Business optimism through the second quarter of 2020 hit an eight-year low, while forecasts for the rest of the year are also gloomy, according to research from BDO.

The latest BDO Quarterly Optimism Index tracked sentiment through Q2, which was at its lowest levels since the BDO Optimism Index was commissioned in 2012.

The quarterly survey is conducted via telephone amongst a sample of 362 business owners and  managers, spanning SMEs and large firms.

Three-quarters of businesses surveyed for the index reported lower levels of activity than during the same period last year. The business environment in Dublin was marginally more challenging, with 80% of businesses based in the capital reporting lower levels of activity, compared with 73% reporting lower activity than the rest of the country.

One in three businesses also reported lower levels of employment than during Q2 2019. BDO said that the employment outlook is most negative among larger companies with more than half reporting lower employee numbers year on year.

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The BDO research found that almost one in five businesses charged lower prices for the most recent quarter compared with the same quarter last year.

Operational profits have also taken a noticeable fall, with businesses operating in the retail, wholesale trade and the services sector hit hardest. The research found that 68% of businesses reported lower levels of profitability during the second quarter year on year.

Despite the negative impact that Covid-19 has had on businesses across Ireland, only one in five businesses told BDO they have sought financial advice regarding reopening/restructuring their business as a result of the pandemic. Brexit is another concern for Irish businesses, with just under half claiming that it will have a negative impact on their business.

BDO Ireland tax partner Derek Henry commented that Covid-19 is weighing heavily on overall sentiment about the months ahead.

“State-funded supports have clearly helped sustain many small and medium enterprises, protect jobs and buy time to restructure their operations in response to the restrictions on activity necessitated by the public health emergency.

“It is concerning, however, that only one in five businesses have sought professional advice about either reopening or restructuring their business in response to the pandemic. It’s hugely important for businesses to take action as early and decisively as possible during a crisis to try to limit the damage and ensure they remain viable long term.”

Henry added that the possible impact of Brexit is also compounding worries for Irish businesses. “We would expect to see the level of concern increase further during the coming months as we near the ultimate deadline of December 31. Again, planning for Brexit as early as possible is the best way to mitigate any negative impact.”

CSO Survey

Separately, research by the Central Statistics Office has found that two-thirds of businesses are concerned about another lockdown.

The CSO’s fifth Business Impact of Covid-19 Survey is based on survey responses from around 750 companies collected between late July and August. As well as concerns about renewed lockdowns, the survey found that:

• Reduced demand due to lower consumer confidence was one of the top two concerns for just under half  of businesses.
• More than half of enterprises had lower than normal turnover for the four-week period 29 June to 26 July 2020.
• During the period 16 March to 26 July 2020, one-fifth of responding enterprises reported that business costs had exceeded turnover.
• An average of six in ten staff among office-based enterprises were working remotely.
• More than half of enterprises have introduced mandatory Personal Protective Equipment in the workplace, while 45% have provided protective screening for staff

CSO statistician Colin Hanley noted that at the end of July 2020, 3% of businesses had temporarily ceased trading, while 0.9% had closed permanently.

Photo: NPHET’s crazy lockdown has prevented c.3,500 pubs from trading for five months. Among the affected enterprises is the Market Bar in Drogheda, where  Noel Nugent and his daughter Collette are the principals. (Pic: Conor McCabe)