Irish SMEs remain optimistic despite ‘inflation stress’

Against a backdrop of soaring inflation, the number of Irish SMEs that are charging customers higher prices for their goods and services rose sharply between April and June, a new survey has suggested.

Linked Finances’ SME Confidence Index for the first six months of 2022 indicates that Irish businesses remained optimistic about their prospects with 82 per cent of survey respondents indicating that they had performed better or in line with expectations over the period despite “inflation stress” and the fallout from Russia’s invasion of Ukraine.

The overall optimism index, based on a survey of 361 business owners and managers across the country, was up slightly to 62 out of 100 in the second quarter, having dipped by 7 points from 68 to 61 between the final quarter of 2021 and the first quarter of this year.

However, some 42 per cent of businesses said they were charging higher prices by the end of June, up from 39 per cent in the previous quarter.

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“Inflation hit 9.1% in July,” Linked Finance said, “and SMEs in Ireland are looking to recover their higher input costs by increasing prices, with only one in three (30 per cent) of SMEs reporting lower profits. This suggests an ability to maintain margins and pass on input cost increases to customers.”

Looking ahead, 62 per cent of respondents said they expect to perform even better in the second half.

Niall O’Grady, chief executive of Linked Finance, said businesses are showing resilience despite the uncertain economic and geopolitical landscape.

However, he said: “The major challenge for businesses, in particular the micro-SMEs and those operating in the retail sector is to find ways to manage the bite of surging input costs, a problem that is likely to get harder during the winter period when use of expensive energy will rise.”