One in three small businesses to run out of liquidity within 6 months without additional funding, according to survey

• Average business costs increased by over 16 percent according
• Over 80 per cent of small businesses experienced rising costs.
• 57 percent of small businesses report increased labour costs.

Eighty-three percent of small businesses have experienced rising costs according to research by the Small Firms Association (SFA), the leading voice for Ireland’s small businesses. The independently produced survey with Amárach about business costs, small businesses were asked about the impact of rising business costs in the past 12 months.

The research also showed an estimated increase of 16.6 percent in average business costs. 57 percent of businesses say that labour costs have contributed to rising costs while 51 percent of small businesses say energy costs have risen in the past year. 45 percent of small businesses say insurance costs have contributed to overall rising costs while 37 percent cited an increase in raw material costs.

In addition to highlighting the state of rising business costs, small businesses were also surveyed about access to finance. Despite reasonably modest levels of debt with 46 percent of businesses surveyed managing debt of less than €10,000, 35 percent stated that they could not trade beyond six months without additional funding. A 3 percent rise from a similar survey conducted in 2022. The survey also shows that one third of businesses could not continue or would find it difficult to operate without Government supports.

Given the scale of these challenges, perhaps it is not surprising to see three quarters would like to see the government do more to help small businesses get access the financing they need.

Reacting to the publication of the survey, David Broderick, Director of the Small Firms Association said:

“Our research shows that 64 percent of businesses surveyed stated that rising costs is the biggest challenge facing small businesses. Almost 30 percent of respondents have stated that labour and employment costs are the biggest operational costs facing them.

“The fact that over a third of small businesses will run out of liquidity within 6 months without any financial aid shows how cashed strapped they are. One in five small businesses have secured funding from friends and family to cope with rising costs. This is an alarming reality.

“With over eighty percent of small businesses experiencing rising costs, this highlights the clear and present threat to the viability small businesses which are the lifeblood of communities across the country.”

When asked about the biggest challenge was facing businesses, 32 percent stated rising costs as the biggest challenge, while 16 percent of businesses stated that labour costs was the biggest challenge facing businesses.

When asked about potential solutions would encourage greater engagement and uptake of upskilling and training programmes for small businesses, 42 percent of businesses said improved communications of financial supports would help while 40 percent said financial support to cover training costs.

When asked which, if any, of the areas below have contributed to the increased cost of running a business, respondents said the following:

• 57% said employee / labour costs.
• 51% said energy costs.
• 45% said insurance costs.
• 37% said raw material costs.

Larger companies (with 10 to 50 employees) appear to be faring worse than those with 1-9 employees in terms of being…

• More likely to be managing debts of €100k+ (17%)
• More likely to have taken out a loan in the past 2 years (48%)
• More likely to have taken out a loan to restructure an existing loan (19%)
• Less likely to have borrowed from a pillar bank (29%)
• More likely not to borrow because of an existing loan (22%)
• More likely to be dependent on Government supports (51%)

The core objective of this research was to assess the impact of the cost of doing business amongst small companies (those with up to 50 Employees) in Ireland. The methodology of the survey involved online interactions and telephone interviews. A total of 476 interviews was carried out by Amárach between 26th April and 8th May 2024. 57% of respondents consisted of businesses employing fewer than ten people and that 43% percent of respondents employ 10 to 50 people.

ENDS

Note to Editor:

• Please see the full report and campaign page for more information.
• The Small Firms Association proudly represents a diverse membership of businesses with less than 50 employees: homegrown and spanning every sector of the economy with members found in every town and every city in Ireland. Please contact SFA Public Affairs Lead, Jonathan McDade, for more information: jonathan.mcdade@sfa.ie 
• Details of the recently published SFA Policy Priorities document (April 2024) can be found here.