Tuesday 23 January 2018

Half of Isme firms fear Brexit will hit profits as wages hold up

Sean Duffy

Almost half of Irish small and medium-sized businesses (45pc) expect turnover to drop this year as a result of Brexit, according to a new survey.

The figures, from the Irish Small and Medium Firms Enterprises Association (Isme) notes that almost the same number (44pc) expect no change in turnover, while just 11pc said they expect earnings to rise.

Nonetheless, the profound impact Brexit could potentially have on indigenous Irish businesses is laid bare by the fact that 48pc of companies questioned believe profitability will suffer decreases of between 1pc and 20pc as a direct consequence of Brexit.

One-third of respondents said they foresee no change in profitability, while 9pc predicted gains of up to 20pc.

Chief among the firms' concerns are currency fluctuations which left many Irish exporters reeling last year in the wake of the June vote.

More than three-quarters of Irish small and medium-sized firms say Brexit is not having an impact on staffing levels.

In total, 77pc of respondents stated that uncertainty brought about by Brexit would not alter their plans for staffing levels in the year ahead.

Provisional data released to the Irish Independent by Isme also shows that over half (52pc) of companies have provided wage increases of up to 5pc in the first quarter of this year.

That is almost 10pc higher than the figure for last year which stood at just 42.3pc for the first three months, an indication that businesses are cognisant of wider wage pressures in the economy despite the uncertainty.

Furthermore, Isme said that around 8.5pc of its membership offered raises of between 6pc and 10pc.

Just over 4.1pc of firms reduced staff wages in the first three months, while 35pc of companies said they would be leaving employee pay unchanged.

One-quarter of respondents said that 20pc of their imports and purchases were denominated in sterling.

An overwhelming majority of Irish firms (88pc) insisted they would not relocate any of their operations to the UK, while 12pc said they could move some of their business across the Irish Sea or the border to mitigate Brexit effects.

More than half of Isme companies (54pc) have export business in the UK, with 14pc replying that the UK market accounts for over 20pc of their revenues.

Isme CEO Neil McDonald said the survey results come with a caveat. "These results do not give the complete picture of Brexit on the SME sector," he said.

"The real scale of impacts, direct and indirect, will only be truly known when we see the shape of the agreement between the European Union and the United Kingdom".

Mr McDonald added that the survey results may have been skewed by the fact that a large proportion of Isme companies are based in the sectors that do not face major exposure to Brexit related concerns.

He said that it is inevitable that some sectors will suffer more than others in the months and years ahead. "We believe that the services, financial and insurance sectors on aggregate will have a lower level of direct exposure to Brexit-related impact than will the industrial, construction and distribution sectors," he said.

Over half of the Isme membership is based in the services sector, 20pc is based in construction, 19pc are based in distribution, 7pc in industry and just 3pc are in the finance and insurance.

Irish Independent

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