How resilient are Irish SMEs to input cost inflation?
Tamanna Adhikari and
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Tamanna Adhikari: Central Bank of Ireland
Niall McGeever: Central Bank of Ireland
No 6/FS/23, Financial Stability Notes from Central Bank of Ireland
The trading performance of Irish small and medium enterprises (SMEs) has thus far proven resilient in the face of significant input cost inflation. Turnover levels increased in 2022, with firms passing on cost increases to customers. Higher prices and exceptionally strong consumer demand broadly allowed most firms to maintain or even increase their profit margins, though a fifth of the firms saw their margins fall. Simulation evidence suggests that profit margins would remain robust in 2023 under baseline projections. Nonetheless, our analysis shows that profit margins would be sensitive to a slump in consumer demand and persistently elevated costs.
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