Energy costs a worry for small and medium enterprises in advance of winter

Companies concerned that customers can no longer afford further price rises, putting further pressure on margins

While energy prices have fallen from the post-Ukraine invasion price spike, the threat of higher costs remains a key concern for SMEs. Photograph: Andrew Matthews/PA

Irish small and medium enterprises (SMEs) are still concerned about the impact of energy prices on their cost base and the prospect of passing through higher costs to their employees in the form of price increases, a new survey from Rockwood Public Affairs has indicated.

The impact of energy costs was a top three concern for some 57 per cent of the 345 business decision-makers surveyed by Amarach at the end of last month. While prices have come down after record spikes following Russia’s invasion of Ukraine in early 2022, the threat of higher costs this winter remains a key consideration for SMEs in the Republic.

About a quarter of respondents said they were concerned about the risk of losing customers as a consequence of increasing their prices amid still-elevated levels of consumer price inflation within the Republic’s economy.

Against this backdrop, labour costs were among the top three concerns cited by some 43 per cent of respondents. A third of companies complained of challenges around red tape and navigating new regulations.

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“While the high cost of doing business in Ireland has been widely accepted, including by Government, this research provides new insights into how Ireland’s cost base is impacting SMEs,” said Lorraine Higgins, managing director at Rockwood.

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“Stubbornly high costs, particularly for energy, have forced SMEs to increase prices. However, this has reached a limit in terms of what customers will accept or can afford. Many Irish businesses are now facing the nightmare scenario of having to choose between raising prices and risk losing customers or absorbing high costs and risking financial viability.”

A summit, held earlier this month at Government Buildings in Dublin, heard the Republic’s economy faces internal and external competitiveness challenges. Taoiseach Simon Harris, who chaired the discussion, said while the economy is strong and growing, “the international context is rapidly changing, and we recognise that many businesses, whether indigenous or FDI [foreign direct investment], are facing increased challenges, including on the cost of doing business”.

Ms Higgins welcomed the Coalition’s recent focus on competitiveness. However, she said the research highlights the need for “sustained reform” to tackle spiralling costs.

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Ian Curran

Ian Curran

Ian Curran is a Business reporter with The Irish Times