Financial strain impacting Irish businesses laid bare as costs increase hits 77 per cent of SMEs amid uncertainty fears
THE financial strain on Irish businesses has been laid bare as a survey has found costs have increased for almost 80 per cent of small and medium enterprises (SMEs) in the past six months.
And staff costs are the biggest financial challenge faced by these businesses, according to the first SME Business Sentiment Survey from Chartered Accountants Ireland and GRID Finance.
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The survey, which will now be repeated every six months, will measure and track the experiences, confidence and sentiment of a range of SMEs, including small accounting practices, doing business in Ireland today.
The inaugural study found that nearly three out of four (77 per cent) of respondents say business costs have increased in the past six months.
Staff costs are the biggest financial challenge affecting nearly two in five (37 per cent) SMEs surveyed.
Small practices were particularly challenged by staff costs - meaning cost of salaries and other benefits and compensations - with half citing it as their single biggest financial issue.
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Operational costs (24 per cent) and regulatory compliance costs (14 per cent) were the other biggest financial challenges facing SMEs, ahead of working capital management and access to funding.
Some 57 per cent identified regulatory compliance as the area in which they most need government support, rising to 75 per cent amongst small practice respondents.
Eoin Christian, CEO of GRID Finance, said: 'These findings align with our own research conducted earlier this year – rising costs, particularly staff-related expenses are creating significant pressure on Irish SMEs.
"While these challenges are real, they also represent an opportunity for SMEs to take stock, streamline operations and invest in smart, sustainable growth strategies.
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"At GRID Finance, we continue to advise our clients to be proactive by forecasting future cash flow needs, exploring flexible funding options and staying ahead of regulatory requirements like auto-enrolment.
"We feel that it's vital that both Government and financial providers evolve in tandem with the changing landscape.
'BETTER PREPARED'
"With the right supports and partners, Irish SMEs can not only weather this period of cost pressure, but emerge from it stronger, more resilient and better prepared for the future."
Auto-enrolment, due to come into effect in January 2026, met with a muted response.
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Only two in five (40 per cent) of respondents feel that they have been adequately informed of the steps needed to implement it in time for its planned launch.
Cróna Clohisey, Director of Members and Advocacy at Chartered Accountants Ireland, said: 'The Government's announcement that it will defer the launch of auto enrolment to January 2026 is welcome, particularly in view of the feeling of unpreparedness many businesses expressed in this survey.
'MANY REMAIN VERY UNCLEAR'
"Many remain very unclear as to what is expected of them in advance of the new system launching.
"Over the next six months, it is imperative that Government embarks on a concerted communications and awareness campaign to bridge this information deficit and equip businesses with the support and guidance they need to make auto enrolment the success it needs to be."
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The survey also revealed a significant gap between demand for, and uptake of government supports called for by SMEs:
Tax relief or incentives
– 40 per cent called for these, but only 16 per cent of total survey respondents report availing of them
Access to grants or loans
- 31 per cent called for these, but only 30 per cent of total survey respondents report availing of them
Meeting energy costs
– 28 per cent called for these, but only 14 per cent of total survey respondents report availing of them.
ATTITUDES MIXED
Attitudes to the effectiveness of the supports are mixed, which may go some way to accounting for the gap between demand and uptake:
Five per cent feel supports for reducing regulatory and compliance burdens are effective.
22 per cent rate access to grants or loans as effective.
23 per cent believe supports for training and upskilling are effective.
Commenting, Cróna Clohisey said: 'There is an evident mismatch between the need for supports and the uptake of those on offer.
"In the case of tax reliefs and access to grants or loans for example, this may be attributable to a perceived lack of accessibility, particularly for time and resource-constrained SMEs who simply find the application process too cumbersome.
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'FURTHER STEPS NEED TO BE TAKEN'
"While the breath of current Government supports in these areas is positive, further steps need to be taken to ensure that business reliefs such as these are not overly difficult to claim if their effectiveness is to be meaningfully felt by small businesses."
Meanwhile, almost three in 10 (28 per cent) of those surveyed report their business profitability has increased in the past six months, while a similar number (26 per cent) report it has decreased.
Small practice respondents reported greater stability, with 56 per cent saying profitability remained the same and only 15 per cent saying it has decreased.
For small business respondents, 30 per cent reported decreased profitability in the past six months.
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SENTIMENT NEGATIVE
Despite the various economic headwinds facing the economy, there was a degree of optimism amongst respondents about their prospects for the coming year.
Some 27 per cent of respondents forecasted their business to be either somewhat or significantly better off by this time next year.
Overall, sentiment was more negative than positive however, with 36 per cent saying they will be worse off.
This negative sentiment was also evident when it comes to the broader economic environment, with a majority (74 per cent) feeling less optimistic about the wider economy's prospects compared to six months ago.
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Compounding this are ongoing tensions and uncertainty in global trade which have already impacted Irish business sentiment.
Some 62 per cent of respondents report that their business operations have been impacted by global trade tensions and tariffs and only 14 per cent say they are prepared for a further escalation of such tensions.
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A survey has found costs have increased for almost 80 per cent of small and medium enterprises in the past six months
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