Business confidence among food and agri firms slumps to five-year low

Over 50% of participants in a new report said rising costs of raw materials are the biggest threat to growth.

Staff shortages also continue to put businesses under pressure, said Ifac.

Business confidence among small Irish food and agri firms falls to a five-year low, according to food consultancy group Ifac.

Inflation, high salary expectations and Brexit have contributed to this dive in optimism, reveals the group’s latest report.

“One of the biggest challenges is rising input costs and for many to maintain margins this means implementing challenging price increases,” said David Leydon, head of food and agribusiness at Ifac.

Over half of the participants in Ifac’s research said rising costs of raw materials are the biggest threat to growth, while the majority of businesses are examining ways to cut costs and plan on increasing price. The cost of stock management has also risen dramatically because of disrupted supply chains, said Ifac.

Many businesses have tried to access bank finance in the past 12 months to help ease the burden of these cost pressures and 90% were successful. However, the European Central Bank’s latest interest rate hike could impact company finances as borrowing costs go up.

Staff shortages also continue to put businesses under pressure. Nearly 70% of participants have experienced difficulty when recruiting for the fifth consecutive year, citing availability of skills as the main reason why businesses are struggling to hire.

Some firms have stopped planning for the future as succession strategies have fallen down the list of priorities.

Half of the respondents said there is no interest from the next generation on taking over a family business while other business owners said they have not given any thought to the future of their company after they leave it.

“This is a tough time for Irish food and agribusiness SMEs following a global pandemic,” said Mr Leydon.

The drop in confidence comes after a market rebound in optimism levels in 2021 to a four-year high, said Ifac. The latest report showed that the Irish food industry can be resilient when facing challenges, as 82% of companies have maintained or increased their turnover in the past 12 months.

Many companies are managing the current headwinds by taking cost-saving steps, implementing price increases, managing contracts with both buyers and suppliers and actively focusing on cash flow management.

The participants in the report were either owners, managers, or at C-Suite level in the Irish food and agribusiness industry.

Ifac is made up of accountants and financial advisers providing specialist advice to the farming, food and agribusiness community since 1975. It is not to be confused with the budgetary watchdog of the same name.

It is a co-operative-owned, professional services firm operating from over 30 locations across Ireland, with over 450 people serving 20,000 clients nationwide. Ifac is Ireland’s ninth-largest accountancy firm by turnover and largest by the number of clients.