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The Irish Economy Continues To Show Resilience

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Slow and Steady Wins the Race

As the risks of an imminent ‘Hard Brexit’ began to fade in the final quarter of last year, recent surveys by the ACCA (Association of Chartered Certified Accountants) and the Institute of Management Accountants suggest that the Irish economy began to show signs of slow defiance and resilience against the Brexit who continued to cry wolf.

Where previous months had seen patterns of slowing down and an evident atmosphere of unease and uncertainty about Ireland’s financial future post-Brexit, the last quarter of the year took a slight upward turn which is expected to continue into the first quarter of 2020 at least. It was also found that global economic sentiment has begun to grow at a slower pace than our own Irish sentiment. Chief economist with the ACCA Michael Taylor has said that:

“The Irish economy is buoyant against a global economy facing a sharp slowdown in global trade.”

Many businesses are reported to have found renewed confidence after the low points early in the year towards the end of 2019. Naturally with Brexit talks due to pick up again this month it is hoped that Irish consumer confidence will not take such a heavy hit as previous as Taylor states:

“The year ahead will be crucial, notably as the UK and the EU negotiate a post-Brexit trade agreement – Ireland being the most exposed EU economy to the UK. […] It would be very positive if a free trade agreement was reached in what is a tight time scale.”

Naturally our proximity and trade reliance on our closest neighbours remains cause for concern in the weeks ahead with such an atmosphere of uncertainty and a lack of clarity as to our position in this exit, but as Irish businesses have been given time to prepare it is hoped that we can weather this storm as well as is possible. A recent estimate by Copenhagen Economics suggests that in the event of a no deal Brexit our economy could take as much as an €18billion hit.

In the event of another Brexit extension, the Irish economy is expected to continue its slow growth of around 3% into 2020. As we learned from the tortoise and the hare, sometimes slow and steady does win the race.

Should you have any concerns or queries on any business or financial matters, please don’t hesitate to contact us here at EcovisDCA where we are always happy to help.

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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY

 

2019 Economic Crystal Ball Gazing

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Hello and welcome to 2019! We here at EcovisDCA hope that all of our clients, colleagues and friends had a wonderful festive season and are well-rested and ready to face the working year ahead. With 2019 just getting ready to kick off, we have decided to begin the year with a little run down of the most prominent predictions for the financial year ahead. Chief Economist for EY, Professor Neil Gibson has given his predictions for the year even amidst all of the Brexit uncertainty surrounding the year, and it will be interesting to see what comes to pass.

  1. GDP Growth to rise by 4.2%

According to Dr. Gibson it is likely that 2019 will see GDP growth remain strong. Rising employment levels and increasing wages should all contribute to this growth which he estimates could reach 4.2% this year.

  1. Employment Growth to rise by 2.7%

In welcome news for our island’s continued economic recovery, it is predicted that employment rates will continue to rise in 2019. According to EY’s studies, Dublin is now the most popular relocation location for firms needing to move in full or part out of Britain due to Brexit

  1. Wage Growth to rise by 3.6%

Following on from the previous, it is predicted that wage growth will remain strong in 2019.

  1. Consumer Spending to rise by 2.9%

It is predicted that consumer spending will grow steadily in 2019, with Brexit making Ireland a very attractive trade location.

  1. Migration to Increase the Population by 40,000

In perhaps one of the more unexpected predictions, it is presumed that Brexit tensions and a growing labour market may create migration, as Ireland becomes a more attractive prospect for companies and workers alike. The risk here is that our ever increasing rent prices may postpone some of the influx.

  1. Inflation to Increase by 1.8%

It is predicted that in 2019 inflation may increase, as prices continue to push upwards.

  1. House Prices to Increase by 4%

An unwelcome prediction for many who already feel pressured by the house prices in Ireland. It is predicted that migration following Brexit may mean that this will be largely felt in rental prices.

  1. Construction Inflation to rise by 7.5%

As we have spoken about many times, there is an increasing demand for housing in Ireland and rising prices reflect this. It is predicted that the cost of construction will continue to rise in the year ahead.

  1. Housing Completions to top 25,000

Demand for housing is set to rise in 2019 and this is set to place a further push on the construction sector.

