Business activity in the Irish SME sector has edged into negative territory for the first time since 2020, according to a new business confidence survey by lender Linked Finance.
Post pandemic trade was strongest for SMEs in 2022, and over the last three years that had remained in positive territory, until now.
While that sentiment reflects the overall general picture, sectors within the SME sector are still performing well, particularly larger businesses.
Linked Finance CEO Niall O’Grady said that it was understandable that some businesses are adopting a cautious mode, concerned about tariffs or revising their forecasts.
“We live in uncertain times, and it is not surprising that SMEs in Ireland are tempering their outlook given constant reports, and now confirmation, about tariffs. This is combined with continuing conflict in both Europe and the Middle East.”
One-in-three SMEs reported that business results were lower year-on-year, an increase of 2% on the same period last year. While the increase is not overly significant, it does show that several factors – both externally and domestically – are affecting the performance of SMEs.
We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences
Business optimism amongst all Irish-based SMEs surveyed was 67% six months ago, but that has now dropped to 61%.
Exporter optimism in the first quarter of 2025, which had increased due to a bounce in orders rushed to warehouses ahead of threatened tariffs in the US, has dissipated somewhat.
The retail and wholesale trade is the one area within the broader SME sector that saw increased optimism levels in the second quarter, with positive sentiment up 5% year-on-year.
Business activity and outlook
While just over two-in-three businesses reported that their activity is the same, or higher, compared to the same period 12 months ago, it is the first time in five years that the tracker tipped into negative territory in terms of the gap between positive and negative (-3%).
Given the uncertainty in the markets and geo-politics in the second half of 2025, this still shows a good degree of resilience.
While large businesses are holding up well, medium sized SMEs (4-9 people) have seen the biggest change year-on-year, with almost a quarter reporting that business activity is down compared to the same period last year.
Activity levels at indigenous businesses are almost flat year-on-year, while the number of exporters who experienced a drop in trade between the first and second quarters of this year jumped by 10% – mainly the result of increased activities in Q1 as exports were boosted ahead of incoming tariffs.
Dublin-based SMEs performing better
Dublin-based SME businesses are performing much better than those in the regions in terms of business activity. Dublin-based firms noted an improvement in activity – with 76% reporting trade was the same or higher – but for those based outside the capital, only 62% reported this was the case.
The sentiment for the third quarter of 2025 is now in slightly negative territory (-3% gap on positive over negative), with mid-sized businesses seeing the biggest impact here.
Only one-in-five expect the third quarter to bring a boost in business, compared to almost one-in-two when surveyed this time 12 months ago. On the positive side, large SMEs remain optimistic, with 46% expecting an upturn in business.
The Linked Finance CEO said there are several positive take-aways from the data, particularly that large companies remain bullish for the next quarter – “which is important as they employ the most people here”.
“In addition, micro businesses are seeing a slight improvement while the retail and wholesale trade is showing some green shoots,” he added.
The quarterly Business Confidence survey is conducted by Ipsos B&A on behalf of Linked Finance. In operation since 2013, Linked Finance has lent more €350m to the Irish SME sector, and recently raised €50m in wholesale funding that is available to its SME borrowers. The most recent survey was conducted several days before the EU and the US agreed a deal on tariffs.
Impact of global trade concerns
SMEs were asked how concerned they are about the possible impacts of a global trade war based on the US campaign of trade tariffs. Overall, almost one-in-four were not concerned about this. However, in terms of larger SMEs as a sub-group, 54% said that they were concerned this would have either a slight – or big – impact on their business, while one-in-three medium sized firms believed it would have a slight impact.
“While the recent announcement of 15% tariffs for many EU goods is not a welcome one, there is a bigger picture to consider,” according to Mr O’Grady.
“Many SMEs in Ireland provide services – and this sector continues to thrive – and is exempt from tariffs. We now have a stronger level of certainty about where things are at, which enables businesses to progress with investment. SMEs are now accustomed to ongoing challenges in the last five years, and I have no doubt that we will see more growth and optimism as the year goes on,” he stated.
Prices and profits
More than 50% of SMEs have held their prices over the past year, and 5% reported price cuts in the period. Just over 40% of firms have increased their prices. In the 24 months between the second quarter of 2023 and the second quarter of 2025, the number of SMEs charging higher prices has dropped by 10% – down from 52% to 42% – showing a possible easing of inflationary pressures.
Smaller SME businesses are more likely to be charging the same prices, while Dublin based businesses are more likely to be lowering prices (8%) compared to half that number (4%) outside the capital. Overall, prices are plateauing year to date.
While SMEs surveyed are still feeling the squeeze when it comes to profitability – with 32% reporting a drop in profit year-on-year – a growing number (44% – up 6% year-on-year) said that operational profit is the same. Micro businesses are stabilising somewhat with almost one-in-two reporting the same profit year-on-year, with mid-sized businesses just tipping into negative territory in the second quarter.
