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Business resilience challenged as unprecedented rising costs begin to impact profitability

23 May 2022

InterTradeIreland’s latest Business Monitor (Q1 2022) highlights the resilience of businesses across the island of Ireland, with sales remaining stable or improving for three quarters of companies (74 per cent).

The fresh figures show that businesses for the most part remain buoyant, with 85 per cent of firms in stable or growth mode. Larger SMEs, those with over 50 employees, are bolstering economic recovery with 47 per cent reporting an increase in their order books, up from 30 per cent last quarter, and 52 per cent enjoying moderate to rapid growth expansion.

The impact of rising costs however has increased sharply. Energy bills are now the number one concern facing SMEs with 86 per cent citing it as an issue, followed closely by overheads at 84 per cent as the impact of Brexit and Covid-19 decreases. In fact, over half of all firms now describe rising energy costs as a ‘huge issue’, the highest these concerns have ranked in InterTradeIreland’s Business Monitor in over a decade.

Martin Robinson, InterTradeIreland’s new Director of Strategy says:

“Whilst businesses have shown outstanding resilience over the past two years in responding to the dual challenge of Brexit and Covid-19, this resilience is being tested further as they now tackle the additional challenge of rising costs. These latest findings point to a potential impact on profitability, particularly for large energy users. The number of manufacturing businesses that say they are profitable dropped to 40 per cent this quarter, down from 76 per cent last quarter. Similarly, the retail/distribution sector, which is also a high energy use industry, has dropped from 60 per cent who were profitable last quarter to 43 per cent this quarter.”

The latest figures also reveal the more nuanced issues facing larger SMEs despite their growth, with labour and skills challenges outranking the impact of Covid-19 and Brexit on these businesses. Sixty-five per cent of businesses with 50 or more employees now report difficulties recruiting appropriate skills and fifty-nine per cent state they have a lack of appropriate skills in their workforce. Martin adds,

“From labour and skills issues to the cost of doing business, firms are up against a multifaceted range of challenges. Businesses need to identify areas where they can reduce costs and improve efficiency such as through automation and adopting digital technologies. At InterTradeIreland, we are closely monitoring these emerging trends and actively pivoting our range of support services to help firms tackle these challenges.

On a positive note, the survey results do highlight the continued agility and adaptability of companies across the island of Ireland. The impact of Covid-19 and Brexit continues to decline in importance, with 42 per cent of cross-border sellers now reporting that they have adapted in full to the new trading conditions, rising from 28 per cent last quarter. To find out how InterTradeIreland can help your business and to avail of our wide range of supports, please visit www.intertradeireland.com.
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