While Irish businesses are still expanding, the pace of growth is starting to flatten. The latest data shows that while sales and profits remain relatively buoyant, quarter-on-quarter, a pattern of slowing growth is emerging as rising costs pile on the pressure.
This is according to the latest InterTradeIreland Business Monitor for the third quarter, the largest and most comprehensive business survey on the island which is based on the views of more than 750 business managers across Northern Ireland and Ireland.
Not surprisingly, energy and the rising costs of other overheads are the overwhelming concerns for SMEs. The impact has been particularly acute for the manufacturing industry with over 20% now indicating they are contracting. However, no sector is immune- over a fifth of businesses expect their sales to decrease in the next 6 months - this jumps to 41% of companies in the leisure, hotel and catering sectors.
According to the survey, 73% of businesses have passed on price rises to their customers in the last 12 months and profitability remains stable. Firms are also reporting that cost increases have not as yet impacted business and consumer confidence quarter-on-quarter ; however it remains to be seen what will happen if firms continue to pass on price rises - in particular as 9 out of 10 firms expect the rising costs of doing business to persist over the next 12 months.
In terms of Brexit, 27% of firms have reported it as an issue this quarter, compared to 35% of businesses in the previous quarter. Half of firms report that they have adapted in full or to a large extent to the changes brought about by Brexit.
Commenting on the research, InterTradeIreland’s Director of Strategy, Martin Robinson says, "There is a great deal of uncertainty in the wider economy – with rising inflation, interest rates and a volatile energy market. The road ahead looks to have a number of caution signs for business. While the majority of firms that we speak to are in a stable position, the number in growth mode has dropped to just over a third, compared to 41 per cent for the same period last year."