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Impact of Recession on SMEs (Industrial Report) - Ireland - September 2009

Small to medium enterprises are the lifeblood of the Irish economy since they represent some 99% of businesses throughout Ireland.

The recession has created one of the most challenging periods for Irish businesses. SMEs are currently being squeezed by contracting markets, late payments, increasing overheads and a sharp decline in access to finance.

Key themes of the report:

  • Limited access to finance is one of the key challenges in today’s market – what impact has this had on SMEs?

  • Increasingly late payments are crippling SME finance. RoI SMEs are now waiting an average of 73 days for payment according to the ISME.

  • The weak Sterling is having a significant effect on both SMEs north and south of the border, limiting the scope for exporting goods as well as importing raw materials.

  • High labour costs in RoI are having a disproportionately negative effect on SMEs than on larger businesses.

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Table of contents

  1. Issues in the Market

      • Key themes of the report:
        • Definition
          • Abbreviations
          • Insights and Opportunities

            • Cherry-picking opportunities available for start-ups
              • Solidify position with mergers and partnerships
                • Bucking the trend: Flourishing businesses amid recession
                • Market in Brief

                  • SMEs lifeblood of the Irish economy
                    • All Ireland output contracts by 7% in 2008
                      • Boom to bust: recession hits Irish economy
                        • Recession sees SME finance tightened considerably
                          • Construction sector output tumbles by 20% between 2007 and 2008
                            • Manufacturing SMEs squeezed by increased competition and the Sterling to Euro exchange rate
                              • Service SMEs contribute majority of SME turnover
                              • SMEs in Context

                                • Key points
                                  • Importance of SMEs to the Irish economy
                                      • Figure 1: Make up of RoI businesses by enterprise size band and persons employed, 2008
                                      • Figure 2: Make-up of NI businesses by enterprise size band, 2008
                                    • Relevant trade and representative bodies
                                    • Internal Market Environment

                                      • Key points
                                        • RoI SMEs lose manpower … and turnover
                                          • Micro businesses hit hardest by job losses
                                            • Figure 3: NI employee jobs, by enterprise size, Dec 07-Mar 09
                                            • Figure 4: Index of NI employee jobs, by enterprise size, Dec 07-Mar 09
                                          • Overview of industry sectors
                                            • Property market crash has knock-on effect on rest of RoI economy
                                              • Before the crash
                                                • Figure 5: Comparison of Construction industry’s impact on RoI economy vs. EU average, 2006
                                              • Effect of recession on construction
                                                • Construction SMEs at the mercy of banks lending
                                                  • Employment in construction falls by 50%
                                                    • Figure 6: Employment construction, RoI, 2006-09
                                                  • NI construction sector continues to suffer from the property market slump
                                                    • Figure 7: NI Index of construction (seasonally adjusted), 2006-09
                                                  • Almost 7,000 job losses in the construction sector
                                                    • Figure 8: Construction jobs, NI, Q1 2006-Q1 2009
                                                  • SMEs turnover 28% of total manufacturing output in RoI
                                                    • Domestic market accounts for high level of SME manufacturing sales
                                                      • Figure 9: Manufacturing sales (€000) by enterprise size and sales location, 2006, RoI
                                                    • Traditional manufacturing sector affected worst than modern manufacturing
                                                      • Figure 10: Seasonally adjusted index of manufacturing, RoI, Jan 06-May 09
                                                    • Employment in RoI manufacturing falls by 130,000
                                                      • Figure 11: Employment in manufacturing industry, RoI, 2006-09
                                                    • NI SMEs sell 43% of total manufacturing output
                                                      • Figure 12: Manufacturing sales (£m) by enterprise size and sales location, NI, 2007/08
                                                    • 5,000 manufacturing jobs in NI lost between 2008 and 2009
                                                      • Figure 13: Manufacturing jobs, NI, Q1 2006-Q1 2009
                                                    • RoI services sector
                                                        • Figure 14: Employment service sector, RoI, 2006-09
                                                      • NI services in decline from mid-2007
                                                        • Figure 15: Index of NI Services, Q1 2006-Q1 2009
                                                      • Service sector jobs decrease by 1.4% from 2008-09
                                                        • Figure 16: Service Sector jobs, NI, Q1 2006-Q1 2009
                                                      • Recession has a negative effect on entrepreneurship
                                                        • Figure 17: Percent of adult population engaged in Entrepreneurial activity, NI and RoI, 2004-08
                                                      • Necessity entrepreneurs
                                                        • Entrepreneurs to boost economy
                                                        • Broader Market Environment

