SMEs Less Optimistic as 84% Report Rising Costs, Profitability Declines
A new survey reveals SMEs are less optimistic, with only a quarter reporting increased profit in the last six months. Eighty-four percent faced rising costs, while 71% are less optimistic about the economy. Geopolitical uncertainty and staff costs are key challenges, and existing government supports are deemed ineffective by many.
Small and medium businesses (SMEs) are less optimistic about their outlook than six months ago, according to a new survey by Chartered Accountants Ireland (CAI) and GRID Finance. Only a quarter of SMEs reported increased profit over the last six months, the lowest since the inaugural CAI survey in April last year.
Eighty-four percent of SMEs reported rising business costs in the past six months, with only 14% stable and 3% lower. Seventy-one percent are less optimistic about the economic environment than six months ago, up from 54% in October. Despite declining profitability, demand for borrowing remains largely unchanged.
Geopolitical uncertainty (48%) and its impact on costs and supply chains is the biggest challenge for SMEs over the next 12 months. Staff costs (38%) and rising costs (54%) for competitiveness were also major concerns. One-third of small businesses cited energy costs and security as having the greatest impact, following global fuel shortages in April.
Cróna Clohisey, CAI director, noted a worrying trend of intensifying cost pressures and declining profitability. She stated that 29% of businesses expect to be worse off, compared to 28% expecting to be better off. SMEs prioritize reducing regulatory and compliance burdens (54%) and simplifying EU regulatory requirements. Clohisey highlighted that existing government supports are not effectively reaching businesses, with 47% needing energy cost supports but less than one in ten applying, and 50% finding them ineffective.