The record high levels of optimism among Irish small and medium-sized enterprises (SMEs) seen a few months ago have returned to more average levels as the shock of the US announcement of high tariffs and subsequent shutdowns has created further uncertainty.
This is supported by data from a new business confidence survey conducted by Linked Finance.
The level of business optimism among all small and medium-sized enterprises was 67 percent at the end of the fourth quarter of 2024, but it fell to 62 percent in the first quarter of 2025, which is average.
While there was no “sharp” decline in business activity, it remains slightly in negative territory year-on-year. SMEs surveyed reported a -5% decline in business at the end of Q1 2025, compared to a -3% decline in the same period in 2024.
Business activity and forecasts
Export activity rose sharply last quarter, likely due to a surge in orders to fill warehouses ahead of expected trade changes and new tariffs announced by US President Donald Trump on April 2 last year.
The survey shows that 36 percent of exporting SMEs reported an increase in business activity in the first quarter of this year, compared with 25 percent of SMEs operating in the local market.
Concerns about a potential trade war are more pronounced among larger Irish SMEs surveyed, those based outside Dublin and those in the retail and wholesale sectors, with one in four feeling very concerned about the issue following the initial announcement of US trade tariffs.
SMEs’ expectations for business activity in the second quarter of 2025 have changed, with 34% of exporters reporting an upcoming decline in business activity year-on-year. However, this may be due to the fact that most export activity was concentrated in the first quarter of this year.
Even more encouraging, micro-businesses (those with 1 to 3 employees) showed their lowest levels of anxiety since COVID-19 closed their doors in 2020, with nearly seven in 10 confident that business activity will remain the same or even increase this quarter.
While employment remains high, Dublin-based businesses are the main drivers of labour force growth, while companies outside the capital are neutral.
Geopolitical instability
Linked Finance CEO Niall O'Grady said geopolitical instability had led to a rapid return to long-term average levels of business confidence, but the medium-term outlook remained uncertain.
“While optimism has fallen and the gap between businesses in and outside the capital remains, Irish SMEs have shown resilience in the past – given the many challenges to trade in recent years – including Brexit and Covid. Micro businesses have seen only a slight dip in optimism and price growth is slowing,
Sourse: breakingnews.ie
