BDO has today released their quarterly Optimism Index which monitors business sentiment among Irish companies. Optimism levels among Irish businesses have improved by 2.9% compared with the third quarter 2017, the biggest jump in the third quarter since 2014.
Despite the overall uncertainty caused by Brexit, optimism levels in Irish businesses improved compared with the same quarter last year from 66.2 points to 69.1. This is the biggest increase in quarter three optimism levels since 2014. Companies in Dublin are currently more optimistic (70.25) than those based outside the capital (68.58).
The number of companies which reported an increase in operational profit increased slightly to 34% this quarter, 2% higher than in the same quarter last year. Since 2011, the number of companies reporting higher operational profit has jumped 12%.
Irish businesses reporting an improved level of business activity has fallen slightly in this quarter, from 46% to 44%. Thirty six percent of companies reported the same level of activity as last year, while 19% reported a decline on last year’s quarterly activity.
The number of businesses outside of Dublin recording an increase in business activity grew slightly to 47%, 3% higher than the previous year. This is not the case for Dublin firms, as business activity growth within the capital was considerably less than the same quarter last year at 39%, down 11% year-on-year. This is a trend that has continued over the last two years, with Dublin firms registering weaker activity than companies outside of Dublin.
There is little difference between Dublin-based companies and regional companies in terms of optimism for the fourth quarter, with 44% and 47% respectively expecting performance to improve. Notably, the number of companies outside of Dublin that are optimistic about business activity in the fourth quarter is 6% higher than last year.
Employment levels have remained stable, with most firms maintaining the same employment levels as last year. Employment growth in Dublin has softened, with 19% reporting higher numbers of employees, 6% less than in the same period last year.
Most companies are maintaining price levels with one in five charging higher prices compared to the same quarter last year. However, just 4% of firms are charging lower prices, the lowest level since the survey began in 2011.
Speaking this week, Managing Partner at BDO Ireland, Michael Costello said, "If the proposed Brexit deal is rejected in January, a result which is predicted to weaken the value of sterling, the UK economy will become dramatically unbalanced likely triggering a negative chain of events for Ireland’s economy and its competitiveness as an international trader."
He added, "A no-deal scenario would present hundreds of new challenges for companies and expose supply-chains to varying degrees of disruption. Contingency planning in advance can mitigate against this and it’s important to understand all aspects of your supply-chain in order to do this."