Online lender Linked Finance says that Irish SMEs continue to pesevere even in spite the rising inflation and global conflict like Russia’s unprovoked war with Ukraine.
The periodic Linked Finance SME Confidence Index states that:
- 82% of businesses report performance better or in line with expectation in H1
- 66% of businesses report higher or same profitability compared to last year
- Business Optimism up slightly to 62 in Q2, after sharp decline in Q1
- 42% of SMEs are charging higher prices to offset inflationary pressures
- Retail businesses, micro-SMEs and exporter are most impacted by challenges
Linked Finance adds that their survey shows that 44% of SMEs cited better performance or much better than expected, 38% the same, and just 18% of SMEs say performance is worse than expected.
Looking towards the second half of the year, 62% expect performance to be better than the first half, and 66% of businesses report higher or same operating profits in Q2 2022 compared to the same period last year.
Overall the Business Optimism Index score1 was up slightly to 62 (out of 100) in the quarter, having dipped by 7 points from 68 to 61 between Q4 2021 and Q1 2022.
Price pressures driven by inflation do pose a challenge, with 42% of companies charging higher prices in Q2 2022, an increase from 39% of respondents in Q1 2022, and up from 23% in Q2 2021.
Inflation in Ireland hit 9.1% in July, and SMEs are looking to recover their higher input costs by increasing prices, with only one in three (30%) of SMEs reporting lower profits – this means higher prices for their customers.
Linked Finance notes that the Central Bank of Ireland indicates that households anticipate average inflation of 10% over the next year.
The Index findings suggest the recovery is coming slower to micro-SMEs (1-3 employees). These businesses report the lowest level of increase in operational profits compared to peers. 25% of micro-SME report higher profits, compared to 38% for transitional SMEs (4 to 9 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.
From a sectoral perspective, the Retail & Wholesale sector 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 recover higher input costs, with 64% increasing prices in the quarter versus 42% for all businesses.
Niall O’Grady, CEO of Linked Finance, issued the following statement on the economic environment:
“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. 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.”
Linked Finance is a market;lace lender with more than 3,200 loans to Irish SMEs.
In Spite of Inflation, Global Conflict, Irish SMEs Resilient – Says Linked Finance Republished from Source https://www.crowdfundinsider.com/2022/09/195446-in-spite-of-inflation-global-conflict-irish-smes-resilient-says-linked-finance/ via https://www.crowdfundinsider.com/feed/