Profits at private sector firms under pressure – AIB

Profits at Irish private sector firms are expected to come under pressure in the next 12 months, according to the latest AIB business activity report.

The profit outlook among the firms surveyed by AIB is at its lowest since October 2010.

It comes despite falling costs, particularly workforce related costs, as companies availed of the Government’s Temporary Wage Subsidy Scheme.

Non-staff costs are likely to soften in the year ahead with firms saying they expect to price aggressively to win business.

Despite that, optimism among firms is at its third lowest level since this series began in October 2009. 

The latest fall marks the fifth reduction in the past six surveys stretching back to October 2018. 

There was a brief respite in February as renewed optimism over a resolution to Brexit uncertainty following the decisive UK General Election. That was registered just before the Covid-19 crisis escalated in March. 

Today’s survey shows that the outlook for employment was at its weakest in a decade. 

“The impact of Covid has been extremely wide-reaching and the severity of that impact has varied greatly across different sectors,” Hilary Gormley, Head of Business Banking at AIB, said.
 
“Respondents highlighted concerns about profitability over the next 12 months, but the key focus for businesses in the short term is liquidity, and ensuring they are adequately resourced and are focused on managing their working capital as best they can,” she said. 

About one in 20 companies surveyed said they expected the recovery from the pandemic hit to take at least two years. 

The most common timescale of seven to 12 months was cited by just over a fifth of firms.

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