More than half of small firms with rental or lease costs have had a rent increase or been approached by their landlord about a need to increase rent this year, according to a new report.
The Small Firms Association (SFA) has published the report Small Business in Ireland: Cost of Doing Business, which examines the cost of doing business in 2022 for Ireland’s small business community.
The report outlines the range and extent of costs associated with doing business in Ireland and provides insights on challenges faced by our smallest employers.
Analysis from the report shows the total average cost of doing business for all small (20-49 employees) micro (less than 10 employees) firms is €138,814 per month. The average for micro businesses is €66,426 and €193,535 for small firms.
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On average labour costs amount to 82 per cent of overall monthly business costs. Banking and other costs (5.6 per cent) is second highest, followed by transport/insurance (5.1 per cent), all property costs (4.9 per cent), and all utility costs (2.4 per cent).
Half (52 per cent) of all businesses with fewer than 50 employees are currently managing debt. Bank loans (63 per cent), other financing loans (28 per cent), and tax debt (22 per cent) are the three biggest forms of debt for businesses.
The average debt for micro and small businesses is €80,903, lowest for micro firms at €56,774 and highest for small businesses at €107,149.
Rising business costs is the top challenge facing small firms. For Small firms with rental or lease costs, more than half (55 per cent) have had a rent increase or have been approached by their landlord about a need to increase rent.
Small enterprises are under pressure to increase employee wages (56 per cent), provide additional employee benefits (26 per cent), and more remote working supports (18 per cent).
SFA director Sven Spollen-Behrens said: “Ireland’s Micro and Small enterprises are facing cost challenges in every area of business be it labour, transport, insurance, banking, and utility costs.
“Many operate in low margin environments, making it difficult for them to absorb cost increases and demand for value makes it impossible for many to pass the increase onto customers.
“At a time of high inflation and no end in rising input prices, notably energy prices, the SFA is concerned that this may lead to viable enterprises closing due to their inability to absorb rising business costs.
“To avoid this and safeguard our domestically owned businesses, Budget 2023 must provide certainty on costs and maintaining competitiveness.”
The group also outlined its small business priorities for Budget 2023, calling on the Government to tackle the increasing costs of doing business, to sustain investment, and retain talent through the tax system.
“In Budget 2023, SFA is calling for measures to support the retention and upskilling of staff to help small businesses survive these challenging times,” said Mr Spollen-Behrens.
“To make Ireland a better country for entrepreneurs, SFA would like capital gains tax to be reduced to 20 per cent and the lifetime limit for CGT entrepreneur relief increased to €15 million.
“Introducing these measures and reducing the cost of doing business would mitigate some of Ireland’s current vulnerabilities and give confidence to business owners.
“With indicators suggesting a difficult winter ahead, the SFA will remain committed to helping small business, as they attempt to manage the current challenges the economy is facing, with the Russian invasion of Ukraine and inflation.”
