Industry & Business

An overwhelming 97% of Irish SME’s are planning to invest in their businesses in the next 12 months, according to the latest Global Business Monitor published by Bibby Financial Services Ireland, a provider of financial support and funding solutions to Irish SME’s.

Irish SME’s have signalled that such investment will focus on up-skilling existing staff (77%), sales and marketing (63%), IT and digital technology (63%) and recruitment (60%). Only 3% of respondents stated that they do not intend to invest at all.

Furthermore, Irish SME’s appear more confident in the strength of the domestic economy than the global economy, with over two-thirds (67%) of those surveyed describing the Irish economy as performing well, compared to just 22% in relation to the bigger global picture.

Geo-political events loom large in the minds of Irish respondents with 69% viewing Brexit as the top threat to global economic growth amongst Irish SME’s in 2017, followed by political uncertainty in the U.S. (55%) and global conflict or terrorism (21%).

However, despite considerable uncertainty surrounding the final outcome of negotiations between the UK and the EU, as well as potential changes to U.S. tax and trade policies, 92% of respondents are confident that the Irish economy will stay the same or improve over next 12 months.

The Global Business Monitor, produced by Bibby Financial Services, is an international survey of over 1,200 small and medium sized enterprises across 11 countries: Ireland, UK, US, Canada, Hong Kong, Singapore, Czech Republic, Poland, France, Germany and the Netherlands.

The report also shows that nearly six in 10 (57%) Irish SME’s say sales have grown over the past 12 months. 30% say sales have remained the same while the proportion of those citing a decline in sales is 13%.

Looking ahead, over half (58%) of Irish SME’s expect sales to increase over the next 12 months, while 31% of respondents expect sales to stay the same. Those with higher turnovers (€1.2m+) signified the greatest optimism with regard to forecasted sales growth.

Broken down by sector, SME’s in the hospitality and leisure (73%) sectors are most positive about the economy citing an increase in sales over the last 12 months, while SME’s in the transportation industry say sales have remained the same (56%). Industries citing a decline in business performance over the past 12 months are mainly business services and manufacturing (21% and 22% respectively). SME’s in the wholesale and distribution industry are most pessimistic about the future, with 24% saying it will worsen over the next 12 months.

According to nearly two thirds (64%) of SME’s, rising overheads/costs are the greatest challenge to their business right now and they also cited this as their greatest challenge in the next 12 months (62%).

When asked which area is the most problematic in managing their business cashflow, over half (57%) of SME’s cited collecting payment from customers on time. Nearly half (49%) of respondents believe that an increase in interest rates will hinder their business growth, compared to 37% who don’t expect their business to be affected.

Almost a third of SMEs (32%) suffered from bad debt over the past 12 months. The average amount written off by each business due to customer non-payment or insolvency stands at €13,780. Internationally, SME’s in Germany have written off the most in the past 12 months with an average of €23,000.

More than a third (37%) of Irish SME’s use external sources of finance for their businesses.

29% of Irish SME’s say access to finance was poor, second only to France (30%).  Smaller Irish businesses (those turning over up to €300,000) are more likely to feel negative about sources of finance, with 9% having experienced finance rejections.

The average number of days for Irish SME’s to receive payment is 36 days, slightly longer than the international average of 34 days.

Of those Irish SMEs trading internationally, the UK, Germany and the U.S. represent the most value by way of exports. The UK also represents the greatest value in relation to imports and it’s for these combined reasons that the drop in value of Sterling has had a differing impact across Irish businesses.

Mark O’Rourke, Head of Business at Bibby Financial Services Ireland, says: “All economic indicators point to a strong economy and one that is primed for additional growth throughout the remainder of 2017 and 2018, whatever challenges are encountered. In the face of global economic and political uncertainty, Ireland remains a stable, competitive and pro-business economy.

In terms of the economic outlook, primary risks to the Irish recovery are external. In particular, Brexit will have an, as yet, unknown long-term impact. For the moment, the main impact is via the value of sterling. At the same time, there are positive developments externally, with the global economy, including the Eurozone, picking up momentum, which in turn is likely to boost Irish exports.

Many Irish SME’s are facing challenges with funding and perhaps are not fully aware of the broad range of funding options available even though many funding solutions, including invoice financing, are far more suited to their needs than traditional lending options.”

David Postings, Global CEO of Bibby Financial Services, says: “Our findings show that SME’s across the world remain concerned about the global economy. We have seen unprecedented geo-political change over the past 18 months, resulting in widespread uncertainty. This declining confidence in the global economy is leading many SME owners to retreat and focus on growth in their domestic markets.”

There are a number of universal barriers to international trade that SME’s must overcome, including time-zones, cultural nuances, border regulations, legal practices and languages. However, our research reveals that currency volatility is the number one concern amongst SME owners today.

Large and small businesses across the world have been impacted by foreign exchange fluctuation over the past year, and this is causing many SMEs to shy-away from international trade, to avoid such risk.

However, there are significant opportunities available for businesses that are able to mitigate risk associated with currency volatility, by locking-in rates to protect against further fluctuations.

While it is encouraging to see SMEs broadly confident about their own sales growth, more needs to be done to highlight the support available from public and private sectors to help businesses unlock growth opportunities from international trade.

Businesses able to leverage the benefits of exporting and importing, whether this is finding new customer markets or forging new supply chains, have a higher propensity to achieve long-term growth.”