Growth expectations among Irish businesses has fallen to the lowest level since 2013, according to research from BDO.

The business outlook is more negative than in recent years, with one in six businesses expecting activity to decline according to the consultancy firm’s Quarterly Optimism Index.

BDO managing partner Michael Costello (pictured) said: “Many businesses are cautious about the future despite strong recent growth in the economy. Overall optimism levels have plateaued, with the outlook within the business community more negative than this time last year. And while there are some positives such as the strong employment figures, there are warning signs.

“Brexit remains a clear challenge for all businesses, large and small, but we are seeing a shift in priorities with a focus on the infrastructural needs of the economy coming to the fore, from housing and education to transport infrastructure. 

“Businesses are concerned about the deficit in our national capital spending and are seeing it impact on their operations – a clear message to government as we approach the Budget in the autumn that investment in capital projects is necessary to underpin future growth and competitiveness.”

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The flatlining of optimism levels is likely a knock-on effect of political uncertainty in the UK, with the research finding that three out five Irish businesses are seeing a negative impact from Brexit.

This uncertainty is being particularly felt by businesses that export goods, with a decrease in the number of export businesses predicting growth activity at 36%, down from a high of 55% reported in 2015.

The overall trend towards higher prices continues, with figures showing a significant increase compared with the same period last year.

State investment in housing supply (81%) and education (77%) are the priorities for firms in the BDO survey panel.