Three-quarters of Irish businesses plan to increase selling price to offset rising cost of inflation
Regulatory red tape and access to a skilled workforce remain a challenge for almost half
A significant number of Irish businesses are feeling less optimistic about the outlook for the economy than just six months ago as inflationary pressures and market volatility present challenges to growth, according to new research from Grant Thornton Ireland. Some 62% of businesses surveyed for the Grant Thornton International Business Report across the first six months of the year report being optimistic about the economy in the coming 12 months. However, this reflects a notable drop from 85% reported by Irish businesses in 2021 - the highest level of optimism of all 29 economies surveyed at the time.
Of the biggest concerns for businesses in the coming 12 months, some 52% said the economic impact of the war in Ukraine is having the greatest negative impact. This is followed by 45% of businesses who said inflation and the knock-on effect on business overheads is the having a negative impact.
In response to the rising costs, more than three-quarters (77%) of businesses said they will increase their selling price in the coming 12 months, with 60% also expecting to increase their revenue in the coming 12 months as a result.
Speaking of today’s figures, Managing Partner Micheal McAteer said:
‘It’s very clear that businesses are navigating a period of uncertainty and planning accordingly to offset the impact of inflationary pressures via increases in selling prices. While optimism levels have dropped significantly in Ireland since the previous IBR survey, the sentiment for the economic outlook is slightly more positive than our numbers in the UK and the EU average which are at 59% and 52% respectively.
‘It’s important that businesses continue to insulate against inflationary pressures and the international trading environment at least in the short to medium-term while we monitor how markets react. Market diversification, business process efficiencies, digital transformation and automation are some of the ways businesses can do this.’
More than a quarter of Irish businesses are still looking to international markets to encourage growth. Some 33% expect to increase revenue from non-domestic markets, while 25% also plan to expand the number of countries they sell to.
More than half (53%) report regulatory red tape as a challenge to growth, up from 37% who reported this issue in the second half of 2021.
More generally, 45% of businesses continue to report the availability of skilled workforce as a challenge. With rising wage demands, some 58% of businesses report labour costs as a constraint to growth – this is more than double the 27% who reported this as a concern in first half of the year in 2021.
Speaking on the challenges identified for Irish businesses, Grant Thornton Ireland Chief Economist Andrew Webb said:
‘We are consistently seeing businesses facing the same challenges such as regulatory red tape, and labour costs and access to a skilled workforce. In such a competitive jobs market across most sectors right now, this will continue to present challenges to growth for Irish businesses as they continue to invest in international markets while at the same time tapping into a wider pool of international talent.’