Optimism amongst medium-sized Irish firms has taken a sharp fall amid continuing global turmoil.

In just the last quarter there has been an 18 percentage point fall according to the Grant Thornton International Business Report (IBR).

The IBR, which provides insights into the attitudes of 10,000 mid-market businesses across 32 economies, reveals that 63 per cent of companies surveyed in Ireland are optimistic about the outlook for the economy over the next 12 months, which stands in sharp contrast with the 81 per cent that said so in Q1.

The research, carried out across April and May, shows that the change in mood has swept through Irish mid-market firms’ view of their performance over the next year.

There was a 25-point nosedive in predicted profitability, with 55 per cent of firms expecting to be in the black compared to 80 per cent in Q1 as well as a nine-point decline in expected revenues (68 per cent versus 77 per cent), and a 10-point spike in the expectation of reduced demand (27 per cent from 17 per cent).

International tariff disputes are a likely factor in the changing mood of Irish medium-sized enterprises, with almost double the level of concern among these companies (16 per cent in Q1; 26 per cent in Q2) that geopolitical disruption would be a key constraint on their business.

This is starkly illustrated in the sharp fall in the percentage of Irish mid-market firms expecting an increase in revenue from non-domestic markets over the next 12 months, contracting from 40 per cent in Q4 2024 to just 16 per cent in Q2 2025.

While the increase in concern about geopolitical disruption is significant, it is still short of the overall level of concern across the Eurozone, which stands at 44 per cent, according to the research.

The global uncertainty is similarly reflected in Grant Thornton’s US CFO survey, also out this week, which reports that 46 per cent of US CFOs surveyed are pessimistic about the US economy, with 46 per cent adjusting their supply chains to reduce the impact of tariffs. 

The worsening outlook in Ireland has had a knock-on effect across a range of areas, with a 10-point fall in the amount of Irish medium-sized firms planning to invest in sustainability initiatives (42 per cent).

This is compounding other challenges in the economy, where Irish mid-market firms are already experiencing a range of issues. For example, at 50 per cent in Q2, the number of firms predicting their labour costs will rise over the next twelve months has almost doubled from Q1 (27 per cent).

Similarly, there was an 18-point spike, from 41 per cent to 59 per cent, in the share of companies that saw the availability of skilled workers as a key constraint on their business.

Commenting on the report Martin Shanahan, head of industry at Grant Thornton, said: “Medium-sized firms, a key component of the economy, are navigating a period of global uncertainty with resilience and adaptability.

"While some companies are reassessing their growth forecasts, this reflects a thoughtful and strategic response to evolving global dynamics rather than a lack of ambition.

"Geopolitical shifts and economic pressures are prompting businesses to think more critically about where and how they invest, especially in key areas like sustainability.

"These challenges, including labour costs and talent shortages, are not new—but Irish mid-market firms have consistently shown their ability to innovate and adapt."

"Diversification and innovation remain powerful tools for progress," he continued.

"The business success stories of the future will be those companies that embrace change, invest wisely, and plant the seeds today for a more vibrant, resilient economy.”

(Pic: Chip Somodevilla/Getty Images)