Ireland is only in the “early stages” of the “cost shock” from the war in the Middle East, corporate advisory firm Azets Ireland has warned, and many small and medium-sized businesses could be facing a “cliff-edge” costs scenario without “timely” Government intervention.
On Friday, the professional services firm published its quarterly Barometer Survey, indicating concern about rising costs is widespread among the 222 small and mid-sized companies polled for the research.
Half of micro firms, those employing fewer than 10 people, and slightly more than half of small businesses employing between 10 and 49 people, cited geopolitical strife as their top concern at the moment.
The issue ranks significantly lower for larger businesses, however.
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Azets said smaller firms are clearly more exposed, with “limited capacity” to absorb the supply and energy shocks emanating from the conflict in the Middle East.
“The latest Azets Barometer provides a clear picture of how Irish SMEs are facing a period of sustained geopolitical and economic disruption,” said Azets Ireland chief executive Neil Hughes.
“What the findings show is that we are in the early stages of a cost shock that has not yet fully worked its way through the system. Rising energy prices linked to the conflict in the Middle East are now feeding into the wider economy, with inflation likely to surpass the 3.6 per cent recorded in March.”
Hughes said the impact of that is “only starting to be felt” by Irish SMEs.
“Larger firms have the scale to absorb these shocks. Smaller businesses don’t,” he said. “And unless there is a near-term easing in geopolitical tensions, the reality is that conditions are likely to become more challenging in the months ahead.”
Against this backdrop, Hughes said SMEs could be facing a “cliff-edge scenario” without rapid Government intervention. He said consideration should be given to a temporary energy support scheme as well as the bringing forward of the VAT cut for the hospitality sector from July.
Oil prices surged again on Thursday amid growing concern about the uneasiness of the ceasefire agreed between the US-Israeli coalition and Iran on Wednesday.
[ Price of home-heating oil hits highest level since 1996 amid Iran warOpens in new window ]
Separately on Thursday, the Central Statistics Office’s latest consumer price index revealed that the price of home heating oil hit its highest level since 1996 in March.
Diesel was at its highest level since July 2022, while petrol prices were at their highest level since August 2022.
The Azets barometer indicated cost pressures are intensifying across the Irish economy. Elevated labour costs were cited as a top concern by 36 per cent of the businesses surveyed, with the impact most pronounced in manufacturing and construction.
Business confidence, however, remains “relatively robust”, Azets said, with Irish firms rating their economic outlook at 6.8 out of 10, in advance of the European average of 6.7 and behind only Sweden and Denmark.
[ Have your say: How has home-heating oil price rises impacted you?Opens in new window ]
