Business advisory firm Azets Ireland has launched a new barometer which reveals falling levels of optimism across the business community amid elevated levels of economic uncertainty.

The Azets Barometer Survey, which polled 119 mid-market, entrepreneurial, owner-managed, and family-owned businesses across Ireland between April and May 2025, found falling levels of optimism, with respondents rating their economic prospects at 5.5 out of 10, down from 6.5 in the previous survey in November 2024 and the lowest level recorded since the Barometer was developed over a year ago.

However, Irish businesses remain among the most optimistic in Northern Europe, ranking second overall—ahead of the United Kingdom (5.2), Norway (5.2), and Finland (4.8).

The barometer reveals that firms in the construction sector are the most optimistic, scoring their economic prospects at 6.6 out of 10.

This reflects the continued high demand for homebuilding to meet Ireland’s ambitious housing targets.

There is a correlation between business size and optimism, with large businesses (6.1 out of 10) more optimistic about their future than smaller peers.

Micro businesses with 9 employees or less have the lowest levels (4.8 out of 10) of confidence about their future economic outlook. 

Trade tariffs and economic uncertainty top the list of business concerns, with a risk score of 6.4 out of 10, followed by geopolitical instability at 6.2, highlighting the impact of global volatility on Irish firms.

Regulatory compliance and talent recruitment and retention also rank highly, each scoring 5.7.

More than 4 in 10 (41%) of firms in Ireland report that higher labour costs are their principal concern, amid the forthcoming introduction of pension auto-enrolment, wage growth and other employment changes.

The impact of higher labour costs was highest among medium-sized businesses, with 45% of firms highlighting its potential impact on future financial growth. 

The data suggests a silent slowdown may be underway, with many mid-market and owner-managed firms reporting rising costs, tighter margins and lower confidence.

Despite strong top-line financial performance, the cumulative pressure of labour costs, compliance burdens and geopolitical risk is eroding the resilience of smaller firms, particularly those without the scale or resources to absorb ongoing volatility.

The Barometer also reveals a decline in focus on sustainability among Irish firms. In the previous survey in November 2024, sustainability scored 6.6 out of 10 in terms of strategic priority.

Six months on, this has dropped to 6.1 out of 10, suggesting that immediate economic pressures may be pushing longer-term environmental priorities down the agenda.

Despite heightened volatility, the Barometer reveals that financial performance among Irish companies remains strong, with financial health rated at 6.6 out of 10.

Irish businesses rank second only to Denmark across the six Northern European countries surveyed as those with the strongest level of financial performance.

Larger businesses tend to outperform smaller counterparts, with large companies (250 employees or more) rating their financial health at 7.0, compared to 5.4 for micro-businesses (9 employees or less).

Succession planning emerges as an area of growing focus for Irish businesses, with an average score of 5.8 out of 10—slightly above the European average and behind only Denmark and the UK.

While just 5% of firms have fully integrated succession plans, 81% have given it at least some consideration.

Larger businesses are significantly more advanced, with scores rising in line with company size.

The finance sector leads the way (6.3), while micro businesses and sectors like healthcare and manufacturing lag behind.

Commenting on the findings from the Barometer, Neil Hughes, CEO of Azets Irelandsaid: “Irish business leaders are steering their organisations through one of the most uncertain periods in recent memory, where trade tariffs, geopolitical risks and economic uncertainty are increasing.

“Our latest Barometer shows that this volatility is beginning to dent business confidence, with a marked drop in optimism since late last year.

“What’s particularly concerning is the strain being felt by micro-businesses who employ less than ten people.

“These firms report the lowest confidence in both their financial health and future prospects.

“They are the backbone of local economies across Ireland, yet rising labour costs and the growing cost of doing business are putting them under real pressure.

“These businesses need greater support if they are to survive and thrive in the months ahead.

“Despite the challenges ahead, it’s reassuring to see that Irish firms are entering this period of volatility from a position of relative financial strength, demonstrating their capacity to successfully overcome the obstacles ahead.

“In fact, Irish businesses rank second only to Denmark in financial performance across Northern Europe—evidence of the resilience that exists across the business community.

“As a trusted partner of ambitious, entrepreneurial, owner-managed, and family-owned businesses, Azets Ireland is helping to meet the needs of mid-sized businesses across the country as they navigate this challenging environment.

“Our team of experts and advisors stand ready to support ambitious businesses navigate heightened volatility and unleash their growth potential in the months ahead.”