Irish SMEs Appear To Struggle More With Rising Costs Than Their Global Competitors
Last month (October 2019), Bibby Financial Services, a top UK independent invoice finance specialist, published its latest Global Business Monitor report. It’s an international survey of more than 2,300 small and medium-sized companies across 13 countries - the UK, Ireland, Canada, the US, Singapore, Hong Kong, Poland, Czech Republic, Belgium, France, Slovakia, the Netherlands and Germany. Worryingly, the survey revealed that Irish SMEs are more likely to have difficulties with cashflow, more so than their international competitors. Indeed, well over a third (38%) highlighted cashflow as a significant concern.
Small companies across the world have described increasing costs as being their biggest challenge, with this particularly being the case in Ireland. Here, almost half (49%) of SMEs indicated that it’s a major obstacle to company growth, compared to an average of 42% globally.
The report has also highlighted how SMEs view the impact of political uncertainty worldwide. A very large proportion (72%) of Irish companies regard Brexit as being the gravest threat to global economic growth. This is followed by issues in the American political landscape as well as the rise of protectionist economic policies globally.
When it comes to Irish SMEs trading internationally, the United Kingdom continues to offer best value and the most opportunities, followed by the Germany and the USA, as well as France and Spain. But with Brexit looming large, nearly two-fifths (39%) of SMEs in the Irish Republic say they are looking at the possibility of exporting to markets further afield from the UK. Despite this, 82% of companies believe that more challenges are on the horizon in international trading generally, with foreign exchange fluctuations being a key concern for many. Irish SMEs are however the fourth most optimistic about the performance of the Irish economy according to the survey, with nearly 60% of SMEs believing it to be strong.
The good news also is that more than half of SMEs reported sales growth over the last 12 months, and expect sales to continue increasing despite Brexit uncertainty. Of those that forecast growth, 72% are expecting it to come from an increase in new customer numbers.
The report also indicates that increasing overheads and costs are also very real challenges that face Irish SMEs today. In fact, the proportion of companies that feel Government policy is favourable to them has dropped by over half, down to just 9% this year from 18% in 2017. Availability of finance is another major concern, with just 21% of respondents saying it was ‘excellent’ or ‘good’, down from 33% in 2017. The number of companies rejected for external finance increased too, from 10% in 2017 to 19% in 2019.
The take-home message overall however is that the robust economic performance of the Irish Republic to date has meant that SMEs here have remained generally optimistic about the state of their global trade. However, the risk is that underinvestment in preparing for Brexit will have a negative effect on Irish businesses, and many SMEs don’t have the resources to put in place the specific contingency plans required. There is also an indication that a large number of SMEs are being rejected for external finance when going down traditional lending routes. Therefore, it’s more important than ever that smaller sized companies look beyond the major banks and engage with a broader range of financing options, which are likely to be better suited to their needs.
How R&D Tax Credits can offer Irish companies a much needed financial boost
The R&D Tax Credits scheme is designed to encourage growth and innovation, as well as boost spending on R&D activities for Irish companies. Since the scheme’s launch in the year 2000, it’s been a very a popular and lucrative financial incentive administered by the Revenue. The credit is calculated at 25% of eligible expenditure and is used against the Corporation Tax bill that companies in Ireland must pay.
Many organisations aren’t aware of their eligibility for R&D Tax Credits and many more do not claim their full entitlement. This could be either through misinterpretation of the rules around how to claim, or simply because they’re worried about the repercussions of over-claiming. This is where we can help.
Which companies will qualify?
Any Irish company in any sector or industry may qualify for R&D Tax Credits. The important thing is that it has undertaken innovative activities that seek to achieve some advancement in science or technology. The R&D work must also look to address some level of technical uncertainty that a competent professional would not be able to solve easily. Essentially if the project has required testing, experimental activities and research, then there’s a good chance that it will qualify for R&D Tax Credits. It’s about the company taking risks to innovate, improve, or develop a product, process, or service - or enhancing a new one. If it does this, then a successful R&D tax relief claim is in reach.
You can find out more on our R&D Tax Credits page.
The acid test
A good way of determining if work qualifies for R&D Tax Credits is to ask yourself whether your team faced scientific or technological uncertainties at the beginning of the project. This means that they should not have known from the outset whether a particular scientific or technological goal was actually achievable. If you can explain, prove and demonstrate that this was the case when you make your application, and show that you’ve broken new ground, your claim has a very good chance of being approved.
Do you have a question relating to R&D or need further advice?
We understand that navigating the process around making an R&D Tax Credit claim can be daunting at best. Our team is based across offices in Dublin, London and Leicester, and consists of specialist accountants and Revenue advisors with years of experience behind them. We’re all on hand to help you make the most accurate, professional R&D tax relief claim possible, with no hassle or fuss.
Developed by our professional team of consultants, accountants and specialists at Myriad Associates, the Tax Cloud platform can assist Irish businesses and accountants in wmaximising thier R&D Tax Credits applications easily and simply.
If you have any questions or would like to discuss R&D Tax Credits - or your company’s plans for innovation - call our team today on +353 1 556 2001 or use our contact page.
- Submitting R&D tax claims since 2017
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- Over €10m claimed and counting
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