Optimism around the outlook for the Irish economy among Ireland’s medium-sized firms for over the next 12 months has fallen sharply to the lowest level since the onset of the covid pandemic, as they grapple with increasing global uncertainty and rising cost pressures, a new report from Grant Thornton has found.
It shows that, as of the fourth quarter of 2025, 54% of firms surveyed felt optimistic about the state of the Irish economy over the coming year which is a sharp decline from the 81% recorded during the first quarter of 2025.
By contrast, global business optimism currently stands at 74%, representing a slight 2% year-on-year decline, which the company said underscores the more pronounced challenges faced by Irish businesses.
Confidence in projected revenue growth in the next year among Irish businesses also shrank from 79% to 59% compared to the previous three months. Similarly, expectations for increasing headcount over the next 12 months have also weakened, dropping from 59% to 46% over the same period.
Geopolitical disruption was cited by 29% as a key constraint on growth — up from 16% at the start of 2025.
Global head of industry at Grant Thornton Martin Shanahan said the fall in confidence among Irish businesses “reflects a broader shift in sentiment we are seeing across many markets as global volatility intensifies”.
Cost pressures are also seen as undermining confidence, with the number of firms citing labour costs as a key constraint on their business jumping from 27% at the end of March last year, to 40% in the final quarter of the year.
Mr Shanahan added the challenges facing Irish firms were “compounded by domestic pressures”, particularly rising energy and labour costs and the growing difficulty in hiring skilled talent.
“While this has led to more cautious expectations around revenue growth, hiring and pay, it is also driving a sharper focus on productivity, investment in technology and building skills internally. Firms are responding to global uncertainty by focusing on those levers that are within their direct control,” he said.
Grant Thornton said this has had a knock-on impact, with the number of companies expecting to increase salaries over the next 12 months falling from 77% to 54%.
More than half of firms, 54%, identified skills shortages as a barrier to growth. Regulation and red tape was cited by 35% as a barrier to growth.
In terms of where companies are going to cut spending, just 41% of firms said they were planning on increasing investment in their brands and marketing — down from 65%. Only 38% expect to increase their investment in sustainable initiatives over the next 12 months.
While plans to invest in certain areas may be impacted, just over half, 54%, of the study’s Irish participants expect to increase IT spending over the next year.
As part of the report, Grant Thornton surveyed 14,000 mid-market businesses globally across 35 countries — including 102 in Ireland.
