The Small Firms Association has launched a new report on the costs involved in running an average small business in Ireland.

The Small Business in Ireland: Cost of Doing Business report is based on research by iReach Insights across 250 micro and small businesses.

The sectoral breakdown of the respondents was retail/hospitality 23%, food/drink 8%, services 31%, manufacturing 7%, ICT 4%, and other 27%.

Analysis from the report shows:

• The total average cost of doing business for all Small (20-49 employees) and Micro (<10 employees) firms is €138,800 per month. The average for Micro businesses is €66,430 and €193,540 for Small firms.

• On average labour costs amount to 82% of overall monthly business costs.

• Half of all businesses with under 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 SME businesses.

• The average debt for Micro firms is €57,000 and €107,000 for Small firms.

• 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%).

SFA director Sven Spollen-Behrens said micro and small enterprises are facing cost challenges in every area of business.

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“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,” he added.

“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.”

SFA Budget 2023 Priorities

• Maintain the National Minimum Wage rate in 2023.
• Postpone the phased introduction of the Living Wage (2024 to 2027).
• Reduce the general CGT rate to 20% to make investing in a business in Ireland more attractive.
• Send a signal of intent to serial entrepreneurs by radically improving the CGT Entrepreneurs’ Relief. Increase the lifetime limit for the relief to €3m immediately and to €15m over time.
• For the R&D Tax credit and widen the scope of what can contribute to the tax credit.
• Ensure the rebuilding of the Experience Economy by making the 9% rate of VAT permanent.
• Index the entry point to the higher rate of tax by  €3,200 in 2023 and to bring the entry point to the top rate of tax to €40,000.
• Commencement of Phase 3 of the Revenue Tax Warehousing Scheme from January 2023 must be kept under review.
• Implement the OECD recommendation to extend tax support through a form of SARP to new hires for SMEs and start-ups.
• Offer 100% capital allowances for small firms to invest in IT equipment and other home office expenditure to facilitate remote working.
• Reform commercial rates.
• Provide an additional €450m to drive low carbon investment in industry by scaling up and expanding industry supports.
• Ensure Accelerated Capital Allowances are in place for low carbon alternatives.
• Rethink the step down of the BEV vehicle BIK exemption.
• Introduce a dedicated seed funding programme to help small businesses adopt circular economy practices, design new circular products and services, and connect with other organisations to exploit asset sharing and reuse opportunities.

Spollen-Behrens stated that government has introduced and announced several policies that have caused some concern to businesses facing rising costs, such as pension auto enrolment, 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,” he said.

“Small business owners have consistently risen to the challenges presented by the ever-changing economic environment. Growth in employee headcount and Revenue statistics show that this perseverance is paying off.

“Nevertheless, it is important to remember that small firms are still in a vulnerable place, with unprecedented rising costs impacting their ability to grow and contribute to economic growth.”