A two-track SME economy is emerging as domestic firms expand and exporters contract. Linked Finance offers €10k–€500k in unsecured business loans to support growth through uncertainty.
Irish SMEs are hiring at the fastest rate in nearly a decade. Our latest Q1 2026 SME Business Optimism Index records the strongest employment reading since 2016 and confirms that domestic confidence remains firmly intact. But, this is only half the story.
Underneath it all, a growing chasm is emerging in the Irish SME sector. Whereas domestic-focused businesses are stable, confident, and expanding, exporting businesses are contracting. The gap between the two is one of the widest that we have ever witnessed. Q1 does not present us with a one-sided narrative, but rather it presents us with a two-track economy.
Our survey, conducted with Ipsos B&A among 370 firms nationwide between 16 April and 1 May, captures sentiment during a period shaped by ongoing geopolitical uncertainty and the immediate aftermath of the Easter fuel protests.
Job Creation Is Leading the Story for Small Medium Businesses
The standout finding from Q1 is the pace of job creation across the SME sector, now at its highest level in nearly a decade.
The employment balance (defined as the difference between the number of SMEs increasing versus decreasing their workforce) is currently +8, the strongest value since 2016. It is particularly strong among mid-sized companies (4-9 employees) and the services sector. SMEs outside Dublin have become leaders in hiring staff, consequently breaking the regional pattern we have seen in the Index during the last two years.
Overall optimism holds at 63.5% positive, broadly in line with Q4 2025. This signals a domestic SME economy that has steadied and is now confident enough to invest in people, even without a clear improvement in trading conditions. It can be said that Irish SMEs are not only surviving uncertainty; they are investing through it.
Emergence of a Two-Track Economy
Although domestic-oriented firms are moving forward, a clear division is emerging between SMEs involved in international trade and those that are indigenous.
Activity among exporting SMEs is down to -16, with a projected further decline to -19 in Q2 2025. Indigenous SMEs remain positive at +4. The gap of 20 points between the two types of firms is one of the largest recorded in the history of the Index.
This trend suggests the emergence of a two-track SME environment, whereby domestic firms either stabilise or grow, whereas firms exposed to international trade retreat as they are hit by the effects of renewed global instability.
Cost Pressures and Profitability
The price balance is currently at +39, indicating that 39% more SMEs are raising prices than lowering them. Operational profitability has dropped to -8%. Notably, the retail and wholesale sector continues to be the most problematic area for margins.
The challenge faced by many SMEs is clear: costs are being passed on where possible, but not fast enough to preserve margins.
SME Response to the Fuel Demonstrations
In this quarter, we also looked at the reaction of Irish SMEs to the fuel protests which occurred earlier this year.
Over half (54%) of SMEs agree to some degree with the protesters’ actions, with 37% opposing their actions. Agreement holds relatively steady by region, but importantly increases to 71% for those businesses with 10 or more employees.
The response of the Government to this situation garnered a mixed reaction; 29% of SMEs expect a resulting positive impact, while 37% fear a negative impact. Most importantly, one out of four SMEs outside Dublin sees the response as “very negative,” three times as high as in Dublin itself.
CEO Perspective: Resilience Amongst Strain
Linked Finance CEO Niall O'Grady commented:
"What this quarter really shows is a two-track Irish SME economy. Job creation is at its strongest level in years, which underlines the underlying resilience of the sector. But that headline number masks real strain among exporters, who are absorbing the cost of global uncertainty in real time and a profitability picture that has slipped back.
What we're seeing in our own loan book mirrors the survey: application activity is holding up well, but customers are drawing down funds more cautiously. Businesses continue to plan and invest, but are doing so with one eye on the wider environment. The focus for policymakers now is on reducing uncertainty - particularly around costs, trade conditions and access to finance - to support that momentum."
Q1 2026 reveals two different realities existing simultaneously on the Irish SME front.
Firstly, resilience is clear: record levels of employment creation, an underlying current of optimism, and local businesses able to hire new staff despite no improvement in their trading situation. This highlights the fundamental capability of Irish small businesses.
At the same time, however, challenges exist: Exporters retreating, profitability in negative territory, and a cost environment that shows no sign of easing. The divide between these two realities is significant and growing.
For SME owners navigating this environment, access to the right finance at the right time matters more than ever. Whether you're hiring, investing in growth, or managing cash flow through a period of uncertainty, having a funding partner who understands your business makes the difference.
Linked Finance offers unsecured business loans from €10,000 to €500,000 with credit decisions in as little as 24 hours. Apply for a business loan today or explore our Merchant Cash Advance for flexible, short-term funding tied to your card sales.
