Brian Keegan: Businesses to grapple with host of issues this year

Over the past several months, businesses have been uneasy about the general outlook for 2023 as borne out by sentiment surveys like the Bank of Ireland Pulse survey. 

Nevertheless, when asked, individual business leaders will admit they have never been busier and that chief among the problems is hiring additional staff. 

It is almost as if some kind of commercial phoney war is going on.

While it would be foolish to make too many predictions for 2023, it is possible to identify likelihoods which we will have to factor in over the coming months. 

It is likely that eurozone interest rates will get higher, perhaps by as much as half a percentage point in the next few months. 

Yet again, Ireland is the victim of a mismatch between where our economy is at, and the outlook for the larger economies such as France and Germany within the eurozone.

In the early 2000s, when arguably we needed higher interest rates to help cool the domestic property boom, a higher rate profile did not suit the eurozone as a whole. 

Now the position is reversed. 

Ireland tops the economic growth forecasts by the Organisation for Cooperation and Development. 

Higher borrowing costs to meet the growing domestic market demand for housing and infrastructure are inappropriate at present for the Irish economy.

Another likelihood is that the tedious legacy overhang of Brexit for this island will finally be removed via some form of politically acceptable resolution of the Northern Ireland protocol. 

While this will make little immediate difference to Irish trading prospects, any normalisation of the relationship with Britain, which remains a key trading partner, improves the outlook for everyone. 

The North is not the only region dealing with post-Brexit uncertainty. 

The future relationship between the EU and Gibraltar still has to be regularised, though the main point of contention there concerns the movement of people rather than the movement of goods.

Large companies will be contending with a new tax regime, in the form of the 15% minimum effective rate of tax which is due to be introduced across the EU during 2023. 

The key point here is that the 15% rate only applies to the very largest, typically though not exclusively, multinational industries. 

Broadly speaking, companies with a group turnover of less than €750m per annum will continue to pay their taxes at 12.5%. 

Large companies will also have to gear up to report on their environmental impact under the Corporate Sustainability Reporting Directive to be ready for reporting on the 2024 financial year. 

Both of these developments will increase the cost of doing business for the multinational sector.

It is likely that in 2023, all businesses, irrespective of size, will continue to find their plans constrained by staff shortages. 

Recruitment is already being exacerbated by the housing crisis, where employment offers are being turned down not because of the wages or conditions on offer but because the employee cannot afford to relocate. 

The housing crisis is now an economic as well as social blight.

Lastly, and perhaps more positively, we should not underestimate the impact of the cost-of-living supports announced by the Government in the budget in late September. 

The first payments are already being made under the €1.25bn Temporary Business Energy Support Scheme. 

At the time of writing, 7,000 businesses had registered for the scheme. 

This number seems low, which points to another likelihood — your business may qualify. Businesses which have not registered should really go about the application process via the Revenue website.

• Brian Keegan is director of public policy at Chartered Accountants Ireland