Linked Finance: SMEs charging customers more amid rising inflation

Small- and medium-sized enterprises (SMEs) have been warned against passing on rising costs to customers.

Research by Irish peer-to-peer lender Linked Finance has found that 30 per cent of SMEs charged higher prices during the third quarter of this year compared with 2020 as the rate of inflation continues to rise.

Inflationary pressures were particularly notable in larger SMEs, those with more than 10 employees, where 41 per cent charged higher prices, and also businesses in the retail and wholesale sector where 58 per cent increased prices.

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Despite rising costs, Irish businesses are feeling more optimistic, the research found.

The P2P lender’s business optimism index hit a score of 68.5 in the third quarter of 2021, up from 52.8 a year ago and close to the all-time high of 69.1 that was reached in 2018.

Niall O’Grady (pictured), chief executive of Linked Finance warned that while SMEs face challenges from their own rising input costs, they must be careful not to feed an inflationary spiral that could damage their own competitiveness and the economic recovery post lockdown.

“This quarter’s index shows that economic trends for the SME sector are positive, with strong current trading sentiment and future expectations improving. The biggest cause for concern is the accelerating pace of inflation,” O’Grady said.

“I’m old enough to remember the horrors of double-digit inflation in the 1980s and notwithstanding the need businesses have to protect margins as input costs rise, it’s also vital they don’t also not douse the rising consumer sentiment that is evident by feeding a dangerous inflationary spiral.”

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