No comfort for most small business owners - SFA reacts to Budget 2026

• Latest hike in the National Minimum Wage will impact the viability of many small businesses
• Reduction in VAT for hospitality sector is welcome but it only benefits 1 in 4 of small businesses
• Small Firms Association reacts to Budget 2026

Tuesday, 7 October 2024 - The Small Firms Association (SFA), the representative body for businesses employing up to fifty people, has reacted to Budget 2026. The decision to increase to the National Minimum Wage (NMW) by 65-cent to €14.15 per hour is very concerning and will result in job cuts and closures for businesses throughout the country. The NMW has increased every year since 2016 and has increased cumulatively by 63.5% since 2015.

The SFA is also disappointed that the Government has not introduced a temporary PRSI rebate for small businesses which would offset the latest increase in the NMW announced in the budget.

The SFA is encouraged with reduction in VAT from 13.5% to 9% for hospitality outlets, catering businesses and hairdressers. However, that reduction will only benefit around a quarter of small businesses nationwide. Furthermore, the SFA welcomes the expansion of Research & Development tax credit from 30% to 35% and the financial commitments to the National Development Plan to improve the country’s infrastructure.

Reacting to Budget 2025, David Broderick, SFA Director said:

“The latest increase to the National Minimum Wage provides no comfort for most small business owners who are struggling with spiralling business costs. This increase will halt investments and lead to job losses in various sectors. The SFA is extremely disappointed that the Government failed to introduce a temporary PRSI rebate to offset this latest minimum wage hike. For over a year, the SFA has been calling for a temporary PRSI rebate to give small business owners a chance to cope with the cost crisis in the small business community.

“The National Minimum Wage has increased every year since 2016. Ireland has the second highest minimum wage rate in the European Union which will impact the nation’s competitiveness in the long run. Many small businesses are already struggling to cope with significant labour costs amid high energy prices, sky high rents and global trade volatility.

“One in three businesses that the SFA recently surveyed stated that they will run out of liquidity within six months without any additional financial supports. 49 percent of businesses surveyed stated that costs have risen in the past year which further emphasis the challenging environment for the small business community.”

In May the SFA made a pre-budget submission which focussed on tackling business costs, easing the tax burden, and upskilling the workforce. Some of the key recommendations are listed below:

• Improved access to finance for small business and small business startups to bank and non-bank finance, via the Strategic Banking Corporation of Ireland and Micro Finance Ireland schemes.
• Financial support to help small business owners on the essential digitisation journey to help with competitiveness and improve efficiencies.
• Reduction of the general Capital Gains Tax (CGT) rate from 33% to 20%. However, consideration could also be given to the introduction of a CGT Tapering relief in addition to Revised Entrepreneur’s Relief.
• Simplification of the claiming and the administration procedure for the R&D Tax credit.
• A significant annual subvention of €600 million annually to offset energy system charges and the PSO levy, reduce costs and bring Ireland into line with European norms.
• Increase the Small Benefit Exemption up to a value of €2,000 per annum and remove the reference to 5 benefits in a year.
• A reduction in VAT related to the hospitality sector, particularly related on the provision of foods and non-alcoholic drinks.
• Through unlocking the €1.5 billion surplus of the National Training Fund, the SFA wants to strengthen small business owners’ leadership, management capabilities through productivity-boosting training provided by the MentorsWork programming.

In June, the SFA published its second annual Small Business Survey. The survey, of over 400 businesses nationwide, found that 49 percent of small businesses have experienced rising costs. The research also showed an estimated increase of 11.7 percent in average business costs. 31 percent of businesses say that labour costs have contributed to rising costs

ENDS

Note to Editor:

• For additional media queries, please contact Jonathan McDade, SFA Public Affairs Lead at 087 625 3551.
• Link to SFA Budget proposal  here.
• Link to ‘Small Business Survey’ report here.
• The Small Firms Association proudly represents a diverse membership of businesses employing up to 50 people: homegrown and spanning every sector of the economy with members found in every town and every city in Ireland.