Close to eight in 10 businesses in Ireland and Northern Ireland are still stable or growing, but rising costs have slowed growth despite relatively buoyant sales and profits, according to the latest InterTradeIreland business monitor.
A third of businesses (34%) questioned for the study in Q3 said they were growing, compared to 44% that were stable and 21% that were in decline. In Q3 2021, 41% of businesses were in growth and 18% were in decline.
In the manufacturing sector, the slowdown has been quick, with just 32% of companies experiencing growth, down from 47% a year earlier, while the number of firms contracting has grown from 18% to 23%.
“There is a great deal of uncertainty in the wider economy – with rising inflation, interest rates and a volatile energy market,” said Martin Robinson, director of strategy at InterTradeIreland.
“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% for the same period last year.”
Asked about sales compared to the previous quarter, 24% of firms said they had increased in Q3, compared to 56% that said they had remained the same and 19% that experienced a decline.
Looking ahead, respondents were somewhat pessimistic about the next six months, with just 18% expecting to grow sales and 22% expecting them to decline.
The leisure, hotels and catering sector was the most downbeat coming into the winter months, with 41% expecting sales to drop and 14% forecasting growth.
Some 29% of businesses in the construction sector expect sales to grow and 21% believe they will fall, while in manufacturing and production, 17% expect sales to rise and 25% have forecast decline.
“Our data shows us that 90% 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% have experienced a substantial increase in transport costs,” said Robinson.
“In terms of Brexit, 27% of firms have reported it as an issue this quarter, compared to 35% 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.”
The survey shows 73% of firms have passed on price rises to their customers in the past 12 months and profitability remains more or less stable as a result. In fact, there was a 10-point increase in profitability between Q2 (56%) and Q3 (66%)
Respondents also reported that cost increases have not as yet impacted business and consumer confidence quarter-on-quarter, although it remains to be seen what will happen if firms continue to pass on price hikes as nine in 10 companies expect the rising costs of doing business to persist over the next 12 months.
“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,” Robinson concluded.
“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.