                                                          • Key points
                                                            • Boom to bust as RoI falls deeper into recession
                                                              • Figure 18: Economic outlook, RoI, 2008-10
                                                            • RoI’s ‘tax and cut’ policy provides little relief for small businesses
                                                              • NI faces recession in 2009
                                                                • Figure 19: Economic Outlook, NI, 2008-10
                                                              • Recession hitting small businesses in NI harder than UK counterparts
                                                                • Figure 20: GDP and unemployment rates NI, RoI and UK
                                                              • Is the worst of the recession over?
                                                                • Boom to bust: the Irish property market decline
                                                                  • Figure 21: Quarterly average house price, RoI, 2005-08
                                                                  • Figure 22: Quarterly average house price, NI, 2005-08
                                                                • Property market slump creates downward spiral of debt for banks
                                                                  • Credit crunch restricts business finance
                                                                      • Figure 23: Types of finance used by SMEs (% of SMEs), Ireland and UK, 2005
                                                                    • Official measures to improve SME access to finance
                                                                      • Figure 24: UK/RoI government initiatives to improve SME access to finance, 2008-09
                                                                    • The effect of tightened credit on SMEs
                                                                        • Figure 25: Loans to SMEs by economic sector, Irish Banks, June 2008-February 2009
                                                                      • Are banks wary of SME borrowing?
                                                                        • Micro companies bearing the brunt of recession
                                                                          • 22% of SME loans in trouble
                                                                            • Figure 27: Profile of SME credit grades, RoI, June 2009
                                                                          • No improvement in credit availability in NI
                                                                            • Rates relief
                                                                              • Late payments costing SMEs
                                                                                • Figure 28: Average debtor days for SMEs, RoI, Q3 2007 to Q2 2009
                                                                              • Strong Euro erodes competitiveness
                                                                                • Figure 29: Euro to Sterling Rate, January 2008 to May 2009
                                                                              • Value of RoI exports falls by almost €3 billion
                                                                                • Figure 30: RoI Exports, 2006-09
                                                                              • Exchange rate sees 12% decrease in trade to UK
                                                                                • Figure 31: Exports from RoI by receiving country, Q1 2008-Q1 2009
                                                                              • Cross-border shopping
                                                                                • Figure 32: Estimated total cost of cross-border shopping to RoI economy, 2007-09
                                                                              • The impact of cross-border shopping on SMEs
                                                                                • RoI minimum wage among highest in EU
                                                                                  • Figure 33: Monthly gross statuary minimum wage rates (€), 2009
                                                                                • Irish electricity costs among highest in Europe
                                                                                  • Figure 34: Industrial electricity prices for small and medium consumers, EU, July-Dec 2008
                                                                                • ‘Think small first’
                                                                                  • RoI company failures increase by 104%
                                                                                    • Figure 35: Summary of creditors’ voluntary liquidations, high court liquidations, receiverships and examinerships, RoI, 2004-08
                                                                                  • NI insolvencies increase by 27% in 2008
                                                                                    • Figure 36: Company insolvencies, NI, 2003-08
                                                                                  • Reduced demand as population shrinks
                                                                                    • Figure 37: Immigration and emigration numbers RoI, 2001-08
                                                                                    • Figure 38: Immigration and emigration numbers, NI, 2001-08
                                                                                • Long-term Impact of Recession on SMEs

                                                                                  • Key points
                                                                                    • Future brain drain threatens
                                                                                      • Figure 39: Unemployment claimants by age, RoI and NI, Feb 2008 and 2009
                                                                                    • Will organisations holding back on graduate recruitment face financial problems in the future?
                                                                                      • Recession sees rise in demand for postgraduate studies
                                                                                        • Innovation suffers as R&D budgets contract
                                                                                          • Surviving SMEs will be leaner and more competitive
                                                                                          • Market Value and Forecast

                                                                                            • Key points
                                                                                              • Figure 40: SME market size, IoI, 2003-13
                                                                                              • Figure 41: Index of SME market size, IoI, 2003-13
                                                                                            • Key points
                                                                                              • Majority of SME turnover in services sector
                                                                                                • Figure 42: SME market value by industry sector, €m, IoI, 2008
                                                                                              • Construction
                                                                                                • Figure 43: Market value of SME construction output, IoI, 2003-13
                                                                                              • Manufacturing
                                                                                                • Figure 44: Market value of SME manufacturing turnover, IoI, 2003-13
                                                                                              • Services
                                                                                                • Figure 45: Market value of SME services turnover, IoI, 2003-13
                                                                                            • Strengths and Weaknesses

                                                                                              • Strengths
                                                                                                • Weaknesses
                                                                                                • Appendix

                                                                                                    • Figure 46: Make up of RoI businesses by enterprise size band and persons employed, 2008*
                                                                                                    • Figure 47: Industrial enterprises, by enterprise size, RoI, 2006
                                                                                                    • Figure 48: House completions by year, RoI 2001-08
                                                                                                    • Figure 49: Total employment and construction sector components, EU and RoI
                                                                                                    • Figure 50: Number of VAT registered construction companies, RoI, 2002-07
                                                                                                    • Figure 51: Persons engaged in manufacturing, by enterprise size, RoI, 2006
                                                                                                    • Figure 52: Services sector profile, RoI, 2006
                                                                                                    • Figure 53: Manufacturing sales (£m) by enterprise size, NI, 1997/98-2007/08
                                                                                                    • Figure 54: Company insolvencies by industry sector for 3 Months ended 31 March 2007-09
                                                                                                    • Figure 55: Company insolvencies by industry sector, RoI, 2004-08
                                                                                                    • Figure 56: Index of persons on the live register by nationality, RoI, May 2007-May 2009

                                                                                                Companies Covered

                                                                                                To learn more about the companies covered in this report please contact us.

                                                                                                Impact of Recession on SMEs (Industrial Report) - Ireland - September 2009

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