  1. Tax Collected from Businesses and Tax Payers will rise by 4.2%

This is likely to be a simpler process due to PAYE modernisation, and it is said that a strong labour market and strong economic growth should see an increase in collected tax going forward.

  1. Government to Spend more than Collected in Tax by 0.1% of GDP

According to Dr. Gibson, “Ireland looks set to enjoy its first positive general government balance in a decade.” As the pressure to spend increases, it is thought that the balance may tip in a more positive direction this year.

  1. Unemployment will reduce further to 4.9%

Unemployment was an issue that plagued Ireland during the economic downturn, and it is predicted that growth will cause unemployment levels to drop even further, perhaps even down to the levels seen at the peak of the financial boom.
It remains to be seen whether these predictions will come to fruition, and it will be interesting to check back in on them next year. We ourselves are very much looking forward to the year ahead and as always, should you have any concerns, queries or require further information on these or any other business and financial matters please don’t hesitate to contact us we are always available to help.

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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY

Is The Economy Overheating?

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Too Much of a Good Thing

When emerging blinking from the darkness of an economic crisis, such as the one Ireland experienced in the not so distant past, it becomes important to latch on to the positive steps in the right direction many of which we have spoken about in the past with new funding options being made available as well as a general increase in consumer confidence. Amidst all this good news there have of course arisen some issues such as the exponential rise in house prices and the general cost of living leaving many to question whether or not Ireland’s recovery will ever be felt in the average wallet. It’s important not to get too cocky or confident in the midst of a recovery as we have seen in the past than anything can happen with no notice.

These fears were somewhat verified this week as the Central Bank warned Ireland not to become complacent about recovery. Mark Cassidy, the Central Bank’s director of economics and statistics has warned that despite all signs pointing to continued strong growth and plenty of jobs being created, that there are many factors at play in the background that could possibly leave Ireland at risk of seriously overheating. Overheating refers to when growth begins to overtake ability to meet demand, something that we are already seeing some evidence of in our housing markets. From the possibility of a hard Brexit which we have spoken at length about to the recently discussed changes in international tax practises, there are many reasons to be wary and plenty of issues which threaten to place Ireland in an economically vulnerable state.

The Central Bank have issued several warnings in recent months that the risk of an external crisis causing issues for the Irish economy was high, but recently have announced that the possibility of an internal crisis is on the rise as Ireland begins to overheat. Last week, Central Bank officials postulated that it may be necessary for taxes to be increase in order to cool down our rapidly overheating economy.

The risk remains that if Ireland continues to recover at the same speed and manages to reach its full capacity for growth, it is of course a positive, but unless demand in various sectors begins to increase in conjunction with this, the risk of overheating and creating some form of downturn remains high.

Should you have any queries or require further information on this or any other business or financial matter please don’t hesitate to contact us here at EcovisDCA’s new head office, where as always we will be delighted to help.

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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY

 

Signs of continued Economic Improvement?

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Hope is the thing with Euros.

Ever since the economic downturn, good news must be taken with a pinch of salt in terms of finances and the economy. Whilst we are somewhat used to the deluge of negative stories of ever increasing house prices as well as the general cost of living, we must also celebrate the good news, the positive stories and the numbers that inspire hope for the future of our small island’s finances. Particularly as more Brexit talks loom on the immediate horizon and there is a certain nervous and uncertain energy associated with the future, it is crucial to accept and celebrate whatever small victories are available to us at this time.

This month it was revealed that consumer spending has risen, which marks 14 months of continual growth for Ireland. Whilst the rise may not seem exponential, it is the fact that growth has been continuous for over a year that is important here for a country recovering from a severe crisis. This is vital as such sustained growth feeds into other aspects of the countries growth through fuelling job creation and boosting morale. The Visa Irish Consumer Spending Index suggests that payments of all kinds increased by almost 4% in April in comparison with the same time the previous year. This rise has been particularly evident in the area of online spending, which continues to soar.

