As the Dáil enjoys the start of the summer recess, directors of Irish business have raised a warning flag to the government believing that the economy is overheating according to the Director Sentiment Monitor, a quarterly survey of director sentiment by the Institute of Directors in Ireland (IoD).
Key findings
- Business sentiment remains positive in Q2 (46%) albeit there is a slight decline in confidence when compared with Q1 results (52%)
- The majority expect the financial performance of their organisation to improve in Q3
- The domestic market is primed for growth in 2018, signalling expectations of improving conditions as the year progresses
- 74% of respondents were positive about the government's performance
- Nearly 50% believe the country faces a general election before the end of the year
- Brexit is seen as the single biggest risk to organisations
- Housing (77%) and regional infrastructures (46%) are seen as the most critical priority areas for investment
- 57% state positive employment growth but talent shortages are a significant challenge
- 50% believe domestic and EU laws are not keeping up with technological advancements
- 57% of respondents have called for significant improvement in accountability for corporate misconduct
The survey of 237 of IoD members including chief executives, senior executives, non-executive directors and chairpersons, shows that 36% are uneasy about the possibility of Ireland’s economy overheating and 43% believe that it may be doing so.
Commenting, Maura Quinn, Chief Executive, Institute of Directors in Ireland, said:
"While business sentiment generally remains positive in Q2 and there are optimistic signs in expectations for domestic growth, it's quite clear Ireland's business leaders are concerned this growth is unsustainable. Combined with Brexit, severe talent shortages and political flux this makes for uncertain times for corporate Ireland."
Government performance
Directors are increasingly supportive of the government (74% compared to 70% in Q1) with two-thirds believing the current Confidence and Supply Agreement between the government and Fianna Fáil should be extended for another term. However, that confidence is somewhat tenuous with nearly 50% believing the country is likely to face a general election before the end of the year.
47% of businesses felt let down by the government's performance in respect of supplying relevant GDPR information prior to enactment in May 2018.
Brexit and growth markets
As March 2019 grows closer, Ireland's business leaders believe Brexit is the single biggest risk facing their organisation at 26% compared to 18% in Q1.
It follows then that our nearest neighbour is seen as an increasingly less attractive market for growth (8%) in comparison to Q1 (19%).
The most significant opportunities for growth are expected domestically (39%) followed by the EU (19%). The US has dropped from 18% to 7%. It is anticipated that emerging markets will provide significant opportunities for growth for just 7% of respondents.
Infrastructure
In relation to Project Ireland 2040, housing investment is rated the most critical priority at 77% followed by regional infrastructures (46%), water supply (44%) and hospitals (37%).
Of the 11% of respondents who provided comments in relation to infrastructure spending, the vast majority assert that national, high-speed broadband is a key priority area in Ireland.
Employment
Whilst a majority of businesses (57%) state positive employment growth, increasing difficulties with sourcing talent (56%) have made the sourcing and retention of capable talent the second biggest risk to their organisation (19%), second only to the effects of Brexit (26%).
Technology
In relation to how technology impacts their organisation and the nature of work, directors believe the greatest impact over the next 5 years will come from the emergence of new businesses or delivery models (51%), changing regulatory environment (48%) and the increasing threat of cyber-risk (45%). 42% of respondents say that smart and autonomous technologies will have the greatest impact on their organisation over the next five years.
50% believe domestic and EU laws are not keeping pace with technological advancements.
Business standards
In relation to business standards, 57% of respondents have called for significant improvement in accountability for corporate misconduct followed by greater focus on long-term planning and reporting (54%), explaining the contribution of business to the wider community (44%) and better transparency in financial disclosures (40%).
Areas requiring some improvement include shareholder engagement (64%), corporate culture (61%), stakeholder engagement (60%) and explaining the contribution of business to the wider community (48%).
*The Director Sentiment Monitor is a research initiative from the Institute of Directors in Ireland (IoD). It tracks director sentiment on a quarterly basis and compares and contrasts trends and attitudes among business leaders in Ireland. An online survey conducted between 2nd-9th July 2018 with a sample of 237 members of the Institute of Directors in Ireland.
A summary of the Q2 findings can be viewed here.