Ibec and BDO publish results of major new Irish Senior Management Business Sentiment Survey
Highlight findings were:
- SME businesses in Ireland expect over half of all employees will be back in the office full time in the next six months
- Over 80% of Irish SMEs, with employees ranging from 10 to 250, find retaining staff a significant challenge, with 8 out of 10 now spending more time on recruitment vs. 2019.
- Demand for Salary increases a concern for Irish management with inflation impacting margins
- Access to key skills a top concern for Irish Management teams
As a consequence of Brexit, 60% of Irish SMEs have changed from a British to EU supplier in the last 12 months
- Despite challenging trading conditions, 60% of Irish SMEs believe their business revenue will increase in the next 12 months
Demands for salary increases, inflation pressures impacting on margins, and access to skills are the top challenges facing SME businesses in Ireland currently according to the inaugural BDO and Ibec SME Sentiment Index, which was carried out by surveying Senior Leadership from the Irish SME sector over the last few months.
The joint survey, conducted by BDO and Ibec, revealed that demands from employees for increased salaries is the biggest challenge facing their business today – 32% of Irish SMEs (*see footnote) surveyed cited this as their top concern. Compounding this issue, 29% of businesses stated that inflationary pressures impacting on company margins is the second biggest challenge facing their organisation. Access to suitable skills and affordable housing for staff were third and fourth at 18% and 4% respectively.
The BDO and IBEC 2022 SME Sentiment Index surveyed Irish SME organisations across three key categories: Staff Retainment and Recruitment; New Working Models (hybrid working); and Business Operations. The research was carried out independently by an in-depth survey of 167 Senior Management from the SME Sector (10-250 employees) in Ireland.
Speaking on the survey results, Michael Costello, Managing Partner of BDO, said:
“Rising inflation rates are having a detrimental effect on SME businesses in Ireland. It has created numerous significant challenges which have drastically changed operational priorities and business strategies when compared to even a year ago. Employees are asking for salary increases to meet the increased cost of living, but at the same time SME businesses are trying to contend with the impact rising inflation is having on margins. Add in the competition of employee benefits and higher salaries larger multinationals can offer along with lower costs of living in other countries to the situation, and it’s clear SME businesses in Ireland are under significant pressure to recruit and retain talent in the current circumstances.
An aligned, strategic approach must be undertaken by both businesses in Ireland and the Government to navigate businesses out of this current crisis and ensure we do not see SME businesses begin to shut their doors throughout the country. Businesses of all sizes across the SME space need to ensure they are adequately preparing for a continuation of these conditions. They need to take practical steps to insulate their business as best they can from these market conditions. We are advising clients to analyse supply chains and current business strategy to isolate their exposure and seek professional advice on how to navigate this difficult period.”
Despite challenging market conditions, 60% of Irish SMEs have confidence in their business strategy and believe revenue will increase in the next 12 months. 20% believe it will stay the same while the same proportion believe it will decrease.
As the number of issues caused by Brexit, the invasion of Ukraine by Russia and global inflation continue to affect supply chains and operations, businesses in Ireland remain resilient and are adapting to change. 60% have adopted digital transformation innovations throughout their organisation in the last year and over half have adopted business process optimisations to improve organisational efficiencies.
Over 60% of businesses reported to have undertaken new strategies to deal with supply chain challenges. Amongst businesses who either import or export, over 70% have increased customs expertise within their businesses and changed their routes. As a consequence of Brexit, the research revealed that 60% SME businesses in Ireland have changed from a British to EU supplier in the last 12 months.
In terms of optimising and securing their future supply chain in light of changing market conditions, 65% of SME businesses plan to build strong networks with suppliers, 62% plan to strategically source new suppliers, and 54% plan to carry out a risk assessment on their supply chain.
In the last 24 months over 60% of SME businesses have increased their employee base and hired new employees. Larger SME’s, employing over 100 people, were the primary drivers of this growth, with over 70% of these organisations increasing employee headcount. Although most businesses reported increasing employee headcount, 83% found it a significant challenge to retain staff.
Increased activity across both employee arrivals and departures has led to a marked increase in the need to invest more time in recruiting talent with 80% of businesses now spending more time trying to recruit new staff today than prior to the Covid-19 pandemic. 70% of respondents also believe Covid-19 has impacted hiring employees from outside of Ireland, with one in four claiming the hiring process has been made more challenging.
New Working Models
The SME Sentiment Index also examined how SME’s in Ireland were coping with hybrid working models and how that was impacting their business.
On average, companies predict 54% of their organisation will work onsite full-time over the next 6 months, 34% will be hybrid and 12% will be off-site or working from home full time in 2022. Over the next 3 years, 75% believe their business working model will be hybrid of remote and onsite. Only 20% believe it will be fully onsite and just 5% think it will be fully remote.
The top benefits of a hybrid working model were the use of digital channels to communicate (32%), increased employee engagement (23%), increased productivity (21%) and reduced operational costs (23%). 89% of organisations cited a good company culture to motivate employees as the key reason remote working is feasible. For staff, improved work life balance (46%) and not having to commute to work (46%) were the top benefits of a hybrid working model.
Not all businesses believe hybrid working models are beneficial to their company, however. 45% of organisations surveyed believed that there are no specific benefits of employees working from home - citing staff engagement (37%), monitoring real time performance (26%), and data security (9%) as the three main challenges managing remote employees.