52% of Irish SME businesses have raised prices to counteract inflation squeeze
There is a continued trend of price hikes across the business landscape as 52% of Irish SME businesses have taken the step to raise their prices, according to the latest Linked Finance SME Confidence Index, based on research conducted by Behaviours & Attitudes.
According to the Central Statistics Office (CSO), Consumer Price Index was 4.6% for July, down from 4.8% in June; and 9.6% in July 2022. Initial steps taken by businesses to tackle the inflation squeeze have focused on price increases, but as Ireland’s rate of inflation slows down, businesses are looking to boost earnings.
The survey found 54% of businesses have taken measures beyond pricing to mitigate the effects of inflation. The measures include: 34% of businesses have cut their operational costs, 19% have pursued product diversification, and 12% have introduced discounts and promotions to navigate the challenging economic environment.
Despite tightness, a positive sign is evident as fewer businesses anticipate a decline in activity for the upcoming quarter, with a projected uptick in business activity for Q4 2023. The Index shows that 83% of businesses expect to perform better or in line with projected expectations compared with the same period last year.
“Notwithstanding inflation and a price squeeze on businesses and consumers, there is evidence of the resilience that defines Ireland’s SME sector and reflect its adaptability in the face of changing economic currents,” comments Niall O’Grady, CEO of Linked Finance. “The ability for businesses to innovative and put solutions in place such as product diversification and promotional campaigns, underscores the evolving strategies adopted by businesses as they navigate through a phase of tempered enthusiasm.”
Overall, the Q2 2023 SME Index sees a notable levelling off in business optimism. The latest Index showed Business Optimism at a level of 61.90 (out of 100), only slightly up from 61.62 a year ago, despite a large drop in inflation during the same period last year.
In a surprising turn, the retail sector has demonstrated remarkable performance, defying expectations. This quarter, retail businesses have seen significant gains in their business activity. Recent findings from the ESRI also found that strong improvements in retail sales continues to drive growth in the Irish economy.
However, it is noteworthy that 75% of Retail & Wholesale businesses have increased their prices, reflecting the overarching trend of price adjustments in response to inflationary pressures.
“While we are seeing increased business activity in segments of the economy and business continue to pass higher prices onto consumers, it hasn’t fully translated into higher profits and earnings. This highlight the pressure that businesses are under due to external factors and influences,” continues O’Grady.
“While challenges remain, the anticipation of improved business activity for Q4 2023 and the potential for job growth in regional markets provide hope for SMEs.”
For more information about the Linked Finance SME Index and to access the full report, please visit https://www.linkedfinance.com/.
