Two thirds (66%) of NI SMEs have reviewed, postponed or cancelled investment plans as a result of Brexit.
The AIB Brexit Sentiment Index for Q1 2019 reveals that less than half (42%) of SMEs in Northern Ireland (NI) have begun planning for or investigating the implications of Brexit. This compares to 64% in the Republic of Ireland (ROI). While there was boost in the number of SMEs from NI who have a formal plan in place from 2% in Q4 2018 to 6% in Q1 2019, 56% of businesses here have yet to commit to a Brexit plan.
Concerns over Brexit continue to impact investment plans with 57% of NI SMEs and 36% ROI SMEs that planned to invest in their business now postponing or cancelling their plans.
The Brexit Sentiment Index baseline is zero, with a potential range from +100 to -100. For Q1 2019, sentiment in Northern Ireland fell to –38 from -31 in Q4 2018 and reached an all new low of -52 in ROI, compared to -41 in Q4 2018.
The rise in negativity in NI among SMEs is driven by a range of factors including worries about the wider economic impact of Brexit (62%), lack of visibility (63%) and the impact Brexit is having on now – 42% – it’s most negative score to date.
Sentiment in Northern Ireland dropped across all sectors with tourism registering its lowest point at -41, followed by retail (-40) and manufacturing (-32). The percentage of businesses reporting a negative impact on sales in NI is now 21%, its lowest measure since the Index launched in September 2017.
Expectations of a hard border have increased slightly among NI SMEs to 17% in Q1 2019 compared to 10% in Q4 2018 – this jumps to 35% among Connaught / Ulster border based SMEs. When asked what their greatest concern would be in the event of a hard Brexit, businesses in both NI (25%) and ROI (33%) cited an impact on profitability as a result of trade being more difficult or expensive.
Brian Gillan, Head of Business and Corporate Banking and First Trust Bank said; “The overall sharp decline in business sentiment in NI to -38 [from previous wave of -31] is not surprising given the increased uncertainty that businesses were experiencing over Q1 2019. All sectors have decreased, with tourism in particular expressing the most negative sentiment of -41. Businesses continue to be most concerned about the future and Brexit’s potential wider economic impacts but despite the uncertainties, we’ve still not seen any pick up in their level of Brexit preparedness with only 44% of NI businesses having started Brexit planning or putting a formal plan in place. Reduced investment continues to be prevalent with 66% of businesses having reviewed, cancelled or postponed pre-Brexit plans.”
Commenting on Brexit preparations, Brian Gillan offered some advice to local SMEs. He said; “Our research shows that local SMEs (25%) expect their working capital needs to increase as a result of Brexit with many businesses already experiencing an increase in cost of sales due to currency fluctuations. We encourage all firms to therefore ensure they have considered and prepared for the potential Brexit impacts on their business, in particular to their cashflow. Despite the clock ticking down it is not too late and any steps you can take to consider the potential impact on your business and your supply chains would be better than none. Banks and other key advisors would be a good place to start and can help you understand the challenges and opportunities presented by Brexit.”
AIB’s Brexit Sentiment Index conducted by Ipsos MRBI is a quarterly survey of more than 700 SMEs in the Republic of Ireland and Northern Ireland that assesses the attitudes of SME business leaders on Brexit and the impact on their businesses.
Advertisement
