62% of Irish SMEs say Budget 2026 fails to tackle rising costs

New research from Bibby Financial Services finds 82% of SMEs remain optimistic for 2026 despite cost challenges and tighter conditions.

Half of Irish SMEs expect to increase prices for customers as a result of the Budget 2026

9 in 10 SMEs express concerns over pension auto-enrolment, with 45% expecting to absorb the costs involved

One third of SMEs lack the cashflow to scale or invest, while those with stable cashflow are three times more likely to expect growth

Over half (52%) say access to finance has become more difficult in the past six months, particularly for manufacturers and young business owners

91% plan to invest in 2026, focusing on digital transformation (32%) and staff training (32%), with €196,000 the average figure quoted

Two thirds (62%) of SMEs say Budget 2026 has fallen short of expectations, as inflation, recruitment difficulties and tighter access to finance continue to weigh heavy on business sentiment. According to the latest SME Confidence Tracker from Bibby Financial Services, Budget 2026 failed to address rising costs, with the services sector particularly critical (75%). Despite these challenges, 82% of SMEs remain optimistic about their prospects for 2026, reflecting a resilient business community determined to grow.

At the same time, government-backed initiatives such as the Strategic Banking Corporation of Ireland (SBCI) remain vital in supporting SMEs’ access to funding and enabling investment in people, innovation and productivity. 

Inflation, finance access and Budget 2026 impact

Inflation remains the top challenge, cited by 45% of SMEs and is the leading cause of sleepless nights for 26% of business owners. The issue is more prevalent in manufacturing (43%), wholesale (45%) and transport sectors (46%) and concern rises to 62% among firms with a turnover above €5 million.

Half of respondents (50%) said they expect to increase prices for customers as a result of the Budget, while one in four anticipate reduced profit margins or workforce reductions. The top measures SMEs would like to see from Government include 

• Low-interest loans or grants for expansion and job creation (39%)
• Simplified tax structures (34%) 
• Lower or stabilised energy costs (27%) – particularly among transport and manufacturing firms. 

Pension auto-enrolment adds new cost pressures

The introduction of pension auto-enrolment in January 2026 is set to further increase payroll costs and administrative complexity, particularly for service-led businesses and wholesale firms. While 27% of SMEs say they are fully prepared for the transition, 90% express concerns – most notably increased payroll costs (43%), administrative burden (33%) and lack of information or guidance (30%). 

Business owners’ planned responses to additional costs vary

• 45% will absorb the cost
• 24% will reduce other benefits
• 24% will delay pay increases
• 18% will increase prices

Link between cashflow health and business optimism

Bibby Financial Services’ analysis highlights a strong link between cashflow health and business optimism: 71% of SMEs with stable cashflow expect growth, compared to just 24% among those without the liquidity to invest. 

Access to finance has also become increasingly difficult, with 52% of SMEs saying it has worsened over the past six months. The figure rises to 63% in manufacturing and 64% among firms struggling with cashflow. While 29% of SMEs currently use external finance, another 18% are open to doing so in the next year, with construction and smaller firms showing the highest intent.

The research also shows that businesses using external finance are significantly more likely to report growth, with 63% of users saying their sales increased over the past six months, compared to 43% of non-users. 

Delayed payments stifling ability to invest and expand

Many SMEs continue to face cashflow challenges, with delayed payments and bad debt remaining persistent risks to profitability and liquidity. 62% of SMEs report slower invoice payments, with construction facing the most severe delays (71%). 

While 61% report a stable day-to-day cashflow, 33% say they lack the funding needed to grow. Manufacturing firms are most affected, with nearly half (48%) lacking the cashflow needed to scale. 

Bad debt remains persistent with 39% of SMEs writing off debt in the past year, averaging €26,000 in losses – underlining the ongoing risk to profitability and liquidity. 

Despite this, businesses are increasingly turning to external finance and government-backed supports such as SBCI funding to maintain stability and unlock investment opportunities. SMEs with strong cashflow and no exposure to late payments or bad debt are significantly more confident, underlying that financial health is the foundation for growth.

Nine out of ten Irish SMEs plan to invest in 2026

Despite these headwinds, SMEs continue to plan for the future. 91% intend to invest in the year ahead, focusing primarily on staff training and development (32%), digital technology and IT (32%) and recruitment (27%). 22% of SMEs see adopting new technology, such as AI, as a key opportunity, with more optimism among larger businesses with a €5 million+ turnover, and those confident about their prospects in 2026. Larger businesses plan to invest between €100,000 and €1 million, with an overall average of €196,000 – a slight increase from the last wave of results in Q1 2025.

Key motivations for investment include staying ahead of competitors (29%), reducing costs or increasing efficiency (32%) and business expansion (20%).

Mark O’Rourke, Managing Director of Bibby Financial Services Ireland, said: “SMEs across Ireland are showing remarkable resilience in the face of persistent cost pressures, but the reality is that rising inflation and tighter credit conditions are putting significant strain on growth ambitions.

Our research clearly shows that cashflow is the lifeblood of growth, those with stable cashflow are three times more likely to expect their business to expand in the next six months, and for many, that stability is only possible through external finance. 

As SMEs look to invest in people, innovation, and productivity, it’s vital that government and industry continue to work together to improve lending conditions and provide targeted support, ensuring businesses have the resources they need to thrive.”

About Bibby Financial Services Ireland:

Bibby Financial Services is Ireland’s largest independent SME funder. With over 19 years of experience operating throughout the island, the company facilitates more than €1 million weekly in new funding limits, in addition to processing significant weekly payments for existing clients. Bibby Financial Services offers flexible finance solutions to help businesses manage cashflow, drive growth, complete management buy-ins and buy-outs, restructure and fund mergers and acquisitions.

We provide support to businesses with a turnover of €750,000 or more, with expertise across sectors such as Manufacturing, Food and Beverage, Wholesale, Transport, Construction, Recruitment, and a broad range of professional business services. The company was awarded Financial Services Company of the Year at the Chambers Ireland InBusiness Recognition Awards 2025.

Bibby Financial Services Ireland is part of Bibby Financial Services Group, an independent financial services partner to over 8,500 businesses across 9 countries in Europe and Asia, with a total funding capacity of €1.3 billion.