Inflation adds pressure to staffing issues, leading to reduced spending

The majority of SMEs are spending more time on recruitment than they did pre-pandemic, according to a new survey by Ibec and BDO. Picture: Gareth Chaney/Collins

Small firms are struggling to find and retain staff as inflation pressures grow, a new survey showed.

A rise in demand for salary hikes is one of the leading concerns for Irish bosses at the moment as inflation continues to hit business margins.

“Some of those challenges, such as recruitment and retention of staff, have been concerning business leaders for some time. Others such as rising energy and commodity prices are new and need to be actively addressed,” said Michael Costello, managing partner of accountancy firm BDO Ireland.

The SME Sentiment Index survey was carried out by BDO and lobby group Ibec and included responses from 167 senior management workers in SME sector.

One of the findings of the survey was that the majority of SMEs are spending more time on recruitment than they did pre-pandemic.

“It’s clear from the results that the local and international business landscape for Irish SMEs is challenging and evolving fast,” said Mr Costello.

Over half of the businesspeople that took part in the survey said they are confident their company’s revenue will increase in the next 12 months, despite challenging market conditions.

The survey also showed 20% of respondents said revenue will stay the same and another 20% said it will decrease.

Ireland's inflation rate was 9.6% in July, according to Eurostat’s latest figures. As employees look for bigger salaries, they are also reducing their spending.

Overall spending in July fell 0.5%, representing the first decrease since January, according to AIB. 

Consumers spent more on certain sectors due to inflation pushing up prices. For example, spend on hotels increased by 13% while pubs and off-licences spend increased 11%.

All other sectors saw a decrease in spending, with airline travel seeing a decline of 8.5%.