Darkening gloom envelops Irish small firms

Confidence levels amongst Irish SMEs have slumped to a record low, although firms based in Munster are the most optimistic, according to a survey.

Darkening gloom envelops Irish small firms

Confidence levels amongst Irish SMEs have slumped to a record low, although firms based in Munster are the most optimistic, according to a survey. Latest findings from the Small Firms Association (SFA) show only 45% of member SMEs feel the business environment is improving.

That is down from 59% at the end of 2018 and marks the largest slump on record. However, the mood is slightly more upbeat among Munster SMEs, with 55% seeing an improvement. While 50% of SMEs, nationally, see their own business performance improving, 60% of Munster SMEs do.

The difference in outlook is partially explained by a higher number of food and drink and professional services firms in Munster responding to the SFA survey than elsewhere in the country. The national slump in positivity is set against a backdrop of rising Brexit and trade uncertainty, continuing business cost concerns and a marked slowdown in manufacturing.

Data last week showed Irish manufacturing production inched ahead in June, but contracted solidly in terms of new business orders, while business confidence levels dropped to a near three-year low.

“Since the beginning of the year small businesses have faced rolling Brexit uncertainty, increasing tax, wage levels and additional regulatory burden.

“These mounting challenges are weighing heavy on small business owners and making it difficult for them to maintain competitiveness, expand and invest currently,” said SFA director Sven Spollen-Behrens.

The fundamentals of the Irish economy and forecasts remain strong for the remainder of 2019. However, Brexit continues to pose one of the biggest challenges faced by small businesses in years

The SFA has called for the establishment of a nationwide small business strategy. Mr Spollen-Behrens said a “clear focus” is needed “on the 98% of businesses employing half the private sector workforce, which are the lifeblood of towns and villages around the country.

“It is time for a plan to boost the number and performance of small businesses,” he said.

The most healthy finding within the SFA’s research is that over 70% of SMEs, nationwide, intend to invest in their business in the next 12 months, with half intending to boost staff numbers.

However, Mr Spollen-Behrens struck a note of caution.

“Ongoing capacity constraints in the labour market could challenge their plans to recruit. In order to fill vacancies and retain employees, where the performance of the business and the individual allows, survey respondents expect wage rates to increase over the coming months.

“In the long-run wage increases will only be sustainable if we manage to reduce business costs or improve productivity among small business. Therefore, we need to boost confidence amongst our small business owners and make it easier for them to compete,” he said.

The NTMA has initiated an external review of its SME lending arm, the Strategic Banking Corporation of Ireland (SBCI).

New loans drawn down through the SBCI slumped by 68% last year to the lowest level since it was established in 2015, as small companies became cautious about taking on new debt.

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