Business Growth Slowing as Rising Costs Pile on the Pressure

The latest InterTradeIreland Business Monitor (Q3 2022) reveals that while businesses are still expanding, the pace of growth is starting to flatten. The latest data shows that while sales and profits remain relatively buoyant, quarter-on-quarter, a pattern of slowing growth is emerging as rising costs pile on the pressure.

Martin Robinson, InterTradeIreland’s Director of Strategy says, “There is a great deal of uncertainty in the wider economy – with rising inflation, interest rates and a volatile energy market. The road ahead looks to have a number of caution signs for business. While the majority of firms that we speak to are in a stable position, the number in growth mode has dropped to just over a third, compared to 41 per cent for the same period last year.”

Not surprisingly, energy and the rising costs of other overheads are the overwhelming concerns for SMEs. The impact has been particularly acute for the manufacturing industry with over 20 per cent now indicating they are contracting. However, no sector is immune- over a fifth of businesses expect their sales to decrease in the next 6 months – this jumps to 41 per cent of companies in the leisure, hotel and catering sectors.

Martin comments, “Our data shows us that 90 per cent of firms have experienced a significant increase in their energy costs, and that is feeding through to nearly half experiencing a large increase in supplier costs, while 44 per cent have experienced a substantial increase in transport costs.”

“In terms of Brexit, 27 per cent of firms have reported it as an issue this quarter, compared to 35 per cent of businesses in the previous quarter. Half of firms report that they have adapted in full or to a large extent to the changes brought about by Brexit.”

According to the survey, 73 per cent of businesses have passed on price rises to their customers in the last 12 months and profitability remains stable. Firms are also reporting that cost increases have not as yet impacted business and consumer confidence quarter-on-quarter; however, it remains to be seen what will happen if firms continue to pass on price rises – in particular as 9 out of 10 firms expect the rising costs of doing business to persist over the next 12 months.

Martin concludes, “We know that businesses that trade cross-border, tend to be more robust. However, businesses across the island are operating against a difficult backdrop and their resilience continues to be tested. There are a number of supports out there for firms, including from InterTradeIreland. We will continue to collaborate with partners and actively review our range of programmes to ensure we can help firms in the current challenging economic landscape. To find out how we can assist your businesses and to avail of our wide range of initiatives please visit www.intertradeireland.com.”