Director Sentiment Monitor (Q2) 2018
The second quarter (2018) IoD Director Sentiment Monitor survey was conducted with IoD members – Ireland’s directors and senior executives – from 2nd to 9th July 2018. In total, 237 members responded to the survey. Q2 findings provide insights from our members about their views on a number of current issues relating to Irish business, the economy and government. We would like to thank our members for their valuable feedback.
*Throughout this document, percentages may be rounded up/down for illustrative purposes.
Respondents: Male (77%), Female (22%), Chief Executive / Managing Director (39%), Senior Exec / Head of Function (26%), Non-Executive Director (18%), Chairperson (10%), Sole Trader / Consultant (3%), Other (4%).
Company Type: Private (48%), Multinational / Plc (14%), Professional Services (12%), Non-profit (9%), State / semi-State (11%), Micro Company (2%) Other (3%).
Industry Type: Financial Services (21%), Professional Services (17%), Life Sciences / Healthcare (9%), Technology / Media / Telecommunications (12%), Consumer & Industrial Products (10%), Services (8%), Construction (6%), Charity / Non-Profit (5%), Other (9%).
- The sentiment survey confirms that while Irish business sentiment remains positive in Quarter 2, 2018, there is a slight decline in confidence when compared with Q1 results.
- Encouragingly, the majority expect the financial performance of their organisation to improve in Quarter 3 with their view that the domestic market is primed for growth in 2018, signalling expectations of improving conditions as the year progresses.
- Irish business sentiment is positive as members reported employment growth in the past three months. However, there is a strong perception that availability of talent is a challenge.
- There is also a perception that government performance is strong, but its’ tenure is called into question.
- The effects of Brexit, labour shortages and political/economic uncertainty remain chief risks facing Irish business.
- Respondents agree that technological, regulatory advancements are set to impact Irish business on many levels.
Positive but cautionary domestic economic, business, markets outlook
The trend in business sentiment in Q2 2018 remains consistent with the perception of a strong Irish economic performance, though sentiment has weakened somewhat from Q1. When asked how they feel now compared to Q1 (2018), almost half of respondents (46%) say that they now feel more optimistic in respect of the Irish economy (52% in Q1), 39% say they feel the same (38% in Q1) and 15% are more pessimistic about the economy (11% in Q1).
However, while there appears to be optimism in respect of the Irish economy, our Q2 survey findings show that there is uneasiness about the possibility of Ireland’s economy overheating. 36% say that they believe the Irish economy is overheating and 43% believe that it may be doing so, while 21% believe that it is not.
Similar to Q1 results, directors and senior executives are upbeat about the outlook for their own organisation, with 56% of respondents expecting improved performance of their primary organisation in Q3 (compared to 57% in Q1). Over a third (39%) of all respondents say that they expect the performance of their primary organisation to stay the same (37% in Q1), while just 4% expect a decline in performance (5% in Q1). Indeed, sentiment is strongest among respondents from private sector SMEs, with 68% expecting performance to improve in Q3.
Q2 results reflect a degree of optimism (albeit slightly less than Q1) in respect of respondents’ own organisations’ performance in 2019. The highest proportion of respondents (61%, slightly down from 64% in Q1) still believe that the performance of their primary organisation will improve next year, 20% say that performance might improve (down from 25% in Q1) and 14% say performance is unlikely to improve next year (up from 8% in Q1). Again, respondents from private sector SME’s are showing greatest optimism, with 71% expecting improved performance in 2019.
Certainly, strong business performance is affirmed by 57% of respondents who say that the number of people that their company employs has increased over the past three months (up from 48% in Q1), 36% say the employment figures are unchanged (down from 41%) and just 5% say the employment figures have decreased (down from 8%). However, while hiring is strong, it appears that the availability of talent is a major challenge; 56% believe that the availability of talent for their business has decreased in the past three months and just 8% say that talent availability has increased. One-third say employment numbers have remained the same.
