Business optimism remains steady, but micro-SMEs are outpaced by larger businesses
Irish SME businesses have demonstrated remarkable resilience in the face of inflation, rising interest rates, and geopolitical events, according to the latest survey by Linked Finance, Ireland’s leading alternative lender.
Optimism among businesses in Ireland’s SME sector remains steady, with the Linked Finance SME Confidence Index standing at 62.95 (scored out of 100) in Q1 2024, compared to 62.43 in Q4 2023. The Index, based on research conducted by IPSOS B&A, shows that from Q1 2022 to Q1 2024, business optimism levels have fluctuated within a narrow range, rising from 61.1 in Q1 2022 to 62.95 in Q1 2024, peaking at 64.13 in Q3 2023.
This sustained optimism is reflected in improved projections for profitability and job creation. 73% of respondents reported profits the same or better than the previous quarter, a significant increase from 60% in Q4 2023. Furthermore, 76% of companies expect trading activity in the next quarter to remain the same or improve, though levels have yet to return to their pre-COVID highs. While year-on-year comparisons show a plateauing in price rises, with 48% of businesses citing higher prices in 2024, a slight decrease from 50% in 2023.
For the labour market, employment growth has also seen a positive shift, with fewer companies expecting to cut jobs and more planning to increase headcount compared to last year.
Despite these forward-looking positive indicators, current business activity has dipped into negative territory for the first time since the onset of COVID-19. Only 33% of businesses expect higher activity in Q2 2024, down from 35% in 2023 and 38% in 2022.
Another concern is the weaker trading experience of micro-enterprises (those with 1-3 employees). Only 28% of respondents from micro-enterprises expect business activity to increase in the coming quarter, compared to 51% of larger businesses (10+ employees). This is also reflected in profitability, with only 26% of micro-SMEs experiencing higher operational profit in 2023, compared to 40% of larger SMEs.
Yet, the overall positive forward-looking sentiment is evident in company planning. 25% of businesses indicate they are exploring government grants or subsidies in 2024. Of these, 51% are focusing on energy grants, 29% on employment subsidies, and 28% on sustainability and ESG-related grants.
Niall O’Grady, CEO of Linked Finance, said: “The resilience of Irish SMEs during economic challenges is commendable. While optimism remains steady and forward projections are positive, the dip in current business activity highlights the need for continued support and adaptive strategies. From a broader perspective, the majority of Irish SMEs are steady, but there are sectors struggling to recover quickly from the past three years’ turbulence, where the COVID-19 pandemic was followed by inflation and interest rate pressures.
As businesses face additional costs, including the introduction of new sick pay, parents’ leave entitlements, and the imminent auto-enrolment system, micro-businesses, often family-run enterprises with 1-3 staff, will need support through this period.
Linked Finance is committed to empowering SMEs by providing them with the necessary resources and financial solutions to navigate these uncertain times and thrive.”
Linked Finance, one of Ireland’s leading alternative lending platforms, recently passed the milestone of lending over €300m since its launch. Notable companies that have raised funding with Linked Finance in the past include the Rolling Donut, Kokoro Sushi Bento, Murphy’s Ice Cream, and the Irish Fairy Door Company.
