A new survey from professional services firm Azets Ireland shows that Irish mid-market, owner-managed and family-owned businesses rate their economic prospects at 5.5 out of 10, down from 6.5 last November.
But it also found that Irish businesses remain among the most optimistic in Northern Europe, ranking second overall and ahead of the UK, Norway and Finland.
Azets Ireland said that trade tariffs and economic uncertainty top the list of business concerns, with a risk score of 6.4 out of 10.
This was followed by geopolitical instability at 6.2, which it said highlighed the impact of global volatility on Irish firms.
Regulatory compliance and talent recruitment and retention also rank highly, each scoring 5.7 out of 10.
Meanwhile, 41% of firms here report that higher labour costs are their main concern, amid the forthcoming introduction of pension auto-enrolment, wage growth and other employment changes.
The barometer reveals that firms in the construction sector are the most optimistic, scoring their economic prospects at 6.6 out of 10, which the company said reflects the continued high demand for homebuilding here.
There is a correlation between business size and optimism, with large businesses (6.1 out of 10) more optimistic about their future than smaller peers. Micro businesses with nine employees or less have the lowest levels (4.8 out of 10) of confidence about their future economic outlook.
Today’s barometer also reveals a decline in focus on sustainability among Irish firms.
In the previous survey in November 2024, sustainability scored 6.6 out of 10 in terms of strategic priority, but six months later this dropped to 6.1 out of 10.
Azets said this suggests that immediate economic pressures may be pushing longer-term environmental priorities down the business agenda.
Neil Hughes, CEO of Azets Ireland, said that Irish business leaders are steering their organisations through one of the most uncertain periods in recent memory – where trade tariffs, geopolitical risks and economic uncertainty increasing.
Mr Hughes said that what is particularly concerning is the strain being felt by micro-businesses who employ less than ten people.
“These firms report the lowest confidence in both their financial health and future prospects. They are the backbone of local economies across Ireland, yet rising labour costs and the growing cost of doing business are putting them under real pressure. These businesses need greater support if they are to survive and thrive in the months ahead,” he stated.
He said that despite the challenges ahead, it is reassuring to see that Irish firms are entering this period of volatility from a position of relative financial strength, demonstrating their capacity to successfully overcome the obstacles ahead.
“In fact, Irish businesses rank second only to Denmark in financial performance across Northern Europe – evidence of the resilience that exists across the business community,” he added.
