Irish CFOs forecast increases in revenue, capex and headcount

Shortage of skilled professionals cited as one of the significant business risks.

The latest Deloitte Irish CFO survey has revealed that there is a stronger level of optimism around business growth from Irish CFOs, compared to their European counterparts.

The bi-annual Europe-wide survey, benchmarks the sentiment of 1,300 CFOs based in 13 countries.

“Ireland has benefitted from the easing of pandemic restrictions earlier this year, with a quicker than expected return to business as usual for many sectors”

The survey heard from 75 CFOs in Irish businesses across multiple sectors including tourism, construction, retail, manufacturing, healthcare, and transport.

Irish CFOs are almost twice as confident as their peers around Europe when it comes to the financial prospects of their business, with 35% saying they are more optimistic compared to the EU average of 18%.

Reasons to be cheerful

The reasons for optimism are evident with Irish CFOs expecting growth across several key business metrics in contrast to the EU average. 63% are expecting an increase in revenue in the next 12 months, compared to the EU average of 58%. There is also a lower proportion of Irish CFOs expecting a decrease in revenue compared to the EU average (16% versus 21%).

“The forecasted increase in revenue across Irish businesses is a welcome sentiment against the backdrop of significant macro-economic pressures,” said Daniel Gaffney, partner at Deloitte Ireland.

“Ireland has benefitted from the easing of pandemic restrictions earlier this year, with a quicker than expected return to business as usual for many sectors. Our strong trade links with the US and other overseas markets, a skilled workforce and a strong multinational base particularly across technology and healthcare are all reasons for optimism across the next 12 months.”

Digital adoption

Deloitte’s Irish CFO survey highlights how the increased optimism brought on by forecasted revenue growth will impact on other areas of Irish business operations. Irish CFOs are forecasting increases in both CAPEX and headcount across the next 12 months, also at a higher proportion compared to the EU average.

“While the signs are positive towards headcount and CAPEX growth forecasts following the period of uncertainty and flux, businesses will still be looking at ways to cut costs, particularly in the current market,” Gaffney said. “At the same time, there is an opportunity for businesses to invest across their organisations to create efficiencies that will in turn reduce costs.

“Digital technologies such as AI adoption are a prime example of where businesses can find these efficiencies. While the majority of finance leaders recognise the importance of data transformation, there is scope for more businesses to leverage it to improve business decision-making. One in four (24%) Irish respondents have already moved beyond traditional automation and analytical tools to adopt AI and Machine Learning within their financial operations, and we’d encourage more CFOs to consider it to drive a connected and insight-driven finance function,” continued Gaffney.

Talent development

While almost half of CFOs want to grow their teams, Deloitte’s research found that the shortage of skilled professionals continues to be a significant risk, outweighed only by broader, external factors such as economic outlook and geopolitical risks.

76% of Irish CFOs believe the shortage of such talent is likely to pose a significant risk to their business in the next 12 months, underlining the importance of effective talent development.

There is broad awareness that developing talent to advance business goals is a key priority in uncertain times, with 89% of finance leaders citing it as ‘very important’ or ‘quite important’, only behind business performance management and technical knowledge.

It’s clear CFOs are looking inward and opting to retain their existing team as they believe the skills are not readily available on the jobs market. Talent retention and attraction is also becoming increasingly important with employee welfare and development a key focus for the finance function as well as HR.

“At a time when talent is in short supply, it’s crucial that businesses provide flexible working environments and a culture of continual skills development, or they are in danger of losing experienced staff, or face recruiting difficulties,” Gaffney explained. “Technology also plays a vital role in improving the employee experience and CFOs that invest in this can free up their teams’ time to work on higher-value projects like analytical reviews of business performance, that will support the overall growth of the organisations,” he concluded.

Inflation and supply chain

While optimism in terms of growth is evident among Irish CFOs, there is a natural cautionary tone when it comes to rising inflation across the bloc. CFOs around Europe believed, when asked during March 2022, that inflation would hit an average of 7.9% by March 2023.

At the time of publication of the Deloitte CFO Survey, inflation had already risen to 7.5% in the EU suggesting that geopolitical and supply chain conditions are driving inflation at a rate faster than finance leaders can keep up.

Gaffney says the pace of inflation is a key area to watch in an Irish context. “There are some solid fundamentals in terms of industry and the workforce in Ireland which make the renewed optimism from CFOs quite clear. However, our position as an island nation as well as the uncertainty of the Northern Ireland Protocol does open our supply chain up to a heightened level of risk. Higher prices for intermediate goods are the key concern for Irish CFOs, more so than the EU counterparts. That’s why it is so important for business to be prepared to be agile in actioning opportunities when they arise.”

Engagement with tax authorities

A fluid tax landscape continues to occupy the thoughts of Irish CFOs, with ‘tax controversy and Revenue audits’ by far the biggest tax-related consideration for Irish businesses over the next 12 months.

Niall Glynn, Partner, Deloitte Ireland, believes that the growing complexity of the tax audit landscape is driving this sentiment.

“Despite current and future global tax issues, such as OECD reforms and BEPS measures making many of the headlines, Irish CFOs are still most concerned by practices surrounding engagement with tax authorities and an increasingly complex auditing landscape.

“This is a trend which is set to continue, with the forecasted revenue and headcount growth noted in the survey likely to lead to more interventions from Irish tax authorities. It is more important than ever for firms to carry out a tax health check, to ensure that they are effectively managing their tax obligations and tax risk,” Glynn said.

John Kennedy
Award-winning editor John Kennedy is one of Ireland's most experienced business and technology journalists.