Irish business leaders’ confidence on growth prospects for 2014 increases, remain cautious on deals and acquisitions
- No return to pre-crisis boom and bust, as corporates adopt ‘steady as she goes’ mentality
- Confidence in credit availability significantly lower in Ireland than other markets
Dublin: Monday 2nd June 2014: Irish corporate confidence is higher than at any time in recent years, while recognising that growth will be at slower rates compared to pre-crisis levels, according to EY’s 10th bi-annual Capital Confidence Barometer. The survey is based on 162 senior executives in Ireland and the UK.
64% of Irish and UK executives surveyed believe that the economy is resilient, with confidence in Ireland higher than the UK average, most likely reflecting the more recent improvement in the Irish economy.
Confidence in credit availability in Ireland is markedly lower than in the UK and other markets, reflecting businesses lingering concerns about their ability to access finance readily.
Adrian Browne, Head of Transaction Advisory Services for EY said: “Business leaders in Ireland have a greater level of confidence in the local economy than their counterparts in the UK, which is a significant turnaround from where we were even a few years ago. While confidence is increasing across the board, companies are increasingly looking to balance growth and efficiency in a low growth, volatile economy.”
While business leaders are optimistic for the year ahead, they are also not getting carried away, recognising that there will be both economic and political volatility on the path to growth.
Major risks to their businesses identified by corporates in both markets include political instability (31%); inability to effectively manage the tapering of the quantitative easing programme introduced by the Federal Reserve (23%); slower than anticipated growth in key emerging markets (22%).
Confidence in the Eurozone is surprisingly high overall, with less than one in five of those surveyed citing the pace of structural reforms in the Eurozone as a key risk. There was more concern exhibited in Ireland on this point.
55% of executives expect deal volumes to improve in the next 12% months. Irish companies in particular were optimistic about organic and inorganic investment and deal volumes. However, the lessons of the financial crisis are very much to the fore with 36% of those surveyed citing cost reduction as a major issue which has been elevated to the boardroom, as a result of shareholder activism.
Graham Reid, Partner and Head of Corporate Finance, EY Ireland added: “While the fundamentals for deal making are favourable, companies are increasingly aware of risk and it is clear that the lessons of the financial crisis have not been forgotten by Irish corporates. A continuing focus on cost reduction and operational efficiency remains and will not be forsaken despite improved economic conditions – companies have been rewarded for doing the right things during the recession and now this is engrained.
Growth is on the agenda for Irish corporates however and M&A is one of the tools for achieving this. Companies remain in the market for the right deals at the right time, with fewer but bigger bets on the table for assets that offer a clear and strategic rationale.”
The report also reveals that the top five destinations where Irish and UK corporates are most likely to invest are China, the United States, Singapore, UAE and Indonesia. Gaining share in new markets (product or geography) is cited as the primary focus of acquisition capital, while overpaying for an acquisition and unforeseen liabilities are the most significant contributors to deals that fall through, according to the report.