SME sentiment across the island of Ireland held steady in the second quarter as modest growth was evidenced along with rising costs and tighter margins.

Two in five (39%) businesses reported growth, according to the latest InterTradeIreland All Island Business Monitor, the highest level in more than two years. A further half of firms remain stable, and 7% experienced decline.

While restrained, growth is broad-based and characterised by stability and slight increases rather than rapid expansion.

The vast majority of firms remain in profit, but InterTradeIreland's longitudinal data show the share reporting higher margins has eased compared with 2024, with some now operating closer to break even.

Six in 10 businesses cited costs as their most significant headwind, with over a third reporting increases of more than 10% over the past two years in areas such as wages, energy and insurance.

In response, nearly half of businesses report they have raised prices in the last six months, and three in ten expect to do so again.

A further quarter of companies are tackling the challenge of rising overheads by taking action relating to energy and operational efficiencies to cut costs.

InterTradeIreland said this highlights an opportunity for more businesses to explore available supports to help boost competitiveness.

Martin Robinson, director of strategy at InterTradeIreland, said that 750 SMEs were surveyed for the the study. He pointed to "unsurprising" pressures on profitability, "given the persistent cost challenges businesses are facing."

"Resilience and modest growth define the moment, but persistent costs and tighter margins are weighing on firms. In this context, cross-border trade can play a vital role in strengthening business resilience," he added.

A fifth of businesses said global politics and trade uncertainty were an issue in Q2 when the EU-US trade deal was still to be agreed, and such sentiment has fallen since it was announcement.

One in 10 businesses across the island feel exposed to the impact of US tariffs. Overall, 13% of businesses said they would value support or guidance in relation to evaluating or managing trade-related risks.

Minister for Enterprise Peter Burke said: "Small and medium-sized enterprises are the backbone of our economy, and I am committed to supporting their growth and resilience.

"To that end, my Department recently established the Cost of Business Advisory Forum to examine and reduce the cost of doing business. A range of supports—including those provided by InterTradeIreland - are available to help your business become more efficient and competitive.

"In addition, the Government has launched a new Market Diversification Action Plan to assist businesses in adapting to an evolving trade environment."

Dr Caoimhe Archibald, Northern Ireland's Economy Minister, said the study highlights the resilience of the business community through much publicised uncertainty.

"The challenges are real, and I don’t underestimate them – but I am determined to ensure our businesses have the support they need to thrive. My tariffs working group also continues to meet regularly to deal with ongoing trade issues.

"InterTradeIreland’s Trade Hub is also a valuable resource for companies eager to grow across the island. We will continue to back our businesses and help build a thriving, regionally balanced economy known for its enterprising spirit."

(Pic: Getty Images)