Growing business confidence of Munster firms tempered by rising costs

Almost a quarter of Munster firms have had to write off bad debt worth an average of €20,378 since the pandemic began

The majority of businesses in the region (76%) say they are either confident or very confident about their business prospects into 2022, with 46% identifying new customers as a top area for growth. File photo. Brian Arthur

The majority of businesses in Munster say they are confident about their business prospects for the remainder of the year and into 2022, a new survey has found.

The study was conducted by financial services firm Bibby of 200 Irish SME owners and decision-makers across the manufacturing, construction, wholesale, transport and services sectors.

The majority of businesses in the region (76%) say they are either confident or very confident about their business prospects into 2022, with 46% identifying new customers as a top area for growth.

The 43% of Munster SMEs considering mergers or management buyouts is significantly above other regions compared to 20% in Connaught, 37% in Leinster and 40% in Ulster. 

Despite the growing optimism, key fiscal and operational challenges still remain for Munster’s SMEs. 24% of these businesses had to write off bad debt worth an average of €20,378 since the pandemic began while it is taking 41% of Munster companies between three and four weeks to get paid.

A fifth of Munster businesses say they will need to renegotiate rates with suppliers and customers compared with 32% in Leinster and 16% in Connaught. A fifth also need cashflow support more now than before the pandemic while 30% of SMEs in Munster are concerned over rising business costs.

"SMEs generally are showing significant resilience after such a turbulent few months, and are remaining positive despite the challenges that still lie ahead," Stephen McCarthy, Head of Business Development at Bibby said.

"Our new report shows there is genuine light at the end of the tunnel both for businesses and the economy. The time has come to begin to move forward with confidence."

Nationally, managing cashflow and accessing working capital is a key consideration for SMEs moving forward. In addition, almost four out of 10 (38%) SME’s nationally say they will require additional funding into 2022 as they look beyond the pandemic and return to growth.

The pandemic has also offered businesses an opportunity to reflect, with some entrepreneurs and business owners deciding it’s time to restructure and refocus. Over a third of businesses (36%) say they are considering merger and acquisition opportunities in the coming months, while one in 10 (9%) SME owners are considering a management buy-in, rising to 19% for wholesale and 33% for transportation businesses. 

When it comes to funding transactions, SMEs owners consider private equity, business loans and invoice finance as the top three ways to finance merger or acquisition activity.

"As businesses recover and get back on their feet, it's concerning that a third say their greatest challenge is rising business costs, while just under a quarter say they need cashflow support more than ever before," Mr McCarthy said.

"As a result, the private and public sectors need to remain focused on providing any required financial support to enable SMEs to do what they do best - drive employment, boost output, and fulfil consumer demand."

The survey was carried out in late September of businesses which had an average annual turnover of €3.2m.