€138,814 per month and rising: The cost of doing business in Ireland

Small Firms Association warns that viable businesses will be lost due to rising costs

Companies with less than 50 employees have seen prices rise for transport, energy, labour costs, insurance, technology, banking and telecoms.

Viable businesses in Ireland may close due to their inability to absorb rapidly rising business costs the Small Firms Association (SFA) has warned.

As businesses and households struggle with rising inflation, particularly for energy, the trade body said small businesses are now caught between rising inputs and customers who are demanding value.

According to the SFA's 'Cost of Doing Business Report' published today, the average small business faces costs of €138,814 per month. The monthly cost for micro-businesses with less than 10 employees is €66,426 and for companies with less than 50 workers, it's €193,535.

The report found that wages and labour costs make up 82% of monthly business costs. Banking, at 5.6% is second highest, followed by transport and insurance at 5.1%.

According to the survey, a majority of businesses have seen prices rise for transport, energy, labour costs, insurance, technology, banking and telecoms. Energy costs, up 33% and transport costs, up 34% have seen the biggest increases in the last two years.

“Ireland’s micro and small enterprises are facing cost challenges in every area of business be it labour, transport, insurance, banking, and utility costs,” SFA Director Sven Spollen-Behrens said. 

“Many operate in low-margin environments, making it difficult for them to absorb cost increases and demand for value makes it impossible for many to pass the increase onto customers.

“At a time of high inflation and no end in rising input prices, notably energy prices, the SFA is concerned that this may lead to viable enterprises closing due to their inability to absorb rising business costs. To avoid this and safeguard our domestically owned businesses, Budget 2023 must provide certainty on costs and maintaining competitiveness.”

The survey also found that half of all businesses with fewer than 50 employees are currently managing debt. Bank loans (63%), other financing loans (28%), and tax debt (22%) are the three biggest forms of debt for businesses. 

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The average debt for micro and small businesses is €80,903, lowest for micro firms at €56,774 and highest for small businesses at €107,149.

For small firms with rental or lease costs, more than half (55%) have had a rent increase or have been approached by their landlord about a need to increase rent. Small enterprises are under pressure to increase employee wages (56%), provide additional employee benefits (26%), and more remote working supports (18%).

In their pre-budget submission, the SFA wants the minimum wage to be maintained to prevent wage inflation and the postponement of the phased introduction of the living wage.

The SFA said recent Government policies have caused some concern to businesses, such as pension auto-enrolment, the living wage, the right to request remote working  policy and statutory sick pay. 

“Whilst many of these additions to the so-called Social Wage have merit on their own terms, these policies will make the business landscape more difficult in the coming months,” the SFA said in its submission.

“With indicators suggesting a difficult winter ahead, the SFA will remain committed to helping small business, as they attempt to manage the current challenges the economy is facing, with the Russian invasion of Ukraine and inflation,” Spollen-Behrens concluded.