SME Confidence Tracker
Resilience, Optimism and Challenges – SME’s reflect on what 2023 holds
Highlights from the research
Our research among Irish SMEs reveals a business population anxious about the challenges they are facing, with stoic resilience and optimism as they reflect on what 2023 holds.
It is evident SMEs are facing into a perfect storm of issues that threaten to impact growth forecasts for 2022 and beyond, including soaring inflation, skills shortages, and a cost of living and energy crisis not seen on such a scale in the 21st century.
The resilience of businesses and their ability to adapt and change - coupled with the wide ranging support available from the private and public sectors - will hopefully fuel SMEs who continue to play a pivotal role in the Ireland’s economic solidarity over the coming months.
Note: This study is based on a poll of 200 Irish SME owners and decision makers across the manufacturing, construction, wholesale, transport and services sectors. Research was conducted by independent specialists, Critical Research and fieldwork took place between 22 – 26 August 2022. Respondent businesses had an average annual turnover of €4.1m.
Key findings
- 87% of SME’s are confident about business prospects over the next 12 months
- 54% of Irish SME’s expect their turnover to increase over the next year, with three in four expecting an increase of up to 10%
- 89% of businesses say they are planning to invest in their business over the coming 12 months. Key areas for investment are: Staff recruitment (36%), Staff training and development (32%), Marketing / sales (29%) and More renewable energy options (24%)
- Attracting new customers (69%) and taking on new staff (37%) are seen as the biggest opportunities in the next 12 months. 23% say trading internationally is an opportunity, while 12% cite Mergers and Acquisition activity as a prospect
- Energy prices (53%) and economic issues due to geopolitical events (45%) stated as top two challenges for SME’s over next 12 months
- 55% of all SME’s say that increased energy bills are an issue for their business right now, while 49% mention the rising cost of raw materials due to inflation
Support for SMEs – Access to Finance
Access to funding will be vital in enabling businesses to deal with this current energy crisis, cope with inflation, overcome supply chain disruptions, fulfil demand, and invest in business growth in these uncertain times.
The exit of both KBC and Ulster Bank from the Irish market will mean that over 570,000 accounts will need to be switched to different financial institutions, of which Ulster Bank business banking current accounts with an overdraft facility account for 70,000.
Almost a third of respondents say they will have to open a new business account due to their bank’s departure, rising to 53% for transport businesses. Of those who have had to open a new business account due to the imminent departure of KBC and Ulster Bank, 55% said they found it hard to find a ‘human’ to talk to discuss their issues, while 36% said that incurring significant fees and cash flow problems caused by having to reapply for overdrafts were an issue.
- A third of businesses (33%) saying they don’t have the required cash flow to operate effectively on a day-to-day basis or for future growth
- 82% of SMEs said they would be considering some sort of cash injection from external sources to support their business n the next 12 months
- 30% of SME’s use a credit card to finance their business, followed by private equity (27%) which rises to 50% for SMEs with a turnover between €5 million and €25 million
- SMEs with a turnover between €5 million and €10 million note that they find it most difficult to access finance (27%), while those with a turnover between €10 million and €25 million find it difficult to manage day-to-day cash flow (53%)
- By sector, manufacturing SMEs top financing issue is understanding the credit risks associated with their client base (36%), compared with wholesale SMEs top financing issue is being able to fund new or larger contracts until you get paid from them (27%)
- When considering a finance provider, attributes considered to be most important are the level of finance available and a relationship-based approach / personal service, both mentioned by 44% of businesses
Bad Debt Barrier and Payment Challenges
When cashflow is so critical to business survival, late or failed payments can be fatal. But it’s not just ‘no payment’ it’s also ‘slow payment’ that’s hurting SMEs. The twin impacts of late and failed payments can starve businesses of the cash they need to survive, and seriously impede the ability of businesses to invest and thrive as they emerge from the pandemic Indeed, business failures remain all too real among Irish SMEs.
- A third (32%) of SMEs say they have suffered as the result of a bad debt in the previous 12 months.
- There’s also a significant sectoral divide when it comes to bad debt, with SMEs in the wholesale, transportation and service sector carrying a larger bad debt burden than those in the manufacturing and construction.
- Of those businesses that have suffered a bad debt, the average amount they have written off is €18,543 per business.
- Neary half (43%) of our respondents said that it’s taking longer for customers to pay them, 30% of which reported they’re experiencing an average wait time between 1 – 3 months for payments, and among which transport businesses have felt the impact most keenly.
- Chasing unpaid invoices is the top financing issue for almost one third of SME’s (32%) followed by managing the risk of a customer non-payment / bad debt (27%) and effective management of day-to-day cashflow (27%).
