Linked Finance: Irish SMEs positive despite economic upheaval
Irish peer-to-peer lending platform Linked Finance has found that small- and medium-sized businesses (SMEs) in the country remain resilient in the face of inflation stress and the impact of the war in Ukraine.
The Linked Finance SME Confidence Index, based on research conducted by Behaviours & Attitudes, has revealed that 82 per cent of businesses felt they performed better or line with expectations in the first half of the year.
Meanwhile, 44 per cent cited performance as better or much better than expected, 38 per cent said it was the same, and just 18 per cent of SMEs said performance is worse than expected.
Read more: Two thirds of SMEs seeking finance to grow
Looking out to the second half of the year, 62 per cent expect performance to be better than the first half, and 66 per cent report higher, or the same, operating profits in the second quarter of 2022, compared to the same period last year.
Overall, the Business Optimism Index score was up slightly to 62 (out of 100) in the quarter, having dipped by seven points from 68 to 61 between the fourth quarter of 2021 and the first quarter of 2022.
Inflation hit 9.1 per cent in July, according to the Central Statistics Office (CSO), and SMEs in Ireland are looking to recover their higher input costs by increasing prices.
Higher pricing in the second quarter of 2022 was reported by 42 per cent of companies, an increase from 39 per cent of respondents in the first quarter of 2022, and up from 23 per cent in the second quarter of 2021.
Read more: Low confidence among London businesses despite investment plans
Only one in three SMEs reported lower profits, implying an ability to maintain margins and pass on cost increases to customers.
Like previous results, the latest findings suggest recovery is slower for micro-SMEs (those with one to three employees). These businesses report the lowest level of increase in operational profits compared to peers.
A quarter of micro-SMEs report higher profits, compared to 38 per cent for transitional SMEs (four to nine employees) and 48 per cent for mid/large SMEs (10+ employees).
Micro businesses also report significantly lower future optimism, with just 38 per cent anticipating a higher performance in the third quarter versus 47 per cent for large SMEs.
“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,” said Niall O’Grady (pictured), chief executive of Linked Finance.
“We’re also seeing some divergence between the experience of SMEs selling within Ireland and those focused 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 has provided more than 3,200 loans to Irish SMEs, amounting to more than €199m (£172.2m).
Read more: FSB urges new PM to help SMEs as business confidence falls