New data from the Linked Finance Optimism Index, conducted in partnership with Ipsos B&A, reveals that optimism among Irish SMEs has reached its strongest levels in four years. The latest findings highlight a surge in confidence, with businesses forecasting 2025 as a year of growth, stability, and increased activity.
A Positive Outlook for Irish SMEs
Optimism levels have risen to 67% across all SMEs, a sentiment that mirrors the business confidence seen in late 2021 before global economic uncertainties took hold. Larger SMEs (10-250 employees) are particularly upbeat, with 77% expressing optimism about the business environment.
Key factors contributing to this positive outlook include stronger business activity, improved profitability, and stable employment levels, all of which signal a healthy SME sector that is bouncing back from the challenges of recent years.
Business Activity on the Rise
The Index reports that business activity is expected to steadily increase, with large businesses, exporters, and Dublin-based firms leading the way. The final quarter of 2024 showed a 10% year-on-year increase in projected business activity for Q1 2025, demonstrating a clear trend of sustained growth.
Confidence in government economic policies also plays a role, with 47% of businesses expressing confidence in the new Fianna Fáil/Fine Gael coalition’s ability to support SME growth.
Employment and Profitability at Strong Levels
The report reveals positive trends in employment, with 96% of businesses seeking to maintain or increase their workforce in 2025. Mid-to-large companies are driving job creation, while micro businesses (1-3 employees) have largely held steady.
Profitability has also seen a notable improvement. While smaller firms continue to face some challenges, six in ten mid-to-large businesses reported higher operational profits year-on-year. Dublin-based businesses are particularly benefiting from this upward trend.
Challenges and Sectoral Differences
While the overall outlook is positive, certain sectors are experiencing slower recovery. The retail and wholesale industries continue to struggle, with some high-street brands facing closures and job losses. Additionally, micro businesses remain neutral in their activity levels, indicating that smaller enterprises may need further support to achieve sustained growth.
There are also concerns about global economic factors, including potential tariffs and trade uncertainties with the new US administration. The next quarter’s findings will provide deeper insights into how these factors may influence SME sentiment in the coming months.
Price Stabilization and Business Confidence
A positive sign for businesses and consumers alike is the stabilization of prices. Nearly 60% of businesses are charging the same prices as in Q4 2023, indicating a slowdown in cost-driven price increases. This shift suggests that businesses are adapting to a more sustainable pricing model, which could contribute to long-term stability and growth.
A Resilient and Optimistic SME Sector
Despite past challenges, the Irish SME sector has demonstrated remarkable resilience. As Niall O’Grady, CEO of Linked Finance, points out: “It’s great to see business optimism, outlook and activity among Irish SMEs at such a high level. We can also see this reflected in the demand for loans at Linked Finance as SMEs continue to grow. As ever, not all sectors are recovering equally, with retail and wholesale struggling, but the overall picture is more positive.
As we move further into 2025, the data suggests that Irish SMEs are well-positioned for continued success. With confidence levels at a four-year high, businesses are looking ahead with optimism, prepared to navigate any future challenges with the same resilience that has defined the sector in recent years.
