Michael McAteer, Managing Partner of Grant Thornton Ireland. (Picture: Conor McCabe)

New data from Grant Thornton Ireland has revealed that 61% of Irish businesses are optimistic about the outlook of Ireland’s economy for the next 12 months, while just 29% are pessimistic. Ireland ranks tenth, and is the highest in Europe in terms of outlook for the economy for the coming 12 months.

Grant Thornton’s latest Global Business Report survey reveals that sentiment has improved across nearly all countries and regions with 57% of firms globally optimistic about the economic outlook over the next 12 months.

A remarkable 52% of Irish businesses expect their revenue will increase over the coming 12 months by comparison to 27% reported in H1 2020, while just 17% say their revenue will decrease.

Of those surveyed in the Business Report by Grant Thornton Ireland, some 41% of Irish businesses expect to increase their profitability over the coming year whilst 19% expect a decrease, with 34% remaining the same.

Commenting on the results Michael McAteer, Managing Partner of Grant Thornton Ireland, said: “It is heartening to see that Irish businesses are remaining optimistic about the coming 12-month period despite anxieties which remain around Brexit and the Covid-19 pandemic.

“Whilst the outlook is showing real improvement with both economic optimism and expectations around revenue and profits on the rise, it is important to note the context of these increases.

“In many cases the improvements we are seeing are due to firms benchmarking the next 12 months against the very depressed economic environment of 2020 due to Covid-19.

“Even with vaccines being rolled out, the reality is it will still be some time before we return to anything approaching normality. Shortage of finance remains a significant concern, with 31% of Irish firms identifying it as a business constraint over the next 12 months.

“This is against the backdrop of record monetary easing and fiscal support for businesses to provide assistance and alleviate cash flow concerns arising from Covid-19.”

According to the report, even with Brexit implications taking hold almost a third (31%) of Irish businesses expect to increase their exports this year, while just 9% expect to decrease their exports in 2021.

Meanwhile, 27% of businesses expect to grow revenue from non-domestic markets as 16% of businesses also expect to increase the number of countries they sell to.

Economic uncertainty

Unsurprisingly, the Covid-19 pandemic has caused a huge spike in Economic Uncertainty with 61% of businesses in Ireland indicating it is the number one constraint on their ability to grow their business. And while optimism has increased, this has not yet materially flowed through to orders, with 34% citing shortage of orders as a constraint.

Businesses are also concerned about the availability of skilled staff (34%) and labour costs (44%) with business citing each as a constraint on their ability to grow.

Companies are making investments – with traditional categories making a comeback

Globally the number one investment area remains technology with 30% of Irish business saying they will need to ramp up their digital transformation to survive the current crisis, followed by investment in staff skills (44%) and R&D (36%) as businesses continue to retool for a new world of business.

With the third wave of Covid-19 hitting many markets, the need to invest in digital business models and having people with the skills to operate in a virtual world for the foreseeable future continues to drive investment decisions.

In this latest research, however, we are also seeing the more difficult decisions Irish businesses are looking to make over the next twelve months with 38% of respondents stating that they will look to reduce overheads to survive the current Covid-19 crisis, followed by 33% looking to diversify their service and product offerings.

Global Standing

Sentiment has improved across nearly all countries and regions in the H2 Grant Thornton Global Business Report. At a global level, Economic Optimism has increased by 14ppts, with 57% of firms optimistic about the economic outlook over the next 12 months.

The underlying context behind these results is one of a rapid initial rebound in activity following the initial lockdowns in H1, but with rising second and third wave outbreaks in some countries/regions, as well as recent positive announcements about vaccine developments.

Ireland ranks tenth, and the highest in Europe in terms of outlook for the economy for the coming 12 months and ranks eight in terms of revenue forecast, the highest across Europe.