58% of Irish SME businesses are confident they can meet new wage requirements
Nearly six out of ten (58%) Irish SME businesses are confident they can meet all new mandatory wage hikes and supplementary business expenses linked to staff expenditures in 2024, according to the latest Linked Finance SME Confidence Index, based on research conducted by B&A.
On 1 January 2024, businesses saw a 12% surge in the national minimum wage, climbing from €11.30 to €12.70 per hour placing fresh challenges and expenses on to SME businesses. In addition, SMEs are confronting additional hurdles including the introduction of new sick pay and parents’ leave entitlements.
In addition to the mandatory wage pressures, 37% of SME businesses expect to implement wage increases the coming year, with only 2% of businesses citing the need to reduce staff numbers to manage the increased wage costs.
Over the past 12 months, 92% of businesses have maintained or increased staff levels, showing the resilience and demand within the labour market in Ireland. This comes as the latest CSO unemployment rate for February fell to 4.2% from the rate of 4.5% recorded in January 2024, and from 4.1% in February 2023, as the Irish labour market remains tight.
Overall, the Business Optimism Index rose year-on-year from 60.1 in Q4 2022 to 62.4 in Q4 2023, but it is down from 64.13 in Q3 2023. Yet, 70% of SME businesses anticipate improved or stable results in Q1 2024 when compared with Q1 2023. This suggests the decline in optimism is more likely a recalibration rather than negativity, signalling a more cautious outlook among SMEs as they go into 2024.
Niall O’Grady, CEO of Linked Finance, said: “The confidence exhibited by Irish SMEs in meeting new mandatory requirements at a time of continued economic challenges is a testament to their resilience and adaptability. As businesses continue to navigate challenges and pursue growth opportunities, strategic foresight and proactive measures will be crucial in ensuring long-term success.”
Nearly half of all SME businesses (49%) implemented a price increase in Q4 2023. While there are some tentative signs of a plateauing, there is large difference in the businesses willing to push prices onto customers, as 63% of larger SMEs (those with 10+ employees) increased prices in Q4 2024, compared with only 39% of micro-SMEs (those with 1-3 employees).
According to the flash estimate of the Harmonised Index of Consumer Prices (HICP) from the CSO, the inflation rate slowed to 2.3% in February 2024, yet businesses continue to feel the pinch, especially smaller SME businesses who may be experiencing heightened market competition and the imperative to maintain close customer relationships.
On a positive, 59% of SMEs reported either higher or the same level of operational profits in Q4 2023 compared to 12-months ago, suggesting that businesses are effectively managing their operations and remaining competitive in the market.
Niall continued: “SMEs play a pivotal role in driving innovation and sustaining economic growth. At Linked Finance we are dedicated to empowering these businesses through accessible and efficient funding solutions. As SMEs navigate today’s competitive economic landscape the research shows positivity and resilience among SMEs, and with almost €300m in capital loans already provided to SMEs across Ireland, Linked Finance stands ready to continue supporting SMEs on their journey.”
