Small firms' costs up 44.4% since 2023
Small firms have seen their costs rise by an average of 44.4% over the past three years, according to the Small Firms Association.
The latest Small Business Survey, conducted by Amárach, asked more than 400 small companies about the extent of the cost pressures they had faced in the past year.
It found that more than three quarters of small firms have experienced cost increases in the past year alone, compared to 49% in the same survey last year.
More than a quarter said their costs had risen by 10% in the past year, with the average firm seeing cost increases of more than 44% since 2023.
Speaking on RTÉ Radio 1's Morning Ireland, David Broderick, director of the Small Firms Association, described the increases as "quite shocking and quite frankly unsustainable" for small businesses.
"Unsurprisingly employment costs is top of the list," he said, referring to a reported 50% rise in labour costs in the past three years.
"Pension auto-enrolment obviously being in there - so four in five firms are reporting that has increased the cost - along with parental leave and sick leave as well in the employment space," he said.
Labour cost increases were followed by energy costs - which were up 44% - while insurance costs were up 39%.
"[Insurance costs] did dip out in 2023 but certainly it's high it is being reported again as an increased cost," Mr Broderick said.
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The SFA said those rising costs had eroded more businesses' financial reserves, with 59% of small firms saying they had less than six months left of liquidity.
At the same time, there was a reluctance to borrow among many companies.
"We have an issue with debt in this country and the right level of debt," he said. "Only one in five companies are actually looking for debt and that is concerning, but that is the risk-averse atmosphere that we are working in.
"But it is certainly something to keep an eye on."
The SFA has called for Government action to ease the pressure on small firms, including expanding the VAT reduction for tourism to all sectors.
It has also called for a freeze on further increases to the national minimum wage for the time being.
"Small business owners know that their staff are the most essential part of their business," Mr Broderick said.
"But there has been an increase [to the minimum wage] over the last few years of over 40% since 2021... They just can't take the hit anymore in terms of that wage," he said.
"That's not saying they want to stop it overall, but now is not the time for an increase in the minimum wage," he added.
