1 in 5 SMEs expect to pass on higher costs

Over a fifth of SMEs expect to pass higher prices on to their customers as a result of inflationary pressures, according to a survey of SMEs by the peer to peer digital lending platform Linked Finance.

That is up from just 6% a year ago.

Rising costs are particularly apparent in larger SMEs – defined as those with more than ten employees – the report notes.

44% of companies in this cohort expect prices to increase.

57% of firms in the retail and wholesale sector expect to raise prices.

Consumer prices have been rising at an annual rate of over 2% here, according to the latest figures from the Central Statistics Office.

Rising energy prices accounted for much of the increase although pandemic related supply chain difficulties have also contributed.

Optimism at pre-pandemic levels

The report found that optimism among business leaders in the SME sector was back at pre-pandemic levels.

Around two thirds of respondents reported profits the same or better than a year ago, compared to 30% in the same three month period last year.

Three quarters said they expected trading activity next quarter to be the same or better, compared to just 46% with this view a year ago.

Job creation expectations have also improved from last year when a third of companies expected to cut jobs and just 3% expected to increase headcount.

However, among micro-enterprises – companies with one to three employees – the experience has not been as positive.

Just under half of respondents – 45% – experienced lower trading performance than a year ago.

However, it was down significantly from 73% in that position a year ago.

Firms focused on the indigenous economy are also proving slower to recover compared to those with exports, although that reflects the relatively slower opening up of the Irish economy relative to major trading partners.

Niall O’Grady, CEO of Linked Finance, while welcoming the bounce back in overall activity, noted the slower progress of recovery among smaller enterprises.

“It’s clear that the pace of recovery is lagging for domestic market focussed micro-businesses,” he said.

The inflationary trend is another sign of the economy heating up, although now more than ever businesses need to be careful to maintain competitiveness, particularly where reliant on export markets,” he added.

The positive indicators picked up in the survey tally with Linked Finance’s loan trends.

After hitting a record monthly high of €5.5m in loans for July, the platform said it was on course for a strong year of lending.

In the year to date, the company has issued over €21.6m in loans, compared to €19.9m for the whole of 2020.

Article Source – 1 in 5 SMEs expect to pass on higher costs – RTE – Brian Finn

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