KBC Bank Ireland and Chartered Accountants Ireland have today released their latest Business Sentiment Survey for Spring 2016.

It shows Irish business sentiment weakened notably in the first quarter of 2016 from the nine year high recorded in the previous quarter.

This pull-back stemmed from some easing in the pace of output growth and, more importantly, from a notably increased level of uncertainty which weighed on the mood of the corporate sector in Ireland.

While the previous reading was the highest in the nine years of the survey, the latest is the weakest since the autumn of 2013. Recent years have seen the sentiment index follow a reasonably similar path to the trend in Irish GDP.

This comparison emphasises that the drop in the sentiment index hints at a drop in the pace of Irish economic growth of late as distinct from a dramatic weakening in economic conditions. Nonetheless, the index implies there has been a notable easing in the forward momentum of the Irish economy in early 2016.

While roughly 60% of respondents indicated there had been no change to their businesses, a substantial 34% noted an increased downside risk to their business of late while just 3% suggested that downside risks had eased.

Irish based firms were then asked to indicate what they saw as the biggest risk facing their businesses at present. Weaker global demand emerged as the most significant threat and was cited by 49% of respondents.

Just under half of the companies surveyed are unsure or not focussed on the potential impact of Brexit on their businesses but 46% are now focussed on the risks it may pose to them while 10% are considering possible opportunities it might present.

However, the survey hints at a lack of readiness on the part of Irish firms in the event that the UK leaves the EU, perhaps reflecting the many uncertainties involved. Only 26% of companies say they have taken action such as seeking advice or examining alternative business relationships and only 5% of firms have adjusted their output or hiring in response to the possibility of Brexit.

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