SMEs to invest this year, but a third expect long road to recovery

About one-third of Irish SMEs have written off debt in the pandemic, with an average of €28,164 lost per business, according to a new report.

The wholesale sector has been disproportionately impacted by payment issues, with 47 per cent of those businesses suffering from bad debt, and the average delay in receiving payments for the sector is 6.33 weeks, a report by Bibby Financial Services Ireland found.

As a result, managing cashflow and accessing working capital was said to be a key consideration moving forward. Almost a quarter (22 per cent) said they now need cashflow support more than ever before.

In addition, the report found that 38 per cent of SMEs will require additional funding into 2022 as they look beyond the pandemic and return to growth.

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Almost nine in 10 SMEs are planning to invest in their business over the next 12 months, but more than a third do not believe they will achieve a return to pre-pandemic levels until well into 2022.

Bibby found that 87 per cent of SMEs were planning to invest an average of €114,338 in their business in the coming year.

The top three areas of investment identified were staff training and development (39 per cent); digital technology and IT (39 per cent); and recruitment of new staff (34 per cent).

Some 84 per cent said they were either confident or very confident about their business prospects for the remainder of the year and into 2022, with 54 per cent identifying new customers as a top area for growth.

Meanwhile, 35 per cent of businesses said they don’t believe they will return to pre-pandemic levels until after the first quarter of 2022, with this sentiment felt strongest by transport and wholesale businesses who believe it will be at least August 2022.

The report said 29 per cent said suppliers have gone into administration, liquidation or receivership, rising to 43 per cent for those in the construction section and 41 per cent for wholesalers.

Other key challenges include increasing business costs (32 per cent), overcoming Covid-19 safety protocols (29 per cent), and renegotiating new rates with customers and suppliers (28 per cent), SMEs reported.

About 12 per cent said they have withheld payments to suppliers, with those in the transport sector (19 per cent) most likely to have held back payments.

Payment times

Nearly half of SMEs (45 per cent) said it is taking longer for business customers to pay since the pandemic began. On average, payment has been delayed by almost five weeks for those experiencing extended payment times.

In addition, the report also said that almost four out of 10 (38 per cent) SMEs will require additional funding into 2022 as they look beyond the pandemic and return to growth.

Mark O’Rourke, managing director of Bibby Financial Services Ireland, said SMEs generally were showing “significant resilience after such a turbulent few months, and are remaining positive despite the challenges that still lie ahead”.

“However, as businesses recover and get back on their feet its concerning that a third say their greatest challenge is rising business costs, while almost a quarter say they need cash flow support more than ever before.

“As a result, the private and public sectors need to remain focused on providing any required financial support to enable SMEs to do what they do best drive employment, boost output and fulfil consumer demand.”