Grant Thornton report shows sharp drop in optimism as firms face rising costs and global uncertainty.
Irish business confidence has fallen to its lowest level since the early months of the Covid‑19 crisis, according to new research from Grant Thornton.
The firm’s International Business Report, due to be published on 18 February, shows that optimism among Irish mid‑sized companies about the economic outlook has dropped to 54%. The last time sentiment was this weak was in the first half of 2020, when confidence hit 39%.
“The fall in confidence among Irish businesses reflects a broader shift in sentiment we are seeing across many markets as global volatility intensifies”
The decline marks a steep fall from 81% at the start of 2025. The findings reflect a year in which Irish firms have been squeezed by rising costs, skills shortages and an increasingly unsettled global environment. While business sentiment globally also softened, falling two percentage points to 74%, the shift in Ireland has been considerably more pronounced.
The survey, which captures the views of more than 14,000 mid‑market companies across 35 countries including 102 in Ireland, reports weakening confidence across several key indicators.
Expectations for revenue growth over the coming year have slid from 79% to 59% since the third quarter of 2025. Hiring intentions have also cooled, with the share of firms planning to increase headcount declining from 59% to 46% over the same period.
Irish firms exposed to global volatility
Irish companies appear more exposed to the effects of global volatility than earlier in the cycle. The proportion of firms naming geopolitical disruption as a constraint on growth has nearly doubled to 29% since the first quarter of 2025. Although lower than the global figure of 46%, the shift signals a growing sensitivity to international tensions.
Cost inflation continues to weigh heavily. Forty% of businesses now cite labour costs as a major constraint, up from 27% at the start of last year. This trend is feeding through to pay expectations, with only 54% of firms planning salary increases, compared with 77% earlier in the year. More than half of respondents report that skills shortages are limiting growth, while concern about energy costs has risen to 37%, up from 27% at the end of 2024.
Regulation appears to be less of a drag on Irish businesses than on their international peers. Thirty‑five% of firms identify red tape as a significant barrier, compared with 49% globally and across the EU.
The squeeze on confidence is reshaping spending plans. Only 41% of Irish companies expect to increase marketing budgets, a sharp fall from 65% at the beginning of 2025.
Planned investment in sustainability initiatives has also been pared back, dropping from 56% to 38% in the space of three months. Despite this, more than half of respondents say they will boost IT spending over the year ahead, suggesting that companies are prioritising technology and productivity even as they cut elsewhere.
Martin Shanahan, global head of Industry at Grant Thornton, said the shift in sentiment reflects a confluence of pressures.
“The fall in confidence among Irish businesses reflects a broader shift in sentiment we are seeing across many markets as global volatility intensifies,” he said. “Rising geopolitical tension, persistent inflationary pressures and slower global growth are forcing business leaders to become more conservative in their outlook for the next twelve months.”
He added that domestic challenges are increasingly shaping decision‑making.
“For Irish firms, these challenges are compounded by rising energy and labour costs and the growing difficulty in hiring skilled talent. While this has led to more cautious expectations around revenue growth, hiring and pay, it is also driving a sharper focus on productivity, investment in technology and building skills internally.
!Firms are responding to global uncertainty by focusing on those levers that are within their direct control,” Shanahan said.
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