This large spike in growth was in fact encouraged by March’s Storm Emma, which briefly dampened consumer activity and lead to a larger spike in April than expected. The unexpected snow storm meant that March saw a rise of only 1.5%. Some retailers have reported a decline in sales of up to 30% which has led to a lot of ground needing to be made up in the remaining months of the year for these retailers, many of which had to close their doors for a number of days due to the adverse weather conditions.

Whilst this increase is of course a move in the right direction for spending in Ireland, it is advisable to remain cautious as always as Visa have themselves reported that this level of growth “remains relatively subdued” perhaps due to the level of ground that needs to be made up following Storm Emma’s damaging effects. Cautiously optimistic may be the appropriate outlook for the coming months.

Should you require any help, advice or guidance on any financial or business matters, please don’t hesitate to get in touch with us here at EcovisDCA, where we will be happy to support you in getting your business to the next level.

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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY

CLEANING THE BREXIT WOUNDS

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We have spoken before about the issues and opportunities that lay ahead for the Irish economy in the wake of Britain’s somewhat shocking Brexit vote results. In the weeks since the vote there has been a continuous atmosphere of uncertainty about all things economic both here and across the water.

 

Goodbody’s recent health check for the third quarter of 2016 shows that Ireland’s economic growth having just about managed to get its feet moving, is due to slow in the next 18 months. This is to be expected however as the view on the Irish economic status becomes increasingly cautious due to our tight links with Britain. It is expected that Brexit will trigger some form of a recession in the UK, primarily related to the uncertainty of the situation and lower spending habits as a result. When or how this would hit Ireland remains to be seen but it is undeniable that it will have a knock on effect to our small island with Goodbody predicting that our domestic demand will fall to 4.2% in 2016 and then lower again to 3.7% in 2017. Goodbody’s chief economist Dermot O’Leary has stated that;

“An imminent UK recession, triggered by Brexit-related uncertainty, is likely to take the gloss off a robust Irish economic performance.”

 

It has also been reported this week that some Irish banks are quite vulnerable to a possible downturn with HSBC claiming that they are enter a period of heightened uncertainty as tax profits fall. Despite making significant progress, Irish banks remain vulnerable to any future financial downturns. Recently, stress tests were conducted throughout Europe in order to ascertain how banks would survive a recession. These tests caused some concern for the Irish economic situation as both AIB and Bank of Ireland fared poorly in these tests as the second and fourth worst performers respectively.

 

Again these seem like grim tidings but it is important to remain open minded as analysts have suggested that weak asset quality and recent losses on bad loans might give good reasoning behind these poor performances and that the exercise did not take into account progressions in the last year and that our high level of overall debt skews these results unfavourably against our banks.

 

There was however an unexpected silver lining in Ireland’s economic situation which came in the form of Ireland’s valiant efforts in the Euros 2016 tournament. The tournament has reportedly send grocery sales skyrocketing with stores such as Supervalu and Dunnes recording a 3.4% and a 6.5% rise in value of sales during the latest period, whilst bargain stores such as Dealz also saw a great surge in sales.

 

It is hoped that the weakened sterling will not cause floods of shoppers to cross the border for bargains as we have seen happen before, and that although there is plenty of uncertainty in the air and the reports are laced with dread, that the Irish economy can level out and perhaps even benefit from this uncertainty as we have seen recently that smaller retailers can flourish in these times.

 

Should you require any help, advice or guidance on your own business or financial matters please don’t hesitate to contact us here at DCA Accountants where we are always more than happy to help.

Manager Index, showing a new push towards caution ahead of the Brexit vote.

Whilst the future and coming negotiations between Britain and the EU will be crucial to Irish interests, we will be reliant on the EU side to maintain the best interests of Ireland. This puts us in an interesting position as much of our business is reliant on the UK. It is hoped that in particular, the Common Travel Area agreement that is in place between the UK and Ireland remains in place as new borders would cause chaos for Irish people working in the UK, as well as making our trade routes increasingly difficult.

It will certainly be a long road of uncertainty ahead for Irish and British businesses, but there is still hope on the horizon and whilst business may not resume as normal for all, new pathways will be forged in the wake of Brexit.

As always if you require any guidance, advice or assistance with your own business or financial matters please don’t hesitate to contact us here at DCA Accountants, let us be the one constant for your business in this time of change.

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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY