Skills shortages take centre stage as business sentiment dips, says Grant Thornton report

Irish mid-sized businesses are more confident about the immediate future than their UK and European counterparts, a new report from Grant Thornton indicates, despite a notable dip in confidence over the past six months.

In its latest International Business Report, the professional services group said 73 per cent of medium-sized business in the Republic were confident about their growth trajectory over the next 12 months.

This is down from 78 per cent in the last edition of the report, but it compares favourably with the UK and the euro zone where just 59 per cent and 54 per cent of similar business respectively said they were similarly confident.

Pessimism about labour costs helped drive down overall confidence among Irish employers, Grant Thornton said, with almost a third of firms citing it as the main barrier to their growth and expansion this year.

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Related to those concerns, almost 70 per cent of mid-sized businesses said they plan to increase salaries this year as available workers remain thin on the ground and cost-of-living pressures persist.

“Employers are increasingly paying a premium to recruit and retain skilled talent, and this has been exacerbated by the cost-of-living crisis with workers seeing their purchasing power impacted,” said Andrew Webb, chief economist at Grant Thornton Ireland.

“These rising costs have a negative knock-on effect, with a reduced number of firms planning to increase their headcount over the next 12 months. As a result, more firms will look to AI to help improve operational efficiencies and enable existing staff to undertake more strategic work, relieving some of the pressures on constrained workforces in the process.”

Just 41 per cent of businesses said they expect to ramp up hiring this year compared with slightly over half last year.

There is growing concern that broader economic trends could hamper business development this year. The number of mid-sized companies citing economic uncertainty as a big concern jumped from 20 per cent to 33 per cent in the most recent round of research.

On a positive note, however, businesses reported a slight drop-off in other operating costs, particularly utility bills with the proportion of Irish companies citing energy costs as a burden on their business falling from 53 per cent to 32 per cent.

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