SMEs Shelve Growth Plans Over Brexit

14 Oct 2019 | 09.34 am

SMEs Shelve Growth Plans Over Brexit

AIB Q3 survey highlights Brexit fears

14 Oct 2019 | 09.34 am

Half of SMEs in the Republic of Ireland and two-thirds of businesses north of the border have shelved expansion/investment plans due to fears about Brexit, according to new research from AIB.

The AIB Brexit Sentiment Index for the third quarter of 2019 is based on survey responses from more than 700 SMEs in the Republic of Ireland and Northern Ireland.

According to the Q3 index, business expansion or investment plans are increasingly being put on hold because of Brexit. The index also reveals that 45% of businesses in ROI and 47% in Northern Ireland are already feeling the effects of Brexit.

Given the Brexit gloom, businesses in the Republic unsurprisingly have a negative outlook, with seven out of ten companies concerned about their future, while 86% foresee a negative impact for the wider economy.

In Northern Ireland, two in three businesses now have a negative outlook on their future.

The Brexit Sentiment Index baseline is zero, with a potential range from +100 to -100. For Q3 2019, the index registered a score of -51 in the ROI, a slight deterioration on -50 in Q2 2019.

In comparison, NI has fallen to its lowest level ever recorded (-41), a fall of five points from Q2 2019.

The research also shows that 14% of ROI SMEs are postponing bank borrowing for capital investment, while in NI there is reduced working capital demand (35%) due to Brexit.

Commenting on the index, Catherine Moroney (pictured), head of business banking with AIB, noted that one-quarter of businesses now anticipate an increase in working capital requirements as a result of Brexit.

“Whatever the outcome of Brexit, it is highly likely that there will be increased costs relating to customs compliance and delays in the supply chain, and in a hard Brexit scenario there will also be customs duties,” Moroney added.

“While some of these costs will be recoverable, they will result in an increased working capital requirement. Businesses should ensure that they have appropriate working capital facilities in place so that the cashflow of the business has an additional safety buffer to assist the business trade through Brexit, irrespective of its ultimate form.”

Oliver Mangan, chief economist with AIB, said that despite the Brexit concern, the index showed that 41% of SMEs in ROI and 53% in NI have still not done any planning for Brexit.

“Indeed, only 7% of ROI and 6% of NI firms have a formal Brexit plan in place. Nonetheless, it is encouraging to see that 45% of ROI importers say they have found non-UK suppliers to replace UK ones, while 39% of ROI exporters to the UK are diversifying into other markets.”

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