Irish micro-businesses are suffering under severe pressure, with profitability for many largely out of reach, research conducted by IPSOS B&A suggests.
The latest Linked Finance SME Confidence Index noted no positive profitability metrics amongst micro businesses since 2018, with 30% not optimistic about trade in the next three months, tipping them into negative territory overall for the first time since the covid pandemic.
In addition, indigenous businesses focused on the Irish market are also feeling the pinch, according to the survey, with minimum wage legislation, inflation and pandemic-linked debt warehousing impacting these two cohorts more than others.
However, the large category of SME businesses is performing particularly well with 69% reporting better results in the last 12 months. Exporters are also doing much better in both trade and confidence terms year-on-year, with an increase of 11 percentage points on the sentiment index during the same period.
Overall, the majority of Irish SME businesses are heading into the second half of 2024 with optimism, despite unstable geo-political headwinds and instability in global stock markets, Linked Finance said.
Overall optimism among businesses in Ireland’s SME sector has seen positive growth year-over-year, with the Confidence Index standing at 62.51 out of 100 between April and June 2024, compared to 61.9 in the same three-month period last year.
However, Linked Finance warned the Index reveals a “widening gap” between larger and smaller businesses in Ireland’s SME sector, as challenging economic conditions continue to divide the market.
It noted that micro-enterprises and those in the Retail & Wholesale sector face growing pressures on multiple fronts, with both sectors showing the lowest optimism levels going into the second half of 2024.
Despite this, the index showed that trends towards higher prices which have been evident since the end of the pandemic have now levelled off.
Businesses also appear more likely to maintain rather than increase prices despite ongoing pressures on profitability, Linked Finance said.
However, this applies mainly to mid-sized SMEs, as opposed to micro-businesses, who have had to keep increasing their prices to cover higher costs.
“The steady confidence levels seen over the past 12 months among Irish SMEs reflect a sector that is becoming increasingly adept at navigating economic uncertainties,” said Niall O’Grady, CEO of Linked Finance.
“However, smaller, domestic-focused SMEs are more vulnerable to inflationary pressures and are still having to pass on pricing increases as a means of protecting their profitability.”
The Confidence Index has also revealed that Irish SMEs had a clear view of which parties they believe will best serve their interests in the next government. Overall, Fine Gael was deemed the party that would best serve the current issues of Irish SMEs in the next government, followed by Fianna Fáil and then Sinn Féin.
However, Linked Finance noted that Fianna Fáil was more popular amongst larger SME businesses than Fine Gael.
The survey results indicate that together, Fianna Fáil and Fine Gael are favoured by more than 50% of the business surveys. However, almost one in four registered their support for ‘other,’ indicating a preference outside the six main political parties, suggesting a significant leaning towards Independents.
“The results from our survey highlight that SMEs are closely monitoring government actions, especially with a general election on the horizon,” Mr O’Grady continued.
“While the overall sentiment remains positive, it is crucial for government policies to continue supporting these enterprises.”