Optimism among Irish businesses is at its lowest level since 2014, according to research by BDO.

The firm’s latest quarterly optimism index, which monitors business sentiment among Irish companies, suggests that the ongoing uncertainty surrounding Brexit continues to erode the confidence of Irish businesses and is having a negative impact on sentiment.

Three in five Irish businesses are concerned that Brexit will have a negative impact on their business, up from two in five a year ago. The proportion of businesses that see Brexit having a very negative impact has doubled from 6% to 12%.

“While business activity in Q4 remained steady, the significant drop in optimism suggests it will be difficult to maintain this level of performance,” said Michael Costello (pictured), managing partner of BDO Ireland.

“While we hope a no-deal Brexit is avoided, our advice for Irish businesses is to make sure that they have a contingency plan in place and ready to implement, as failure to prepare in advance could have a significant impact until a long-term agreement is reached between the UK government and the EU.”

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Negative Impact

The findings show that Brexit is having a negative impact on sentiment across all industries and businesses of all sizes. The retail and wholesale trade industry is expecting to be hit the hardest, with 75% of respondents from this sector concerned about the negative impact.

However, despite the negative outlook for the months ahead, business activity levels remained steady during Q4 2018, with 35% of business reporting a similar level of performance to Q4 2017, and 49% reporting improved levels of activity.

While performance remained stable for businesses overall in Q4, companies that rely on exporting have found the current business environment challenging, with overall activity at these companies on a downward trajectory since 2015.

The latest set of results show that one-fifth of exporting firm reported lower levels of business activity in Q4.

BDO’s research also found that employment levels have remained steady. Some 15% reported higher levels, while 6% reported a lower level of staff numbers.

Mid to large-sized companies are driving employment growth, with one-third of employers in this category reporting higher staff numbers than at the end of 2017.

The overall trend towards higher prices continues.  Only 4% of firms are charging lower prices year-on-year, the lowest level for Q4 since the survey began in 2012.