SME optimism in Ireland is at its highest level for four years, according to a survey by SME lender Linked Finance and Ipsos B&A.

Confidence among Irish small and medium-sized businesses is now at the same level as in the second half of 2021, as the country was starting to come out of the Covid pandemic but prior to the war in Ukraine.

Business optimism now stands at 67% for all SMEs, rising to 77% among larger small firms with 10-250 employees.

The last quarter of 2024 ended on a particularly strong note, with a year-on-year average increase of 10% in terms of business activity.

Businesses based in Dublin are more bullish in their outlook for this quarter, compared to those located in the other regions.

The proportion of companies reporting lower business levels has steadily decreased since the pandemic, with larger and Dublin-based businesses and exporters largely driving the improvement while micro businesses (1-3 employees) have been neutral.

Post-election and a new cabinet formation, there is a high degree of confidence that the Irish government’s current economic policies will support SME growth in 2025, with half of businesses saying they have some confidence in the Fianna Fáil-Fine Gael coalition, supported by Independents. 

During the fourth quarter of 2024, positivity levels rose to their strongest level for a year-and-a-half, with 80% expecting business activity to be higher or the same.

The survey fieldwork took place in January, prior to Donald Trump's inauguration as US President, so concerns may be reflected around tariffs and the global economy in the next quarterly survey.

“It’s great to see business optimism, outlook and activity among Irish SMEs at such a high level," said Niall O'Grady, CEO of Linked Finance.

"We can also see this reflected in demands for loans at Linked Finance, as SMEs continue to grow. As ever, not all sectors are recovering equally, with retail and wholesale struggling, but the overall picture is more positive. 

"Geopolitical factors may cause some short-term uncertainty, but our SME sector has faced down challenges before and come out fighting.”

Almost six in 10 businesses were charging the same prices in Q4 as they were during the same period in 2023, while the number of SMEs charging higher prices year-on-year dropped almost 10% in Q4.

In terms of profitability, micro businesses remain in negative territory, with 36% reporting lower operational profits year-on-year.

However, in the case of mid-large companies, six in 10 reported higher operational profits year-on-year.

Businesses with a Dublin base are driving the improvement in profitability and quarter-on-quarter, overall profitability is at its best in two years.

Some 96% of business surveyed reported that employment levels were the same or higher in Q4, while the proportion of businesses reducing staff numbers was at its lowest level in the history of the tracker.

Job creation is being driven largely by mid-large businesses, but one in five transitional businesses (4-9 employees) recruited more employees last year, while 97% of micro-businesses surveyed had the same number of staff year-on-year.

There are signs, however, that retail and wholesale firms are struggling somewhat, with one in eight businesses reporting that employment levels are lower compared to last year.

The industry and services sectors are performing strongly, for the most part.

“It’s important to see that prices are stabilising after a period of increases fuelled by higher costs and inputs,” O’Grady said.

“Employment levels are very strong as reflected in some SMEs challenge to land new employees and facilitate growth plans. The sector though has come through a tough few years and has emerged resilient and optimistic.” 

Photo: Niall O'Grady. (Pic: File)