Over half of businesses are on a “stable footing”, according to new research by InterTradeIreland.
Its latest all-island business monitor suggests that 2023 is off to a smoother start for many companies.
36% of businesses said they have reported growth in the first three months of the year, while a third of businesses said they are optimistic about sales increases over the next six months.
Growth was more prevalent among larger companies, the findings show.
44% of big firms are growing, compared to just 14% of small companies.
Energy and rising costs are still the top concerns for companies, but this research suggests the impact is starting to lessen.
“There is some easing of inflationary pressures and less volatility in the energy markets,” said Martin Robinson, InterTradeIreland’s Director of Strategy.
However, today’s data shows the vast majority of businesses are not optimistic about any decline in input costs.
80% of firms expect to be hit by further rises in the next 12 months.
Meanwhile, finding the right talent continues to be a challenges, impacting three in ten companies surveyed.
“This pressure is particularly acute for the largest firms, with a massive 50 per cent citing difficulty in sourcing the right skills,” said Mr Robinson.
“Recruitment has been a consistent issue for SMEs but until recently has largely been overshadowed by rising energy and costs. However, a skills squeeze is a headwind that could constrain growth,” he added.
92% of businesses have experienced rising costs in the past 12 months, with two thirds passing these costs on to their customers.
But Mr Robinson said this strategy is not sustainable in the long term.
“It is concerning that half of firms report that they have not yet tried to put sufficient measures in place to combat costs or resolve skills issues.
“Firms need to adopt digitalisation and sustainability practices that enable them to reduce costs and their reliance on skills in what is currently a constrained labour market,” he added.