Uncertainty over Brexit hits Irish businesses hard
Firms are postponing investment and cutting back on hiring as Brexit continues to take a toll on planning for the future while wafer-thin profit margins for small firms has increased their vulnerability to a sudden shock, according to a new study by InterTradeIreland.
The cross-border business body's latest survey showed that a third of large companies reported that Brexit was having a negative impact on investment decisions and it noted that 89pc of companies have not increased or decreased staff in the past quarter.
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It is a striking statistic given the strong gains in employment registered recently in the State, where the economy is booming.
"While the wider economy on the island remains resilient, there are further signs of difficulties generated by the uncertainty around Brexit. Businesses are cautious, and this could potentially impact on growth prospects," said Aidan Gough, InterTradeIreland's Strategy and Policy Director.
Economic growth in the State was 6.7pc last year and a record number of people are now in work, while even Britain recorded better than expected first-quarter growth numbers and has seen strong jobs growth, although economists say that some of the UK economy's out-performance has been due to stockpiling.
Uncertainty over Brexit looks set to continue as talks between the UK government and the opposition Labour Party to forge a consensus on an exit agreement collapsed last week.
In addition, British Prime Minister Theresa May's position is looking more uncertain after losses in recent local elections and with some opinion polls showing the Conservatives could sink to sixth place in the forthcoming European Parliament elections.
Brexit has already hit businesses that trade across the Border, according to InterTradeIreland which says that among cross-border traders, only 18pc reported an increase in sales in the first quarter of this year, compared to 26pc in the previous quarter, and that 44pc of these companies said they had been negatively impacted by Brexit.
Forecasts from the Central Bank of Ireland and the Department of Finance show that a "hard Brexit" in which the UK leaves the European Union without a deal could reduce economic growth here to as little a one percent in the 12 months following its departure.
Smaller businesses in InterTradeIreland's survey are especially vulnerable, with 34pc of micro firms recording profit margins of less than 5pc, a margin that could be wiped out by moves in the value of the pound against the euro in the event of a hard Brexit as sterling fell 10pc in the year after the referendum.
InterTradeIreland's survey is based on the views of more than 750 business managers across the Republic and Northern Ireland.