15% of small and medium sized businesses in Ireland are considering laying off some staff when the Employment Wage Subsidy Scheme (EWSS) comes to an end – due to rising costs and falling profitability.
That is according to new research by the Association of Chartered Certified Accountants (ACCA) and Grant Thornton.
They surveyed 200 finance professionals who reflect the views and outlook of 8,000 SMEs across a range of sectors.
The research reveals that on average costs for SMEs have increased by 25% since the start of the year.
86% of those surveyed called for more supports for small businesses to cope with the rising costs.
Nearly 20% of SMEs said they are struggling to meet monthly payroll commitments, with almost 40% saying they have to pass on costs to customers.
“We welcome the Government’s decision to cut VAT on fuel bills, but we would also urge policymakers to keep further reductions under review,” said Caitriona Allis, Head of ACCA Ireland.
“The economic conditions facing our small business sector are extremely challenging with many still in recovery mode from the pandemic which is impacting their ability to absorb rising costs,” she added.
With inflation now at its highest rate in 21 years at 5.6%, Ms Allis said small business owners will be faced with difficult decisions in the months ahead to ensure their business remains viable.
“The present economic uncertainty is showing no signs of easing anytime soon and that is why it is vitally important that we continue to support our SME sector through this difficult period,” she said.
Andrew Webb, Chief Economist at Grant Thornton said the findings of their research are consistent with a decline in optimism that has emerged across various sentiment trackers.
“The inflationary pressures that emerged as pandemic restrictions were lifted were expected to pass by this summer but ‘higher for longer’ is the unfortunate summary of what inflation is doing,” he said.
“Inflation is now expected to peak late this year or early next.
“SMEs are feeling this from two directions – higher input costs and via a ‘squeezed consumer’ that is having to divert more spending to essential items such as heat and food,” Mr Webb said.
“This reduces the amount available to spend on non-essential items, hindering large parts of the economy,” he added.
While these elevated rates of inflation are expected to pass, Mr Webb said that is cold comfort to SMEs plotting a course through the next 6-12 months.