Irish SMEs remain "resilient" in the face of rising inflation and the wider effects of the war in Ukraine, according to Linked Finance's SME Confidence Index.
The research, conducted for the P2P lending platform by Behaviours & Attitudes, shows that 82% of businesses feel they performed better than or in line with expectations in the first half of the year.
Some 44% of the 361 business owners/managers nationwide who were questioned for the survey between 14 July and 3 August described performance as better or much better than expected, while 38% said the same as expected, and 18% worse than expected.
For the second half of the year, 62% expect their business to perform better than during the first half, and 66% believe they will report the same or higher operating profits in the final six months of the year when compared to the same period of 2021.
Overall the business optimism index, which asks businesses to express their optimism on a scale of 1-10, rose slightly to 62 out of 100 during the second quarter, having dipped from 68 to 61 during Q1.
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Some 42% of companies raised their prices in the second quarter, up from 39% in the first quarter, during the time Russia's invasion of Ukraine began, and higher than the 23% who did similar on Q2 2021.
Only 30% of SMEs reported lower profits, suggesting success in passing on input costs to consumers.
“Irish SMEs have shown themselves to be resilient in the face of the ongoing challenges of rising inflation and the economic ramifications of the war in Ukraine," said Niall O'Grady, CEO of Linked Finance.
"The survey shows SMEs demonstrating a strong ability to weather the current storm with improving levels of activity, increasing operational profits, and a positive outlook for the rest of the year.
The major challenge for businesses, in particular the micro-SMEs and those operating in the retail sector, is to find ways to manage the bite of surging input costs, a problem that is likely to get harder during the winter period when use of expensive energy will rise.
"We’re also seeing some divergence between the experience of SMEs selling within Ireland and those focussed on export, with exporters less optimistic about the outlook and starting to find the pressures of Brexit and rocketing shipping costs potentially outweighing buoyant demand.”
Similar to previous surveys, the results suggest recovery is coming slower to micro-SMEs with one to three employers, with such businesses reporting the lowest level of increase in operational profits compared to peers.
A quarter (25%) of micro-SME report higher profits, compared to 38% for transitional SMEs (four to nine employees) and 48% for mid/large SMEs (10+ employees).
Micro businesses also report significantly lower future optimism, with just 38% anticipating a higher performance in Q3 versus 47% for large SMEs.
In terms of sectoral optimism, retail and wholesale has been the slowest to recover, with just 31% of businesses reporting stronger performance in Q2.
Retailers also appear to be trying the hardest to recovery higher input costs, with 64% increasing prices in the quarter versus 42% for all businesses.
Exporters are also coming under pressure with a declining overall confidence index score of 58 as a result of heightened shopping costs and growing Brexit-related bureaucracy, compared to 62 among indigenous businesses.
Photo: Niall O'Grady.
