Resilience of Irish firms in face of higher costs highlighted in new study

The resilience of the Irish business sector in the face of rising costs has been highlighted in a new survey, which indicated that nearly three quarters of Irish companies (74 per cent) reported either stable or improving sales in the first quarter of this year.

InterTradeIreland’s latest business monitor report found that “businesses for the most part remain buoyant” with most companies in stable or growth mode despite the challenging price environment.

The cross-Border enterprise group said larger SMEs, those with over 50 employees, are bolstering economic recovery with 47 per cent reporting an increase in their order books, up from 30 per cent last quarter, and 52 per cent enjoying moderate to rapid growth expansion..

Nonetheless, the group’s report detected a sharp pick-up in concern about the impact of rising costs.

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Energy bills are now the number one concern facing SMEs with 86 per cent citing it as an issue, followed closely by overheads at 84 per cent as the impact of Brexit and Covid-19 decreases, the report indicated.

Over half of all firms described rising energy costs as a “huge issue”, the highest these concerns have ranked in the group’s quarterly monitor.

Skills issues

Firms also ranked labour and skills challenges as bigger and more pressing issues than Covid-19 and Brexit. Sixty-five per cent of businesses with 50 or more employees now report difficulties recruiting appropriate skills and 59 cent state they have a lack of appropriate skills in their workforce, it said.

"Whilst businesses have shown outstanding resilience over the past two years in responding to the dual challenge of Brexit and Covid-19, this resilience is being tested further as they now tackle the additional challenge of rising costs," InterTradeIreland's new director of strategy Martin Robinson said.

“ These latest findings point to a potential impact on profitability, particularly for large energy users. The number of manufacturing businesses that say they are profitable dropped to 40 per cent this quarter, down from 76 per cent last quarter,” he said.

“Similarly, the retail/distribution sector, which is also a high energy use industry, has dropped from 60 per cent who were profitable last quarter to 43 per cent this quarter.”

Mr Robinson said: “From labour and skills issues to the cost of doing business, firms are up against a multifaceted range of challenges. Businesses need to identify areas where they can reduce costs and improve efficiency such as through automation and adopting digital technologies.”