36% of businesses will not increase pay this year.
Export Expectations drop by 24%.
55% state Brexit will have a negative impact on their bottom line.
43% of companies find it difficult to hire new staff.
The results of the ISME Quarterly Business Trends Survey for the second quarter of 2017, released today (21st July) shows a decline in 7 of 12 confidence indicators: Business Expectations, Current Employment, Current Sales, Current Investment, Future Investment, and Export Expectations for the SME sector. However, there are improvements in Profitability Expectations, Sales Expectations and Current Exports. The Trends report also looks at pay in the SME sector. As expected, Brexit is the biggest concern for SMEs in 2017.
Commenting on the results, ISME CEO, Neil McDonnell said “Today’s results reflect the current situation within the SME sector. The gains made in the previous quarter have reversed; with 7 out of 12 confidence indicators declining. Brexit, reduced orders and economic uncertainty are the biggest issues facing small businesses; this must be reflected in budget 2018.”
“This week the Government accepted the recommendations from the Low Pay Commission for an increase in the statutory minimum wage, despite the lack of an evidential basis for doing so. This will have a negative impact on small businesses, particularly retailers. Our research shows business confidence and current sales within this sector have declined. 36% of businesses stated they will not increase pay this year
“This statutory increase will do nothing to improve the living standards of those on the minimum wage, if anything, it will undermine current employment and future employment.”
The survey was conducted in the first week of July, with almost 536 SME respondents, 51% of whom employ less than 10; 36% employ between 11 and 49; and the remaining 13% employ between 50 and 250. Geographically, 34% are from Dublin; 54% are spread across the rest of the country; and 12% have multiple sites.
There was a decline in our trends confidence index for Q2’17, with 7 (out of 12) indicators showing disimprovements, compared with 5 positives in Q1’17. There was a decrease in Business Expectations (down from 32% Q1’17 to 22% Q2’17); Current Employment and Future Employment both experienced declines in Q2, dropping from 28% to 26% and 26% to 18% respectively; Current Sales are down on last quarter dropping from 24% to 21%; Current Investment and Future Investment recorded drops from 40% to 37% and 39% to 34% respectively; Export Expectations experienced the biggest decline dropping a significant 24% on previous quarter from 30% to 6%.
There where improvements in Business Confidence up from 16% in Q1’17 to 17% in Q2’17; Business Environment also experienced an increase up to 39% from 37% in Q1’17, while Profitability Expectations and Current Exports experienced increases of 14% and 3% respectively.
The Retail sector for Q2’17 recorded a reversal of the previous improvements in Q1’17, with 5 out of 10 confidence indicators declining. Business Confidence decreased from 22% to -6%, Business Expectations dropped from 28% to 11%. Future Investment drops from 22% to 17% Current Sales dropped from 11% to 6%. There where improvements in Business Environment up from 0% to 11%; Profitability Expectations while remaining in negative territory, recorded an improvement from -22% to -11%. Current Employment is up from 6% to 11%, while Sales Expectations and Current Investments improved by 16% and 11% respectively.
The Manufacturing sector continues to show declines; 9 out of 12 confidence indictors recorded a decline. Business Confidence declined from 31% to 17%, Business Expectations dropped from 40% to 38%, Business Environment drops from 50% to 42%, Current Employment is down from 45% to 38%, Future Employment is down from 31% to 29%, Current Sales are down from 33% to 29%, Current Investment is down from 52% to 46%, Future Investment is also down from 57% to 54%, Export Expectations are down from 43% to 10%. There was an improvement in two confidence indicators; Profitability Expectation is up from 21% to 29%, along with Sales Expectations up from 40% to 50%. Current Exports remain unchanged at 20%. This quarterly decline is mostly impact by the uncertainty and protracted nature of businesses.
Exports are a key area for the Irish economy; external shocks such as Brexit and currency fluctuations have implications for many SMEs. Business Confidence remains unchanged at 16%. Business Expectations increased from 2% to 20%, Business Environment improved slightly from 37% to 28%, Profitability Expectations improved from 5% to 19%, Sales Expectations increased from 34% to 36%, Current Exports increased from 14% to 17%. Current Employment records a drop from 28% to 26%, Future Employment dropped from 26% to 18%. Current Sales dropped from 24% to 20%, Current Investment dropped from 41% to 38%, Future Investment dropped from 39% to 34%, and Export Expectations dropped from 30% to 6%.
The services sector in Q2’17 has made improvements on the previous quarter. There was an improvement in 7 out 12 confidence indicators. Business Confidence is up from 8% to 18%, Business Environment is up from 32% to 42%. Profitability Expectation is up from 2% to 15%, Current Employment is up from 17% to 21%, Current Sales is up from 21% to 43%, and Current Exports is up from 13% to 50%. There was a decline in Business Expectations, down from 35% to 6%, Future Employment is down from 37% to 15%, and Sales Expectations drop from 27% to 12%. Current Investment is down from 42% to 33%, while Future Investment drops from also from 43% to 33%.
Pay Expectations: Employees
Our latest pay research shows 36% of SMEs will not increase pay this year, 27% of businesses will increase pay between 0.5% to 2.4%, 26% will increase pay between 2.5% to 5%, while a nominal 5% will increase pay of more than 5%.
Pay Expectations: Owner Manager
When we asked business owners about their own pay this year, 62% said they would not increase their earnings from the business. 5% intend to increase their wages of plus 5%, 13% will increase their pay between 2.5%-5%, while 12% will increase their pay between 0.5%-2.4%.
The Survey also tracks the current biggest concern of SMEs
The top three concerns for SMEs in this quarter are Brexit, reduced orders and economic uncertainty; Brexit at 21% still remains the biggest concern for small and medium enterprises, followed by reduced orders at 12%; and economic uncertainty at 11%. It is unsurprising that Brexit is the biggest concern, given 55% of respondents state Brexit will have a negative effect on their bottom line.
“Budget 2018 must reflect the challenges small and medium enterprises face. In our pre-budget submission we outline the priorities and steps Government must take to ensure SMEs are protected in the current climate”