Irish business sentiment has "worsened markedly" in the past three months as concerns about the UK's vote to leave the European Union dented confidence.
The KBC Bank Ireland and Chartered Accountants Ireland business sentiment index found that while business activity has weakened only marginally in the past three months, companies are taking a more cautious attitude to their prospects.
Brexit worries brought the sentiment index back to its lowest level in three and a half years.
The summer 2016 sentiment index gave a reading of 99.9, down from 117.7 in the spring quarter, which was the sharpest quarterly fall since the third quarter of 2010.
Concern
Companies expressed concern about the impact of a weak sterling on global currency markets, while other Brexit-related issues, such as potential administrative difficulties in trading with the UK and the relocation of activities out of Ireland, were also highlighted.
Chartered Accountants Ireland chief executive Pat Costello said the drop in confidence should be seen "as a broadly based recognition of increased risks to Irish economic prospects rather than a sign of panic".
However, the findings suggest the consequences of the UK’s exit from the EU in the future will be widely felt across Irish businesses rather than confined to specific sectors, he added.
Brexit impact
While the impact of Brexit was identified as the main risk by 40 per cent of respondents, it was "not the only cloud in the economic sky" for Irish businesses, KBC Bank Ireland chief economist Austin Hughes said.
Slowing global demand is still widely seen as a significant concern, while domestic political uncertainty was cited by 20 per cent of respondents.
About half of the companies surveyed focused on the threats posed by Brexit to their business, with just a fifth saying they were primarily concentrating on the opportunities it might present.
A “notable” 10 per cent of companies said the main issue for them was the potential relocation of some element of their activities. “This would suggest Brexit could result in a formidable level of corporate reorganisation,” said Mr Hughes.
The KBC Bank/Chartered Accountants Ireland index is based on the responses of 321 senior executives in leading Irish companies, with the survey conducted between July 28th to August 11th.
The majority of companies – 87 per cent – indicated they had not yet made any changes to their plans in relation to activity, hiring or investment. This was down from 95 per cent of firms in the previous, pre-Brexit survey.
The proportion of companies implementing cutbacks has increased from 4 per cent to 9 per cent, while there was “a significant but not substantial” pullback in the proportion of companies that expect to boost employment, from 37 per cent to 31 per cent.
“This suggests that heightened uncertainty of late has led to a pause rather than panic on the part of Irish business,” Mr Hughes said.
