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Solid growth in Irish business activity so far in 2013

Despite the better outlook, hiring plans remain depressed for the coming months.

Image: Business People Activity via Shutterstock

BUSINESSES IN IRELAND have seen improvements in the first three months of 2013 as sentiment increases and the impact of austerity becomes less severe.

According to the latest sentiment survey from KBC and Chartered Accountants Ireland, business activity posted “solid growth” between 1 January and end-March.

The majority of companies believe the deal on national debt helped their businesses and “stronger conditions are expected to take hold in the coming months”, according to the Spring 2013 research.

While companies remain cautious in their hiring, there are signs of greater confidence in the outlook for the Irish economy as a whole.

The majority of companies think that a deal to ease the burden of Ireland’s national debt will have a positive impact on their business within the next couple of years.

“Most feel this will occur through a general improvement in sentiment but 30 per cent think that the easing in austerity that the deal will allow will be helpful to them while 12 per cent think they will benefit through lower borrowing costs,” explained Chartered Accountants Ireland president Austin Slattery.

On deflated hiring plans, he said it was “not entirely surprising” given the “somewhat uncertain global outlook” and the fact that domestic spending power is still “under pressure”.

“[It] is as favourable an outcome as could be expected. However, it means we can’t expect dramatic improvement in domestic spending through 2013.”

Chief economist at KBC Bank Ireland, Austin Hughes, added, “The Spring survey shows a gradual recovery in Irish business conditions is taking hold as companies report an improvement in activity levels.

“This appears to have spread to companies focused on domestic spending, while export firms are continuing to report moderate growth.

“What seems to be happening is a gradual easing in the negative forces that have depressed activity in recent years. Although the ‘headwinds’ restraining recovery are easing, there are few signs that strong supportive ‘tailwinds’ that would generate a dramatic improvement in business conditions are taking hold”.

Although few companies felt that recent movements had a negative effect on their business, the survey noted the influential nature of exchange rate developments.

While 36 per cent felt there had been some slightly negative impact, these results show that most Irish companies are coping with recent Sterling weakness.

“Nearly half of the companies surveyed indicated that currency movements were of importance to them,” said Hughes. “They also indicated that the impact of currency fluctuations is not entirely straightforward with significant numbers of companies citing the impact of cheaper imported materials (40 per cent) and increased competition from abroad (22 per cent), as well as the difficulties faced by exporters (37 per cent).

Download the survey in full>

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