Our latest global research indicates that despite the continuing threat of Brexit, the business environment for Irish small and medium enterprises (SMEs) remains largely positive, acting as the main source of jobs for the Irish economy. The Irish economy is performing strongly, with GDP growing 8.2 per cent in 2018 according to the Central Statistics Office. Excluding multinationals, the economy grew at the slightly lower rate of 6.5 per cent.
In particular, it has benefited from the strong performance of the macro Irish economy and a 13 per cent rise in exports for the first five months of 2019 compared to the same time last year according to the Central Statistics Office. There has also been increasing diversification in the destination of Irish exports ahead of Brexit, with a 35 per cent increase in exports to Germany, a 19.6 per cent increase to the Netherlands and a 13.8 per cent increase to Italy. According to a recent report from the Banking and Payments Federation Ireland, SMEs in the retail, food and accommodations sectors are concerned about recent falls in consumer spending and sentiment, in addition to a drop in the number of tourists visiting from the UK.
Despite considerable uncertainty surrounding trade relations once the UK leaves the EU, only two fifths (39%) of Irish SMEs say they are considering export markets beyond the UK due to Brexit. More worryingly, two-thirds (66%) say they haven’t spent any money preparing for Brexit. Irish businesses need to continually plan ahead and be ready to face the challenges that will accompany this changed business environment.
Businesses that manage their exposure to Brexit disruption at a customer, currency and supply chain level will be well placed to create the most competitive solutions post-Brexit.
However, it’s clear that Brexit will have a disproportionate impact on the SME market, and several regulatory changes could lead to better protection for businesses. A Seanad Public Consultation Committee recently recommended bringing capital gains tax rates and reliefs in line with international norms and increasing collaboration and cohesion between bodies and initiatives supporting SMEs. Additional challenges facing the SME market include delays in the roll-out of the National Broadband Plan, the high cost of rent, insurance and rates, and difficulties in accessing competitive rates.
While Irish SMEs are doing their part to diversify their businesses, these are significant challenges that will need to be addressed if the sector is to flourish after January 31st.