Business sentiment at highest level in nine years

Activity levels across firms operating in the economy continued to increase as the year drew to a close, but the pace of growth was only fractionally ahead of the previous three months.

A combination of stronger activity levels at companies and increasing optimism about the broader Irish economy meant business sentiment moved to its highest level since 2007 in the final quarter of 2015, according to the latest sentiment study from KBC Bank Ireland and the Chartered Accountants.

But the study also showed that domestic costs continued to build, with increases across the widest range of firms since 2008.

Chartered Accountants Ireland chief executive Pat Costello, inset, said the increase in costs in this survey could reflect difficulties some companies might have in sharply scaling up their activity levels.

“It may also reflect a correction after a very sharp fall in costs through the downturn as well as possibly owing something to the impact of currency movements on import costs,” he said.

“It is important not to be alarmist about this development and businesses surveyed are confident about their future growth. However, in a world of very low inflation, a rising trend in Irish costs needs to be monitored closely.”

The study also found that wages are expected to rise this year in eight out of ten companies surveyed with just over half of those pay rises under 2pc.

More than half, 54pc, of firms don’t see direct impact on their business from a UK withdrawal from the European Union, while 42pc fear negative effects and only 4pc see positive consequences.

For those that worry about the negative impact, 67pc see increased economic uncertainty with greater currency fluctuations, and 54pc note the increased costs of doing business.

Austin Hughes, KBC Bank Ireland economist, said Irish- based companies have reported continuing increases in activity and employment levels.

“Significantly, companies are reporting increases in their business volumes in 2015 that broadly tally with current estimates suggesting Irish GDP grew by close to 7pc,” Mr Hughes said.

“So, the sentiment survey suggests that from corporate Ireland’s perspective, recovery is now both strong and broadly based.”

The study also showed that two-thirds of companies were signalling increased business volumes and less than 6pc were indicating weaker activity.

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