Business Irish

Sunday 24 March 2019

'Unprecedented' uncertainty from Brexit impacting SMEs

Retail sales were down on a monthly basis for the third month running in January (Stock image)
Retail sales were down on a monthly basis for the third month running in January (Stock image)
Ellie Donnelly

Ellie Donnelly

The "unprecedented" uncertainty from Brexit is starting to impact small and medium businesses in Ireland.

This is according to the latest SME Market Monitor from the Banking and Payments Federation Ireland (BPFI).

While the Irish economy has improved over recent years, with a return to more sustainable growth and trading conditions, there exists a number of challenges for SMEs, including the increased possibility of a no-deal Brexit, as well as a slowdown in the global economy, each of which could prove to be extremely difficult for small businesses.

The monitor, which was prepared by the EY-DKM Economic Advisory, looked at 15 different indicators including consumer sentiment, manufacturing PMI, domestic demand, disposable income, retail sales, and the rate of employment.

It points to a number of negative trends, including a fall in consumer sentiment, declines in retail sales and domestic demand, and a drop in the number of visitors coming to Ireland from Britain.

"Given that the average spend by visitors from Britain is €274 per trip, such a trend will be a concern for those SMEs reliant on the tourism industry," the monitor states.

Annette Hughes, director, EY-DKM Economic Advisory, said: "Our analysis shows that consumers are struggling to balance the possibility of an undesirable Brexit outcome with the reality of favourable macroeconomic conditions and there is evidence that this is starting to impact the sectors where SMEs tend to operate, such as retail, food and accommodation – sectors which are arguably also some of the most vulnerable to Brexit."

While Ms Hughes points to some of the factors that may mitigate the impact of Brexit uncertainty, such as the strength of the Irish economy, a healthy labour market and double-digit growth in new lending to SMEs, she warns that the short-term outlook for SMEs is a growing concern.

"Ultimately, the prospect of a no-deal Brexit or indeed an extension of Article 50, in tandem with a slowdown in some of the Eurozone’s largest economies remains a serious downside risk."

"As a consequence, and notwithstanding Ireland’s strong macroeconomic performance, a great deal of caution is warranted in regard to the short-term outlook," Ms Hughes added.

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