IBR H2 2021 - Irish highlights
Optimism
Rising optimism has been a feature of the IBR since the low point of H1 2020 when 39% of Irish businesses were optimistic about the next twelve months. Since then, as vaccine development and a successful roll out enabled economic restrictions to give way to reopening, business optimism has been on a strong upward trend. The latest IBR finds 85% of businesses optimistic about the economic outlook. This is up on the 76% from H1 2021 and 15 percentage points higher than the global average. Of course, the emergence of the Omicron variant has changed the economic context yet again but the impact of that will not be known until H1 2022. The current expectation is that the impact from the Omicron variant will not be as severe as previous Covid waves.
Outlook
The general trend of Irish business optimism carries through to the outlook indicators in the IBR. Almost two thirds of IBR respondents expect to increase their turnover and the buoyant labour market, which has seen job listings surpass pre-pandemic levels, appears set to continue. 45% of businesses expect to increase their staff compliment and only 13% expect to see a decrease. Given the new trading relationship between the EU and UK, the IBR’s export indicators provide a telling insight. 37% of respondents expect to increase their export sales but only 23% expect to sell into new markets suggesting a steadier state post-Brexit than might have been feared.
Constraints/Restrictions
While optimism and outlook indicators are displaying strong positive sentiment, there is a strengthening sense that constraining factors to growth are increasing. Almost half of firms (48%) think that economic uncertainty is a constraint on their business, up 10 percentage points since H1 2021. The most significant changes in terms of constraints have come via energy costs in the labour market. For the first time in IBR’s history, more than half of businesses (55%) cited energy costs as a constraint on their business. For context, the average annual score in this indicator between 2013 and 2020 was 18%.
Similarly, the availability of skilled labour has shifted dramatically in the percentage of businesses citing it as a constraint on their business. 63% now reference the availability of skilled workers as a constraint, up from 37% in H1 2021. The previous highest reading was 50% in H2 2017. This constrained availability of skilled labour is contributing to a corresponding increase in concern over labour costs as a constraint. 56% of businesses now cite this as a constraint, up from 27% in H1 2021. This scale of this change between H1 and H2 suggests that the strength of the labour market has emerged from the pandemic at a much faster pace than expected.
Investment
Investment intentions were up in comparison with H1 2021, but the scale of increase identifies areas of focus for Irish Businesses. 42% of firms expect to invest in R&D, up from 40% in H1 2021. The percentage of businesses intending to invest in Technology fell from 48% to 40%, which may indicate that a lot of technology investment took place to implement home working and ensure business continuity during the early stages of the pandemic. Perhaps reflecting the tight labour market, 55% of business now expect to invest in staff skills, up from 35% in H1.