Business sentiment has weakened, according to new data, as increased uncertainty about the outlook for the global economy affects firms’ expectations for their activity levels, as well as their assessment of prospects for the Irish economy as a whole.

That’s according to the Q2 business sentiment index from KBC Bank and Chartered Accountants Ireland, which has fallen by 2.2 points to 114.2, the weakest reading since spring 2017.

However, the report states that confidence remains high: “There were still notably more positive than negative responses to questions about the outlook for business and the broader Irish economy even if the gap between the two narrowed marginally since the spring survey.”

On Brexit, only 7% of respondents felt that the impact of Brexit on their companies had become clearer of late while 17% felt it had become less clear. Two concerns dominate their worries about effects of Brexit, market access and an increased documentation and regulatory burden.

Businesses believe there is a one in three chance that the UK could leave the EU in March 2019 without the ‘safety net’ of a transition period. The possibility of a ‘crash exit’ by the UK is regarded as a material risk by large firms, even if it is not their central scenario.

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Respondents expect broad negative effects on activity levels in the event of a UK crash exit from the EU, with 48% of companies envisaging a worsening business outlook.

The KBC/CAI survey canvassed the views of 205 chartered accountants working in senior positions in leading companies.

Sentiment was divided on priorities for Budget 2019, with equal numbers emphasising spending on social infrastructure (health and housing) and avoiding overheating in the Irish economy.

KBC chief economist Austin Hughes said: “While the number of companies reporting job gains in the past three months is four times the number of companies reporting job losses, it is clear that confidence is being affected by a range of threats running from Brexit and trade tensions internationally to domestic concerns such as housing and overheating risks.”

CAI chief executive Barry Dempsey added: “It’s clear that Irish business needs to prepare for the consequences of a hard Brexit and our new guide Taking the Lead: Chartered Accountants and Brexit will businesses prepare for customs checks and controls that they could face.”