Optimism within the Irish SME sector is at its highest level for over a year – according to the Linked Finance SME Confidence Index. 

Large SMEs, which employ between 10 and 250 employees, are the most upbeat, reporting a positivity rate of more than 72% on the index on their current outlook, while micro-SMEs (1-3 employees) were the least optimistic, with a score of just over 61%.

The service sector showed the strongest positivity, at almost 66%, while there was marginally more positivity among Dublin SMEs (65%) compared to similar businesses outside the capital (62%). A degree of optimism has finally returned to micro businesses – a particularly welcome development.

Business activity for the last quarter is trending downwards year-on-year across all SME sectors surveyed. Year-on-year trading activity is down 3% according to the index. The most recent CSO figures show that SMEs comprise 99.8% of businesses in Ireland and employ 2.3 million people here.

There is a strong divergence between mid/large SME businesses, which are doing very well, and smaller businesses that are still struggling. 

Large businesses have improved the most. Almost half of all large SMEs (48%) have seen increased business activity in the last 12 months – with only 15% reporting reduced activity – while 42% of mid-sized SMEs (4-9 people) are ahead in terms of trading over the same period.

Two in five micro-businesses (1-3 people) surveyed are reporting reduced business activity year-on-year.  Export businesses have been feeling the pinch over the past two years now, while indigenous only businesses are struggling a little.

Q2 v Q3 shows relatively little change in these areas in 2024. While there may be a juxtaposition in SME trading activity down – with optimism up – the near flat-lining of inflation, a “Budget bounce” and a stable domestic political environment all feed positively into sentiment.

Increased business costs – particularly energy – have ultimately been passed onto the consumer, with this in turn impacting spending and trading activity. However, if we are to look back to sentiment in Q3 2022 (59%), there has been a near 4% increase in positivity across the Irish SME sector. 

While micro-sized businesses have a marginally negative view of short-term prospects (-3%), they are substantially more positive looking forward into the next quarter, than they were this time last year.

Mid-sized businesses expect very similar activity levels to last year, while larger businesses are particularly bullish and showing the highest level of optimism since 2021. Indigenous SMEs are showing a strong improvement from last year in terms of positive outlook to year-end. Exporters are more positive compared to last year (when there was a sharp increase in those expecting lower levels of activity) but are still just in negative territory (- 2%).