Grant Thornton survey finds housing, transport, energy and labour pressures reshaping outlook for Irish medium-sized businesses.
Irish mid-sized businesses are increasingly concerned that weaknesses in national infrastructure and rising operating costs are limiting their ability to grow, according to the latest Grant Thornton International Business Report.
The quarterly study, which surveys 10,000 mid-market firms across 28 countries including 102 in Ireland, shows that 66% of Irish respondents now view infrastructure challenges in housing, transport and utilities as a significant constraint on growth.
“Confidence among Irish businesses is clearly under pressure, reflected by a perfect storm of structural and inflationary challenges that have been building over time”
Business leaders also point to mounting pressures from energy and labour costs, alongside persistent skills shortages.
Energy and labour costs mount
Concerns about energy costs have intensified markedly. At the end of 2024, 27% of Irish firms identified energy prices as a constraint on growth. In the most recent survey, that figure has risen to 51%, reflecting ongoing volatility in global energy markets and its impact on operating margins.
Labour costs are following a similar trajectory. One year ago, 27% of firms cited employment costs as a challenge. That has since increased to 43%, as wage inflation and competition for talent continue to shape staffing decisions across the economy. Almost half of businesses surveyed, 49%, also identified the availability of skilled workers as a negative factor, continuing an upward trend from the previous quarter.
These combined pressures are feeding through into business expectations. At the start of 2025, four in five Irish companies anticipated an increase in profitability over the following 12 months. The latest report shows that just over half, 51%, now expect profits to rise over the year ahead.
Expectations around pay growth have softened in tandem. Three quarters of firms surveyed previously planned to increase salaries, but that figure has declined to 64%. Export ambitions are also subdued, with only 18% of respondents forecasting growth in overseas sales in the coming 12 months.
Martin Shanahan, Global Head of Industry at Grant Thornton, said the findings highlight the cumulative effect of long-standing challenges on business confidence.
“Confidence among Irish businesses is clearly under pressure, reflected by a perfect storm of structural and inflationary challenges that have been building over time,” he said. “Infrastructure deficits across housing, transport and utilities are now acting as a tangible constraint on growth, while the sharp rise in energy costs over the past year has added a further layer of uncertainty for many firms.”
Shanahan noted that the survey was conducted before the escalation of conflict involving Iran, developments which he said have since added complexity to the trading environment for Irish companies.
“These are not short-term issues, they go to the heart of Ireland’s competitiveness. Even more concerning in this respect is that the latest research was undertaken prior to the conflict in Iran and the aftereffects that Irish businesses are having to grapple with now.
“Labour costs and skills shortages are making it more difficult for companies to expand. Ireland has long benefited from a strong talent proposition, but the latest IBR findings underline the need for continued investment in skills development and producing a pipeline of talent with the right skillsets from our education system to sustain that advantage.
“What is particularly striking from our latest study is the shift in sentiment around profitability and growth. Attitudes have shifted significantly over the past 12 months, with fewer firms anticipating profit increases, lower appetite for salary expansion, and subdued export outlooks.
“While the resilience of this cohort of companies should not be underestimated, these results point to the need for a renewed focus on competitiveness, infrastructure delivery and cost management to support sustainable business growth in the period ahead,” Shanahan said.
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