Optimism recovers among small business since beginning of 2024

Small- and medium-sized businesses in the Republic are more optimistic about their future than they were at the beginning of 2024, a new survey from Azets has revealed, despite lingering concerns about talent retention and recruitment.

Smaller businesses remain wary about investing in artificial intelligence (AI) tools despite significant interest in the technology among their larger peers.

The accounting and business advisory firm on Friday published its latest barometer report, based on a survey of some 111 mid-market businesses from across six countries in northern Europe.

Businesses in the Republic are the second most optimistic in the region, ranking behind Denmark, with Irish respondents rating their economic prospects at 6.1 out of ten.

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According to the report, there has been a marked recovery in sentiment among smaller enterprises since the start of the year. Micro businesses employing nine people or fewer have increased their score from 3.7 out of 10 at the beginning of 2024 to 5.2 out of 10, Azets said.

As we look ahead to Budget 2025, it is important that growth in the mid-market is nurtured and encouraged over the coming months

—  Neil Hughes - Azets Ireland

Small firms employing 10 to 49 employees scored 6.5 out of 10. “The positive sentiment among SMEs may reflect a lower level of concern regarding warehoused tax debt, lower levels of inflation, and a positive outlook for economic growth,” the report said.

Yet, challenges remain and a large cohort of businesses polled expressed concern about talent retention and recruitment in a tight labour market. Some 33 per cent said skills shortages were the biggest issues facing their business with 41 per cent concerned about being able to match expectations around financial compensation.

“Despite facing higher labour costs, increased costs, higher levels of regulation and the payment of warehoused tax debt in recent times, it is positive to see the growing levels of optimism among ambitious owner-managed businesses,” said Neil Hughes, chief executive of Azets Ireland. “As we look ahead to Budget 2025, it is important that growth in the mid-market is nurtured and encouraged over the coming months.”

The report also highlights a divergence between small businesses on the one hand and medium-sized businesses on the other regarding AI adoption.

It found 57 per cent of micro-businesses said they will make no investment in AI over the next 12 months compared to 96 per cent of medium-sized businesses, employing 50-249 people, who said they will invest in the coming year.

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