New year threatens small firms with double whammy
11 January 2019 | 0
The latest Small Firms Association’s Business Sentiment Survey makes for strange reading. I say “strange” because of the bizarre similarities between the responses given in May 2017 and November 2018 when it comes to the rankings for what small firms perceive to be the biggest opportunities and risks.
Back in May 2017, the respondents identified wage inflation, Brexit and domestic economic stagnation as the biggest risks (in that order). But for the next two surveys in November 2017 and May 2018, Brexit and domestic economic stagnation took a backseat and were replaced by attracting talent and the regulatory burden. In November 2018, however, they mounted a comeback with Brexit and attracting talent tied for first place, wage inflation coming in second and domestic economic stagnation in third place. Regulatory burden, which one assumes may have been connected to fears over GDPR, fell out of the top three.
The strange thing here is not the re-emergence of Brexit as a concern given the looming deadline of the UK’s supposed exit from the EU, but why it gained such prominence 18 months previously. It’s interesting that the priorities or concerns of small firms shifted so markedly back to more conventional business issues in November 2017 and May 2018. It’s not as if Brexit faded into the background for those 18 months.
The assumption has to be that the strong performance of the Irish economy in the last couple of years has demanded more attention and focus from small firms than the theoretical consequences of a no-deal or bad deal Brexit. On that note, it’s worth pointing out that the proportion of respondents who said their business was growing in November 2018 was, at 51%, exactly the same as in May 2017.
Which brings us to opportunities and again, bizarrely, there is a synergy between May 2017 and November 2018 with domestic economic growth, sectoral opportunities and new products in the top three positions (albeit in a slightly different order). Unsurprisingly, small firms cited domestic economic growth is the number one opportunity in all four surveys but there were slight differences between November 2017 and May 2018 with the inclusion of new brand/marketing campaign in the top three.
One of the major concerns for many businesses in Ireland, big or small, is the effect that Brexit will have on the Irish economy and domestic economic growth. It was something highlighted by SFA director Sven Spollen-Behrens in a statement accompanying the release of the survey. “The fundamentals of the Irish economy are strong and economic growth and job creation are forecast to continue in 2019,” he said. “However, Brexit poses one of the biggest challenges faced by small businesses in years and the SFA will remain focused on preparing members for the opportunities and risks to their businesses.”
The point was reinforced by Ibec CEO Danny McCoy when that organisation published its latest Quarterly Economic Outlook. “Many firms will face a more difficult period in the months ahead due to sterling weakness and continued Brexit uncertainty,” he stated. “This uncertainty is already impacting business decisions with a slowdown in SME lending in recent months as companies hold back investment decisions until there is a clearer understanding of what the final relationship between the EU and the UK will look like.”
He added that many companies were “implementing very costly contingency measures such as holding higher stock levels. Almost seven out of 10 exporting firms (69%) do not have experience of dealing with tariffs and customs arrangements. These companies will therefore need supports for enterprise stabilisation, cashflow, and diversification if close trading ties with the UK are not maintained post 29 March 2019”.
It will be interesting to see whether the results from the SFA survey from May 2019 echo those of May 2017 and November 2019. Given that it will take place barely a month after the UK’s projected exit date of 29 March, it’s difficult to see how they won’t.