as Covid and Brexit fears remain elevated, new surveys show

Bank of Ireland said 75% of households still plan to spend the same or more on presents and celebrations this Christmas as was the case last year.

Conditions are continuing to tighten for Irish consumers and businesses, two new surveys show.

A study by recruiter Hays has found that as much as 91% of Irish-based employers have faced recruitment and staffing challenges inside the last 12 months, with rising skills shortages undermining productivity levels, business growth, revenue generation and profitability.

Meanwhile, Bank of Ireland’s latest monthly economic barometer confirms that Irish consumer confidence is firmly in decline.

Mounting Covid uncertainty is rapidly diminishing consumer positivity, while Brexit issues and supply chain bottlenecks are causing hardship for businesses. 

Bank of Ireland said its monthly ‘economic pulse’ hit its lowest reading for eight months in November.

“Some sprinkles of festive cheer were evident in the survey results but not enough to offset Covid concerns and Brexit blues,” Bank of Ireland chief economist Loretta O’Sullivan said.

“Households have downgraded their expectations for the economy over the coming year and with all four of the business sectors posting softer readings in November, economic sentiment fell to an eight-month low."

Not only is uncertainty increasing again but pandemic and Brexit-related bottlenecks are biting.

“These are having spill-over effects, with three in four firms reporting increases in non-labour input costs and over half saying that they are likely to hike their selling prices,” she said.

It’s the second survey showing such trends in a week; with KBC Bank Ireland’s monthly consumer sentiment index last week showing confidence at a seven-month low amid higher Covid case numbers, rising energy costs, and renewed Brexit concerns. 

That said, KBC said its November findings suggest that while consumer caution is increasing, confidence is not collapsing just yet.

Christmas spending

It did suggest, however, that Christmas spending plans have taken a dent.

The Bank of Ireland study found business confidence most heavily hit, of late, in the areas of services, retail, and construction. 

However, Ms O’Sullivan said there are signs that companies are planning to invest in expanding production capacity next year.

That is something which should have a positive impact on everyone.

This suggests that adjustment is starting to happen on the supply side, which should help alleviate some of the pressure on business costs and consumer prices.

Bank of Ireland said 75% of households still plan to spend the same or more on presents and celebrations this Christmas as was the case last year.

Global shares tumbled last Friday on rising fears of the new Covid strain, with airlines and travel companies bearing the brunt of the sell-off amid concerns that widespread travel restrictions may resurface.

Meanwhile, despite the skills shortage fears, 84% of Irish employers still intend to recruit next year — up from 78% 12 months ago — according to Hays Ireland.

It also found that employers are 35% more likely to counter-offer a resigning employee than they would have been before the Covid crisis.

Overall, Hays said unrealistic salary expectations and continued visa issues are being seen as the key challenges facing employers over the next 12 months.

Impact of skills shortages

A total of 50% of Irish-based employers claim ongoing skills shortages have had a negative impact on organisational productivity. 

Meanwhile, 39% say it has undermined their ability to deliver key projects and 30% claim it has stalled their plans for expansion, Hays said. 

One in five employers suggest recruitment challenges were impacting their profitability and revenues, it said.

“The competition for talent has been a universal challenge for Irish-based employers throughout 2021 and we expect this trend to continue into the new year,” said Hays Ireland director Maureen Lynch.

“At a more macro-level, it is well documented that the Irish economy has rebounded strongly in the second half of the year and Irish employers understandably want to capitalise on this growth and position themselves for further expansion in the 12 months ahead," she said. 

"To this end, it is important that we look to identify meaningful solutions, including tackling recent work permit delays, to alleviate ongoing recruitment pressures."

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