Apr 8, 2024

Just 41pc of the Irish companies surveyed expect to recruit. Stock image Donal O'Donovan Today at 03:30 Rising labour costs in Ireland are putting employers off hiring but business leaders here are more optimistic than their EU or UK peers. Professional services firm Grant Thornton’s International Business Report (IBR) shows that businesses’ optimism about the outlook of Ireland’s economy for the next 12 months has slipped slightly – falling five points to 73pc. But it is running ahead of the mood elsewhere in Europe – where the eurozone average is 54pc and in the UK it is 59pc. The IBR tracks attitudes among 10,000 mid-market businesses across 28 economies including Ireland. The decline in sentiment dip here is thought to be linked to ongoing challenges posed by increased labour costs, inflation and higher interest rates. Inflation has calmed significantly since the start of this year and ­interest rates are expected to start reducing from June. However, labour costs remain a ­major challenge in many sectors as a result of a combination of factors. That includes the effects of a ­number of direct interventions by the Government to lift the minimum wage and implement significant non-pay changes around Statutory Sick Pay schemes as well as the upcoming pensions auto-enrolment regime – implementation of which will fall on employers. At the same time, the historically low rate of unemployment and rising cost of living have also driven wage demands higher across much of the economy, ­resulting in higher pay being secured by workers. The increased labour costs are dampening plans for headcount expansion, but are not impacting growth ambitions, the Grant Thornton report said. Only four in 10 (41pc) of the Irish ­companies surveyed expect to recruit compared to just over half in the last round of research. The research suggests business will invest in technology to increase output. The research shows that more Irish medium-sized businesses plan to ramp up artificial intelligence (AI) investment. A third of companies surveyed saw investment in AI as a means of delivering cost savings, with over half investing in the technology to improve internal workflows. ​Grant Thornton Ireland chief economist Andrew Webb said the International Business Report data highlights the tight labour market as an ongoing challenge in Ireland. “Employers are increasingly paying a premium to recruit and retain skilled talent, and this has been exasperated by the cost-of-living crisis, with workers seeing their purchasing power impacted. “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,” the chief economist said. The overall results show almost three-fifths of Irish companies surveyed expect profits (59pc) and revenues (56pc) to increase over the coming 12 months. However, there was also a spike in Irish companies citing economic uncertainty as a factor in holding their business back, jumping from 20pc in the previous round of research to 33pc, according to the latest data.