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Average spend of €110,000 will be invested by SMEs over next three months

Written by Robert McHugh, on 16th Apr 2019. Posted in Financial

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Despite the threat of Brexit, 80% of Irish SMEs continued to invest in their business as the original 29 March deadline approached, with the main areas of investment being staff training and development (42%), digital and IT capabilities (33%) and additional machinery and equipment (33%).

This is according to the latest SME Ireland Confidence Tracker, published by Bibby Financial Services Ireland, a national survey of over 200 small and medium sized enterprises across the Republic of Ireland, conducted on a bi-annual basis.

Almost half of Irish SMEs expect to see either a slight (37%) or significant (12%) increase in sales in the second quarter of 2019, despite the uncertainty regarding the outcome of Brexit. A further 38% expect their sales to remain steady.

The research found that Brexit was still having a negative effect on SMEs’ confidence, with sales expectations trending downwards since the third quarter of 2018, when two thirds of SMEs anticipated an increase in sales. The focus on investment is set to continue into the second quarter, with an average spend of €110,000 planned by SMEs over the next three months.

A reduction in operating costs is the major driver of this planned investment, cited by 27% of businesses, followed by a need to keep ahead of competitors (23%) and replace equipment or technology that has deteriorated (19%).

Significantly, of those SMEs that have no plans for investment in the next three months, 55% cite the UK’s exit from the EU as the chief limiting factor, followed by domestic economic uncertainty (38%), and cashflow issues (34%).

There is also continued dissatisfaction with the amount of state support provided for SMEs ahead of Brexit, with 63% believing the government should have done more to assist the sector, and 71% identifying a need for tax breaks. Additional measures cited include the need for a lower VAT rate or additional mentoring.

Commenting on the research, Managing Director at Bibby Financial Services Ireland, Mark O’Rourke says, "The most recent Brexit extension will only extend the uncertainty for Irish SMEs, while the risk of a disorderly Brexit and the damage this would do to the sector also remains on the table. It’s clear from our research that, in the face of these challenges, Irish SMEs remain largely optimistic about the potential for growth, and are focusing on investment in order to grow and future-proof their businesses as much as possible."

He added, "At the same time, however, there is continued concern over the amount of support SMEs have received from the government, and any disruption to cashflow and working capital will present a serious threat to businesses’ profitability. Many SMEs are unaware of the range of financing options available to them – including invoice financing – that can offer them greater support and flexibility in everyday operations and in growing their business."

Source: www.businessworld.ie

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