Rising labour costs, inflation and higher interest rates have dented optimism around the outlook for the economy among mid-sized businesses here, according to research from Grant Thornton.
There was a five percentage point drop in economic optimism levels to 73%, the latest International Business Report concluded.
The report captures insights from over 10,000 mid-market business across 28 economies with optimism levels in Ireland remaining relatively buoyant compared to other markets.
Optimism levels averaged at 54% across the eurozone and at 59% in the UK.
Around three in five Irish companies surveyed said they expected their profits and revenues to increase over the coming 12 months.
A third of companies said labour costs had acted as a constraint on their ability to expand with just over two thirds - 68% - saying they planned to hike pay in the year, reflecting the tight labour market and cost of living related wage demands.
Only two in five companies said they planned to take on more staff this year. That compares to half of companies who said they would do so in the last round of research.
On a positive note, the proportion of Irish companies citing energy costs as a burden on their business fell from 53% to 32% in the latest International Business Report.
A record level of Irish participants also said they planned to invest in technology over the next 12 months, with almost seven in ten (67%) companies surveyed flagging their plans to spend in this area.
"Our latest research highlights that medium sized Irish businesses continue to navigate inflationary pressures and a tight labour market," Patrick Dillon, , Grant Thornton Ireland Head of Deal Advisory said of the latest report.
"Despite the challenges, the overall mood of the business community remains positive, with many companies seeing 2024 as an opportunity to deliver increased revenues and profitability."
Grant Thornton Ireland's chief economist Andrew Webb pointed to the challenges relating to labour and skills shortages which, together with cost of living challenges, had put further upward pressure on pay.
"These rising costs have a negative knock-on effect, with a reduced number of firms planning to increase their headcount over the next 12 months," he said.
"As a result, more firms will look to AI to help improve operational efficiencies and enable existing staff to undertake more strategic work, relieving some of the pressures on constrained workforces in the process," he added.
