BUSINESS SENTIMENT IS on the up in Ireland – and that means that more firms are hiring too.

That is according to the summer 2013 business sentiment survey from KBC Bank Ireland / Chartered Accountants Ireland, which shows a gradual improvement in Irish business conditions that they say is leading firms to increase hiring.

However, the results contrast with recent GDP data, with the survey taking a broader picture of trends across the economy and its findings, pointing to a “gradual improvement in business conditions of late”.

Among the main findings of the survey are that Irish business activity strengthens in second quarter of 2013, and that business conditions may be “somewhat better” than implied by recent GDP data.

It also found:

• Business hiring stepped up, with layoffs notably lower
• An improvement in business activity expected to continue to build gradually in coming months
• A labour market turn is becoming evident: 25 per cent of firms feel outward migration is affecting their ability to fill vacancies
• Companies see markets growing somewhat faster than twelve months ago and are less focused on further cost reductions
• Credit concerns are not negligible, but lower than in Summer 2012

Small steps in a positive direction

Austin Hughes, chief economist of KBC Bank Ireland, said that in contrast to the GDP data, the summer 2013 survey suggests the Irish business climate is continuing to improve. He said that this was admittedly in small steps, “but still in a clearly positive direction”.

The survey looks at the Economy in a somewhat different way to national accounts data, comparing conditions across all sectors rather than trying to arrive at a summary numerical estimate of activity. Consequently, it presents a different and arguably more broadly representative picture of recent trends in Ireland.

According to Hughes, there are signs an upturn is being seen across a wider number of sectors and companies. He said that there is an increase in the number of firms signalling higher business volumes and a drop in the share of firms indicating lower business volumes. Hughes also said that these “modestly positive trends” are expected to continue in the next three months.

Pat Costello, Chief Executive, Chartered Accountants Ireland described the improvement in the employment element as “probably the most encouraging aspect of the summer survey”.

He said it showed there were notably fewer layoffs and some increased hiring in the past three months, and that in part, this reflects stronger conditions in domestic-focused firms “as these tend to be more employment intense”.

It also seems many companies may be playing ‘catch-up’ as they have been very cautious in their hiring in the past year or so, altering headcount only in response to clearly established needs rather than forward-looking plans.

Hughes said the summer survey “threw up some surprising response” in relation to the impact of inward and outward migration flows:

For most firms, this wasn’t a key issue at present but a sizeable 26 per cent said that outward migration was beginning to make it harder to fill vacancies. The survey isn’t suggesting such problems are widespread but it does imply that the Irish jobs market is turning and the ‘push ‘factor driving emigration may be waning.

Costello said that companies are reporting no dramatic changes in the business climate in the past twelve month.

Market growth is seen as more supportive of expansion than a year ago. So, companies have eased the focus on cost cutting. While constraints on credit on can’t be ignored, this seems to be a less important drag on demand for their output than twelve months ago.

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