2 in 3 entrepreneurs expect turnover to increase over the next 12 months despite the threat of a hard Brexit – according to new KPMG Entrepreneurs Barometer
Issued 27 August 2019. A new survey conducted during July 2019 by RED C Research on behalf of KPMG Ireland, the KPMG Entrepreneurs Barometer, shows that in spite of the threat of a hard Brexit, business sentiment remains positive among entrepreneurs in Ireland with 2 in 3 business owners saying they expect turnover to increase over the next 12 months. The average expected increase is 16%, with the increase being higher among smaller companies and those located in Dublin. 41% of respondents also said they expect to hire more staff in the next 12 months, but almost half of respondents (49%) said they have difficulties recruiting the right people for their business.
The KPMG Entrepreneurs Barometer was conducted in July among a sample size of 200 entrepreneurs throughout the Republic of Ireland, 150 of which have 10 – 49 employees, and 50 which have 50 – 100 employees.
We were a little surprised to see that although a hard Brexit is coming into sharper focus, entrepreneurs in Ireland are still optimistic about growth and employment over the next 12 months. We feel this is indicative of the fact that Irish entrepreneurs are extremely resilient and innovative.
Despite their overall optimism about the next 12 months, 67% of Irish entrepreneurs are concerned that Brexit will have a negative impact on their business. Of the remainder, 17% are of the view that Brexit will have no impact at all on their business, 12% say that Brexit will have a positive impact and 4% are unsure of its potential impact on their business. Naturally, exporting companies are more likely to expect a negative impact. More than half of respondents expect to be negatively impacted by the potential introduction of border checks and currency fluctuations – these are more likely to be larger and exporting companies.
While 60% say they have done some form of preparation for Brexit, only 17% of companies have done a full Brexit analysis. Of those who have carried out any Brexit preparation, 36% say they have incurred extra costs as a result of this preparation.
66% of respondents plan to expand in the near future. This will mainly be funded by working capital/internal funds (52%) and bank finance (40%). Smaller companies are more likely to use private equity and leasing/hire purchase to fund their expansion. However, these companies are less optimistic than larger companies in relation to the ease with which they can source funding. Just 1 in 3 of the businesses surveyed believe it is easy to access funding at the moment.
While virtually all (95%) entrepreneurs have been able to source suitable premises for their business, Dublin based companies are more likely to consider availability of suitable premises and the cost of renting/leasing as issues facing their businesses. Dublin based companies are also more likely to face issues relating to public transport and excessive traffic congestion. As expected given access to adequate broadband is not universally available, a significant proportion of those based outside of Dublin claim that their broadband access is not adequate for their business needs (40% versus 20%).
58% of entrepreneurs believe that the lack of availability of residential accommodation in Ireland is a disadvantage in their ability to recruit and retain staff, with 40% reporting that their staff are finding it difficult to find suitable residential accommodation.
The vast majority of those surveyed said they support more action on climate change, yet expressed concern about the impact that an increase in green initiatives could have on their bottom line.
The vast majority of companies (85%) support the move towards more action on climate change but over half (53%) have concerns about the increases in business costs these actions will bring.
When asked for their views in relation to the current tax regime, 75% of Irish entrepreneurs surveyed believe the regime is more favourable to multinationals, 53% say the system places a significant administrative burden on smaller businesses, and 38% believe the current tax regime puts Irish entrepreneurs at a disadvantage compared to those in Europe or the UK. 46% say the R&D tax credit is not working effectively for their business, while 42% believe that the tax regime does not encourage entrepreneurship and growth. Smaller companies are more likely to endorse these statements.
Among Irish entrepreneurs, alignment of personal tax rates for self-employed, capital gains tax reform and share scheme incentives tailored for SMEs are the top three elements they would like to see addressed in Budget 2020.
Irish entrepreneurs are very positive towards Enterprise Ireland with just over half saying they have used their services. Engagement with these state support services has been beneficial with more than 4 in 5 having received grants/investments as a result of their engagement.
Speaking about the KPMG Entrepreneurs Barometer, Olivia Lynch, Partner, KPMG Private Enterprise, said “This is an interesting snapshot of sentiment among Irish entrepreneurs at an important time for the economy. While we were a little surprised to see that although a hard Brexit is coming into sharper focus, entrepreneurs in Ireland are still optimistic about growth and employment over the next 12 months. We feel this is indicative of the fact that Irish entrepreneurs are extremely resilient and innovative.
It is clear, however, that they have some real concerns regarding some key tax policy issues which they would like to see addressed in Budget 2020. Entrepreneurs want to see more measures that will help them to compete at home and internationally. In relation to the talent pool, almost half of respondents said they were having difficulty recruiting staff with the right skill set for their business, which is probably to be expected as our economy approaches full employment, but points to the need to address this potential bottleneck for progress.”
“It is also interesting to note the sentiment towards climate action,” said Olivia Lynch, “with the vast majority of those surveyed saying they support more action on climate change, yet expressed concern about the impact that an increase in green initiatives could have on their bottom line.”