Challenges emerging in key SME sectors of tourism and construction
Employment and tax revenues shows signs of vulnerabilities
Consumer sentiment decreases to its lowest level in six years
The latest BPFI SME Market Monitor, prepared by EY-DKM Economic Advisory Services and published today by Banking & Payments Federation Ireland (BPFI), cautions that there are a number of issues, which are indicating an increasingly challenging environment for SMEs, notwithstanding the outcome of Brexit.
Tracking trends across 15 different indicators, which are important for the performance of the SME sector, the latest SME Market Monitor highlights some of these key challenges:
- In the key SME sectors of tourism and construction:
- overseas trips to Ireland in Q2’19 were 1.8% down on Q2’18 with more recent monthly data showing that numbers continued to decline during July and August
- the latest Ulster Bank Construction Purchasing Managers’ Index (PMI) reported a further slight loss in momentum in construction activity growth in June’19, with the headline PMI easing by 1.8 points compared with May’19.
- Employment and tax revenues also showed some vulnerabilities:
- the first quarterly decline in employment in 26 quarters (-20,900) was reported in Q2’19;
- the reliance on income tax as a significant contributor to the overall tax base may come under pressure in the event of a No-Deal Brexit.
- The KBC Consumer Sentiment Index decreased to its lowest level in six years in September, as consumers became more nervous about the outlook for the Irish economy in general and their personal finances in particular
Providing her assessment of the current SME environment, Annette Hughes, Director, EY-DKM Economic Advisory, explains that in spite of the major challenges, which Brexit and a deteriorating global economy present for SMEs at a macro level, trends evident in some of the key domestic indicators do not augur well for SMEs:
“With or without a deal, the expectation is that the impact will be serious for the Irish economy and especially under a disorderly Brexit scenario. Reports of significant job losses, interrupted supply chains, higher prices for some products and increased administration for those firms trading with the UK are some of the consequences expected for businesses and consumers… However, regardless of Brexit, there are a number of issues which are indicating an increasingly challenging environment for SMEs.”
“As the Brexit deadline approaches, the expectation is that there will be a deterioration in economic conditions. While the economy will still grow by a respectable 3.7% this year (EY GDP forecast), the SME environment is already seeing some negative movements in key economic indicators. Some SME sectors, notably, tourism, are expected to be increasingly challenged over the coming weeks and months.”
The BPFI SME Market Monitor is available on the BPFI website here.
Notes: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland. Together with its affiliates, the Federation of International Banks in Ireland and the Fintech & Payments Association of Ireland, BPFI has some 100 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.
Contact: Jillian Heffernan, Head of Communications, BPFI, Ph: 01 4748835 / 087 9016880
Orla Grant, Communications Manager, EY Ireland, Ph: 086 36565005
