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Firms focus on holding their ground as innovation takes back seat

31 Aug 2023
  • 57 per cent of businesses report they are stable.
  • Almost half of firms report they are not innovating.
  • Number of firms reporting they have largely or fully adapted to post-Brexit trading conditions has dropped below half.

InterTradeIreland’s latest All-Island Business Monitor reveals that stability in business performance continues to set the tone for 2023. In the second quarter, 57 per cent of firms reported a stable three months, with just over a third in growth.

Sales performance and profitability were stronger in Q2 compared to the previous quarter - a sign that cost pressures are softening and margins are holding up, in spite of the headwinds of global inflation and higher interest rates.

Martin Robinson, Director of Strategy at InterTradeIreland, says:
“It seems that the uncertain economic backdrop has led many firms to focus on stability and maintaining their current position. Encouragingly, some of the pressures faced by businesses appear to be easing, with concerns about energy costs falling back from recent levels.

Worryingly, the focus on maintaining a stable position indicates less appetite for innovation. 43 per cent of firms say that in the past two years, they have not undertaken innovation activity, nor do they plan to start. Martin adds, “While business performance appears to have returned to pre-Covid levels, a lack of forward momentum in innovation is likely to impede future growth.”

“Interestingly, the latest All-island Business Monitor shows that businesses that export across the border are more interested in and aware of the importance of innovation than their non-exporting peers. Innovation is key for future profitable growth. InterTradeIreland offers several initiatives to stimulate innovation, which can de-risk the innovation journey, accelerate competitiveness and harness technological change. We have just launched a new Business Explorer programme to help SMEs identify new innovation opportunities and put in place a practical plan to move forward with their ideas.”

Looking ahead, a cautious sense of optimism prevails, with just under a quarter of businesses anticipating sales growth. Only seven per cent of firms expect sales to decrease over the next six months.

The implementation of the Windsor Framework is also on the radar for many businesses. Just over a quarter (27 per cent) of businesses, identify Brexit as a continuing issue, down from a third (35 per cent) this time last year. While 44 per cent of businesses indicate that they are not affected by the new trading conditions, the number reporting they have adapted to them largely or in full has dropped from over half to 34 per cent, the lowest in the last four quarters. This suggests a degree of uncertainty about the new trade rules forthcoming under the Windsor Framework.

Martin comments “It would be unwise to read too much into one quarter of data; however it is reasonable to assume that the ongoing implementation of the Windsor Framework has prompted more businesses to examine its practical implications. To help address these concerns and provide clarity, InterTradeIreland has put in place a new Cross-Border Trade Hub that provides comprehensive information, the latest advice, guidance and practical support. Cross-border trade remains buoyant and presents significant growth opportunities for firms of all sizes. I’d encourage businesses to contact InterTradeIreland to find out how we can help.”

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