One in three SMEs forced to absorb higher energy costs, one third pass them on to customers

Energy cost is now 'biggest challenge' to Irish SMEs, says report

Half of Irish small and medium businesses say energy costs are their biggest challenge, with one in three SMEs saying they are being forced to absorb higher costs into their margins.

Half of Irish small and medium businesses say energy costs are their biggest challenge, with one in three SMEs saying they are being forced to absorb higher costs into their margins.

A report published by on Tuesday finds that higher energy costs are having an increasing effect on the business outlook in Ireland. The InterTradeIreland All-island Business monitor reported that 36% of Irish SMEs report they are absorbing the costs into their business, with 29% passing the price rise onto customers, with 33% taking neither course of action. 

Some 18% of business are investing in energy efficiency, with 7% actively trying to reduce energy use by changing products, services, or operating practices. Only 4% are investing in renewables and energy storage.

Nevertheless, most businesses report they are stable in the second quarter of 2026 (60%), with 35% reporting growth. Six out of 10 say they remain profitable.  “The All-Island Business Monitor shows that SMEs remain resilient, with most firms profitable and stable," said Anne-Marie Murphy, assistant director of Strategy at InterTradeIreland.  “However, looking beyond quarter-to-quarter fluctuations, the four-quarter analysis indicates momentum slowing, with growth, sales, profitability, and hiring intentions having edged downward over the past year. Stability remains the order of the day.”

The quarterly report found that profit margin uncertainty has increased substantially. In Q2 2026, nearly half (47%) of respondents said they were unsure of their profit margin - when the same question was asked in 2019 before the covid shock, just one in 10 firms said they were unsure of their profit margin.  “Profit margin visibility is not being helped by the uncertainty and volatility many businesses are having to deal with," said Ms Murphy. "Firms are operating in an environment where key costs such as labour, energy, and overheads have been on the rise. Although 61% of firms are profitable, just 8% say they are very profitable, while over a third are absorbing rising energy costs rather than passing them on to customers.” 

Energy prices in Ireland have risen by almost 12% in the past year, data from the Central Statistics Office (CSO) shows, with the continuing crisis in the Middle East putting pressure on wholesale energy costs. Meanwhile the final report of the Cost of Business Advisory Forum - which gathered input from across business sectors - published last month identified energy pricing as the biggest driver of business costs in Ireland, cited as the biggest non-pay-related cost. The Cost of Business Advisory Forum report recommended examining the scale and impact of non-wholesale 'pass through' costs put on electricity bills, with a focus on SME and domestic customers.

InterTradeIreland’s Business Monitor is based on the views of more than 750 business managers across Ireland. The survey found a large number of businesses are focusing on building financial resilience and investing in staff to retain key employees and skills. 

The report also said there was signficant potential for many SMEs in developing cross-border trade in Ireland.