Businesses remain resilient, but the conditions for growth are becoming more challenging
InterTradeIreland’s All-island Business Monitor is the largest survey of SME sentiment across the island. Every quarter over 750 SMEs are asked about business performance, sales, challenges and profitability with Q1 2026 focusing on the impact of energy costs and wider business challenges.
The latest findings point to a resilient business base, with 55 per cent of firms reporting stable trading conditions, 39 per cent reporting growth and 6 in 10 firms reporting they are profitable.
However, the wider survey evidence points to a growth squeeze rather than a demand crisis. While demand conditions remain relatively stable, rising costs, labour pressures and growing uncertainty are making it harder for businesses to sustain growth, with a growing share reporting that wider business challenges are now affecting their ability to expand. Despite these pressures, employment remains resilient, with most firms maintaining existing staffing levels and little evidence of widespread planned job reductions.
Assistant Director of Strategy for InterTradeIreland, Anne-Marie Murphy comments:
This quarter we wanted to dig deeper into the challenges businesses are facing, especially considering the wider geopolitical environment we all find ourselves in. While we have seen modest growth in both business performance and sales this quarter, achieving growth is becoming increasingly challenging.
This sense of constraint is illustrated in the scale of challenges that SMEs report they are facing, with cost pressures continuing to dominate business concerns. Rising energy costs remain the biggest challenge facing SMEs, with56 per cent of businesses citing it as an issue; followed by rising costs of other overheads (including cost of supplies, insurance and transport), staffing costs and recruitment difficulties.
The survey was conducted in March and April 2026, immediately after the conflict between the USA and Iran led to heightened tensions around the Strait of Hormuz, renewing concern around energy costs and global supply chains. The survey incorporated targeted questions on energy costs to establish a timely measure of business sentiment and the impact of wider external pressures.
Of those that cited energy costs as an issue, 86 per cent report that electricity costs are weighing them down, while 58 per cent point to other fuels (e.g. petrol/heating oil) and 34 per cent cite gas costs as an issue. Energy pressures are particularly acute in construction, hospitality and manufacturing, where businesses report high exposure across electricity, gas and other fuel costs. However, energy pressures are prevalent across all sectors and company size, suggesting energy costs are affecting businesses well beyond traditionally energy-intensive sectors.
When considering the impact of other overheads, the top three issues for those businesses impacted are the cost of supplies/ consumables, insurance costs and transport costs which increased from 11 per cent in Q4 2025 to 32 per cent in Q1 2026, highlighting further evidence of fuel concerns.
Business challenges are increasingly restricting growth. The share of firms saying wider pressures are affecting growth to some or a large extent rose from 23 per cent at the end of 2025 to 31 per cent in Q1 2026, while those reporting no impact fell from 50 per cent to 34 per cent.
One bright spot amidst the ongoing uncertainty is that those businesses that trade externally are outperforming their peers. SMEs with cross-border sales report improved business performance and sales in Q1 2026 and are more likely to be profitable, demonstrating the importance of market diversification.
Economy Minister, Dr Caoimhe Archibald MLA says:
SMEs are the backbone of our economy and continually demonstrate their resilience. Once again, for the second time in only four years, geopolitical factors outside their control are contributing to growth constraints.
Through the delivery of the Energy Strategy, we are working to break the link with volatile global fossil fuel energy shocks by moving to home-grown renewable energy, which has a stable cost, over which we have control. Our 2026 Action Plan outlines how we are stepping up progress to accelerate renewables and support growth across the economy.
As cross-border trade in goods and services reaches a record high of almost £15 billion, we are committed to helping SMEs seize the opportunities in the cross-border market through our support of the work of InterTradeIreland.
