As we move into the second half of 2024, Irish SMEs are showing remarkable optimism, despite the challenges posed by global geopolitical tensions and instability in international stock markets. This sentiment is reflected in the latest Linked Finance SME Confidence Index, based on research conducted by IPSOS B&A.
Key Highlights from the Q2 2024 SME Confidence Index
Positive Trends Amid Global Challenges
The overall confidence of SMEs in Ireland has seen a positive uptick, with the Linked Finance SME Confidence Index standing at 62.51 in Q2 2024, a slight increase from 61.9 in Q2 2023.
The Index remained stable from Q1 2024, indicating a consistent performance across the sector.
Mid-sized and large businesses, particularly those with more than 10 employees, are driving this positive sentiment with with 69% reporting better results in the last 12 months.
These companies are leading the way in job creation, with the employment metric for the SME sector remaining in positive territory.
Irish exporters are also contributing to this positive outlook, performing exceptionally well compared to their domestic-focused counterparts with an increase of 11 percentage points on the sentiment index during the same period.
Challenges for Micro-Businesses and Indigenous Companies
While larger SMEs are thriving, micro-businesses (those with 1-3 employees) and indigenous companies are facing significant challenges.
Profitability for micro-businesses has been under severe pressure, with no positive metrics in this area since 2018.
3 in 10 are not optimistic about trade in Q3 2024, according to the results. Factors such as minimum wage legislation, inflation and the lingering effects of COVID-related debt warehousing have disproportionately impacted these smaller enterprises, making it difficult to maintain profitability.
Indigenous businesses have also slipped into negative territory, indicating that domestic-focused companies are struggling more than their export-oriented counterparts.
Retail & Wholesale Sector Under Pressure
The Retail & Wholesale sector, in particular, has seen a stark decline in sentiment.
In Q2 2023, 40% of businesses in this sector had a positive outlook, but that figure has since halved to just 20% in Q2 2024.
At the same time, the percentage of businesses with low expectations has jumped from 12% to 28% year-over-year.
Profitability remains a serious concern for companies in this sector, leading to job losses and increased strain on businesses operating in retail and wholesale.
Pricing and Profitability Trends
One positive sign for the broader economy is the stabilisation of prices.
Since the end of the COVID pandemic, the trend of increasing prices has finally levelled off, offering some relief to businesses and consumers alike.
According to the Linked Finance SME Confidence Index, businesses are more likely to maintain current pricing levels rather than raise them further.
However, this trend mainly applies to mid-sized SMEs; micro-businesses have had to continue raising prices to cover higher costs.
This trend also points to the ongoing pressures on profitability, particularly for smaller businesses that have less flexibility in their pricing strategies.
Political Engagement and Government Support
The Linked Finance SME Confidence Index also reveals that Irish SMEs are politically engaged, with a clear view of which political parties they believe will best support their interests in the next government.
Fine Gael emerged as the top choice, followed by Fianna Fáil and Sinn Féin.
Interestingly, Fianna Fáil appears to have stronger support among larger SMEs than Fine Gael.
Together, Fine Gael and Fianna Fáil are favoured by more than 50% of the businesses surveyed.
However, nearly one in four respondents indicated a preference for parties outside the six main political groups, signalling a significant interest in Independent candidates.
As Ireland approaches the next general election, SMEs are closely monitoring government actions. While overall sentiment remains positive, there is a clear need for continued government policies that support these enterprises as they navigate economic challenges.
Linked Finance: Supporting SMEs in a Changing Landscape
Linked Finance is committed to helping Irish SMEs succeed in this complex environment. CEO Niall O’Grady commented,
“The steady confidence levels seen over the past 12 months among Irish SMEs reflect a sector that is becoming increasingly adept at navigating economic uncertainties. However, smaller, domestic-focused SMEs are more vulnerable to inflationary pressures and are still to pass on pricing increases as a means of protecting their profitability”
Linked Finance offers a flexible and accessible alternative to traditional bank lending through our peer-to-peer lending platform.
This model gives Irish SMEs quick access to the finances they need to grow, even in challenging times.
To date, Linked Finance has provided over €320 million in capital loans to SMEs across the country.
In 2024, we were once again recognised as one of CNBC’s “World’s Top 250 Fintech Companies,” solidifying our position as a global leader in fintech. The company has helped fund a diverse range of Irish businesses, including well-known brands like the Rolling Donut, Kokoro Sushi Bento, Murphy’s Ice Cream, and the Irish Fairy Door Company.
As we move further into 2024, Linked Finance remains dedicated to supporting Irish SMEs, helping them navigate the challenges ahead and seize new growth opportunities.
Research was conducted by Behaviours & Attitudes and reflects business performance in Quarter 2 2024 and projections for Quarter 3 2024. Fieldwork was conducted between July 14 – August 3 with 351 subjects in the sample.
