Optimism within the Irish SME sector is at its highest level for over a year - according to the Linked Finance SME Confidence Index. 

Large SMEs, which employ between 10 and 250 employees, are the most upbeat, reporting a positivity rate of more than 72% on the index on their current outlook, while micro-SMEs (1-3 employees) were the least optimistic, with a score of just over 61%.

The service sector showed the strongest positivity, at almost 66%, while there was marginally more positivity among Dublin SMEs (65%) compared to similar businesses outside the capital (62%).

A degree of optimism has finally returned to micro businesses - a particularly welcome development.  

Business activity for the last quarter is trending downwards year-on-year across all SME sectors surveyed.

Year-on-year trading activity is down 3% according to the index.

The most recent CSO figures show that SMEs comprise 99.8% of businesses in Ireland and employ 2.3 million people here.

There is a strong divergence between mid/large SME businesses, which are doing very well, and smaller businesses that are still struggling. 

Large businesses have improved the most.

Almost half of all large SMEs (48%) have seen increased business activity in the last 12 months - with only 15% reporting reduced activity - while 42% of mid-sized SMEs (4-9 people) are ahead in terms of trading over the same period.

Two in five micro-businesses (1-3 people) surveyed are reporting reduced business activity year-on-year. 

Export businesses have been feeling the pinch over the past two years now, while indigenous only businesses are struggling a little.

Q2 v Q3 shows relatively little change in these areas in 2024.

While there may be a juxtaposition in SME trading activity down - with optimism up - the near flat-lining of inflation, a “Budget bounce” and a stable domestic political environment all feed positively into sentiment.

Increased business costs – particularly energy - have ultimately been passed onto the consumer, with this in turn impacting spending and trading activity.

However, if we are to look back to sentiment in Q3 2022 (59%), there has been a near 4% increase in positivity across the Irish SME sector. 

While micro-sized businesses have a marginally negative view of short-term prospects (-3%), they are substantially more positive looking forward into the next quarter, than they were this time last year.

Mid-sized businesses expect very similar activity levels to last year, while larger businesses are particularly bullish and showing the highest level of optimism since 2021.

Indigenous SMEs are showing a strong improvement from last year in terms of positive outlook to year-end.

Exporters are more positive compared to last year (when there was a sharp increase in those expecting lower levels of activity) but are still just in negative territory (- 2%). 

Niall O’Grady, CEO of Linked Finance said: “Businesses based in Dublin in particular are driving most of the positivity, but outside Dublin, businesses are more positive compared to last year.

“It is encouraging to see this uplift in optimism, particularly given the ongoing instability in the geo-political environment, and high costs that SMEs continue to face.”