In respect of their primary business, it is anticipated that the domestic market will provide the most significant opportunities for growth in 2018, according to the highest percentage of respondents (39%). Lagging behind is the EU (19%), the UK (8%), and global markets (17%). In respect of the USA market, respondents had notably higher expectations of growth opportunities in the US market in Quarter 1 (18%) than Q2 (7%). It is anticipated that emerging markets will provide significant opportunities for growth for just 7% of respondents.
Business leaders generally positive about government performance, but challenges remain
Similar to Q1 findings, the perception of government performance for Q2 is positive, and indeed, improving. 30% rate government performance in Q2 as either very good or excellent (23% in Q1), and 26% rate performance as either fair or poor (down from 30% in Q1). 45% say performance was good (47% in Q1).
However, when asked how the government performed in respect of supplying General Data Protection Regulation-relevant information to Irish business in the months prior to the enactment of the regulation, the highest proportion of respondents say government performance was either fair (33%) or poor (14%). Considerably fewer respondents say the performance was either very good (18%) or excellent (3%), and 31% say government performance in respect of supplying GDPR-relevant information to businesses was good.
Additionally, views about the continuation of the current government are mixed. While 67% of respondents indicate that they are either strongly or somewhat in favour of an extension of the Confidence and Supply Agreement from three to five years, up from (56% in Q1), a significant proportion of the respondents (48%) believe that the current minority government is extremely or somewhat likely to fall, and that the country will face a general election before the end of 2018.
Housing, water supply and regional infrastructure investment priorities
The Q1 Director Sentiment Monitor found that the majority of respondents (66%) believed increased infrastructure spending is key in terms of investment in Ireland’s future development. Following on from this, the Q2 survey asked respondents to identify the priority areas regarding infrastructure spending in Ireland. Housing investment is rated the most critical priority at 77% and 46% say that ‘focusing on regional infrastructures’ is a priority. The third-highest proportion (44%) say that ‘water supply’ is critical to future development, and 37% note ‘hospitals’ as critical.
Of the 11% of respondents who provided comments in relation to infrastructure spending, the vast majority of their comments assert that national, high-speed broadband is a key priority area in Ireland.
Effects of Brexit- top risk facing companies
Over a quarter (26%) of directors and senior executives identified the ‘effects of Brexit’ as the single-biggest risk facing respondents’ organisations (up from 18% in Q1). The labour market is a significant risk for organisations too, with (19%), selecting ‘labour/sourcing/quality/capability/retention’ as the single biggest risk currently facing their organisation; a perceptible drop from Q1 findings (26%). 14% of respondents highlight ‘political/economic uncertainty’ as the single-biggest risk (equal to Q1).
Clear impact of technological, regulatory changes
In response to the impact of continuing technological changes over the next five years, over half (51%) of respondents say that the ‘emergence of new business or delivery models’ will have the greatest impact on their organisation over the next five years. The ‘changing regulatory environment’ is the issue that will deeply impact their organisation according to 48% of respondents and 45% believe that there will be an ‘increase in cyber-risk’. 42% of respondents say that ‘smart and autonomous technologies’ will have the greatest impact on their organisation over the next five years.
Notably, the highest proportion of respondents (49%) believe that Irish and EU directives and regulations are not keeping up with technological advancements.
Business leaders identify areas for improvement in business standards
When asked to select the areas in business standards that require improvement, respondents’ attitudes are generally aligned.
In respect of the areas that require significant improvement, the highest proportion of respondents (57%) select ‘accountability for corporate misconduct’. The second-highest proportion (54%) select ’greater focus on long-term planning and reporting’ as an area that is in need of significant improvement. 44% note ‘explaining the contribution of business to the wider community’ and 40% say that ‘transparency in financial disclosures’ is in need of significant improvement.
According to respondents, the areas that require some improvement are ‘shareholder engagement’ (64%), corporate culture (61%), stakeholder engagement (60%), and ‘explaining the contribution of business to the wider community’ (48%).
Respondents say the areas in business standards that require no improvement are, ‘whistle-blowing protections’ (28%), ‘shareholder engagement’ (15%), ‘transparency in financial disclosures’ (14%) and stakeholder engagement (14%).
A press release on these Q2 findings is available on our website here.