Small and medium sized businesses will need to adjust their profit expectations in order to ensure the viability and continued growth of the sector, a new analysis has suggested.
Publishing its latest SME Monitor, the Banking and Payments Federation Ireland (BPFI) also said that more strategic Government supports for small and medium sized firms will be required.
“Our latest SME Monitor shows a healthy outlook for the Irish economy, which is expected to grow at a moderate level in the short term after significant expansion since 2019,” said Brian Hayes, Chief Executive of the BPFI.
“Employment has reached a new record high and inflation pressures are beginning to ease.”
“However, increasing labour costs, including increases to the minimum wage, the proposed pension auto-enrolment scheme and higher employer PRSI contributions, will have implications for SMEs.”
“In addition, almost 58,000 businesses availing of the Revenue Commissioners’ debt warehousing scheme will need to commence repaying their debt from 1 May 2024.”
The BPFI said amid this rising cost environment, the Government will have to move away from subsidising current spending among small firms to supporting their future development.
This could be done through measures that will increase productivity and efficiency, it suggested.
“In order to ensure the viability and continued growth of the SME sector in Ireland, there needs to be a two-fold response from both the industry and government,” Mr Hayes said.
“If businesses do not increase productivity and efficiencies or adjust profit expectations, particularly for businesses in the service sector, these additional costs are likely to create structural long-term imbalances and put upward pressure on average prices for customers at a time where price levels are on average 19% higher than prior to the pandemic.”
“In addition, while one-off Government support schemes in the form of grants or loans helped many businesses in the short term, we need to move from subsidising costs to financing development and expansion in the form of longer term solutions for SMEs in the Irish economy.”
Article Source – BPFI says SMEs face adjusting profit expectations as costs rise – RTE
