The DKM/BPFI SME Market Monitor is a quarterly publication commissioned by the Banking and Payments Federation Ireland (BPFI). The purpose of the Market Monitor is to present up-to-date trends across a range of indicators which are important for the performance of the SME sector. The indicators presented are grouped under four headings:
This is the tenth publication of the DKM/BPFI SME Market Monitor, prepared for the Banking & Payments Federation Ireland (BPFI). The purpose of this Market Monitor is to present up to date trends across a range of indicators which are important for the performance of the SME sector.
A total of fifteen indicators, which are published on a quarterly and/or monthly basis, are presented in tabular and graphical form with a brief commentary. This publication also contains a summary commentary which seeks to bring an overall assessment of what these indicators are telling us about the environment for SMEs.
Upon examination of the fifteen indicators, there appears to be an emerging concern about the impact of international factors, notably Brexit and the new US President, on the Irish economy. That concern is evident from recent trends in consumer confidence, the moderation in the volume growth in retail sales, increases in input prices in the manufacturing, food and construction sectors, a decline in the number of tourists visiting from Britain and an increase in the savings ratio.Download Report
The DKM/BPFI SME Market Monitor, October 2016, prepared by DKM Economic Consultants (DKM) and published today by Banking & Payments Federation Ireland (BPFI), notes the continuation of the positive economic environment for SMEs as the economic recovery continues to gather momentum.
The latest DKM/BPFI SME Market Monitor highlights the importance of ascertaining the true underlying performance of the economy for SMEs by examining a broader set of indicators other than the headline GDP and GNP figures, which have been subject to substantial revision.
By and large, the latest assessment of the SME economic environment, based on 15 indicators, suggests a modestly positive environment for SMEs; however, it should be noted that a number of indicators were unchanged, whilst a small number registered declines. DKM’s Annette Hughes questioned whether these can be attributed to uncertainty over Brexit, but acknowledged that it is perhaps too early to say. She also stated that “the most useful indicator of activity for the SME sector is underlying domestic demand, increased by 8.7% on an annual basis in Q2’16. But this increase reflects substantial revisions to the investment component of the National Accounts. Excluding intangibles, domestic demand still expanded, but at a lower rate (1.9%) in year-on-year terms. With the annual rate of growth in the volume of consumer spending having slowed in each of the last three quarters, there is therefore no room for complacency”.
The report also points to key positive trends in other indicators including the increase in employment, the strong performance in the tourism sector, the continuing fall in unemployment, all important for sustaining the performance of the SME sector. At the report launch, one week in advance of the forthcoming budget, the challenge of maintaining competitiveness was highlighted, as SMEs are key suppliers to the exporting sector.
The DKM/BPFI SME Market Monitor, May 2016, prepared by DKM Economic Consultants (DKM) and published today by Banking & Payments Federation Ireland (BPFI), highlights the positive impact being felt by SMEs as the economic recovery continues to strengthen and grow.
Tracking trends across 15 different indicators which are important for the performance of the SME sector, the latest DKM/BPFI SME Market Monitor highlights the improving environment for SMEs spurred by a rebound in domestic demand and supported by an expanded labour market, with DKM’s Annette Hughes stating that: “With 2016 well underway, indications are that the continuing economic recovery is increasingly benefitting SMEs. The strengthening in GDP, with 7.8% growth in 2015, was associated with a broadening of the economic recovery, which has been in train now for the past eighteen months. Both have been facilitated by the continued improvement in the labour market which has contributed to the rebound in domestic demand, a key driver of the recovery.”
The report also points to key positive trends in other indicators including a record breaking performance in the tourism sector and the continuing fall in unemployment and underlines the importance to SMEs of sustaining this recovery. However it also outlines the challenges which SMEs face, sounding a note of caution in respect of average earnings and the importance of maintaining competitiveness: “With average earnings in the economy still behind peak levels, they began to recover in 2015, increasing by 1.7%. With momentum gathering across the economy for further increases in earnings, it will be important not to jeopardise any further positive benefits from a continued recovery in employment for SMEs across the country by excessive wage demands, as some locations have yet to join the recovery.”Download Report
SME Market Monitor shows underlying improvement in economic environment for SMEs
The DKM/BPFI SME Market Monitor, December 2015, prepared by DKM Economic Consultants (DKM) and published today by Banking & Payments Federation Ireland (BPFI), highlights an underlying improvement in the economic environment for SMEs with many indicators rising and with others stabilising.
Tracking trends across 15 different indicators which are important for the performance of the SME sector, this latest DKM/BPFI SME Market Monitor points in particular to the significance of strengthening domestic demand and ongoing recovery in consumer spending, with DKM’s Annette Hughes stating that:
“One of the most important indicators for SME firms, Domestic Demand, continued an upward trend in the first six months of the year, with the quarterly value surpassing €42 billion (constant 2013 prices) in Q3’15 for the first time since early 2008. Investment was the star performer in Q3’15 for the second quarter in a row. Although overall retail sales were marginally lower in the month of October, the ongoing recovery in consumer spending and in the level of housing transactions is having a positive impact on sales in selected sectors”
With indicators showing an increase, by homeowners, in their expenditure on home renovations, the report outlines the success of the government’s Home Renovation Scheme and the positive impact which private household spending will have into next year:
“A further interesting measure of the extent of expenditure on home renovation and refurbishment works is available from the Home Renovation Incentive (HRI) scheme for owner occupiers and investors. This scheme attracted nearly €625 million worth of construction work by 6,341 contractors on 40,477 projects covering 28,911 properties since it was introduced in 2014. Combined with the bounce back in residential construction activity, a further increase in housing transactions and disposable incomes should support private household spending on home renovations next year. This will further sustain SME businesses both directly and indirectly supplying goods and services in this sector”.
The DKM/BPFI SME Market Monitor, March 2015, prepared by DKM Economic Consultants (DKM) and published today by Banking & Payments Federation Ireland (BPFI), sees further evidence of an underlying improvement across a range of indicators for the SME sector, with some challenges still remaining.
Tracking trends across 15 different indicators which are important for the performance of the SME sector, this latest DKM/BPFI SME Market Monitor points to an improvement in the retail sector, with DKM’s Annette Hughes stating that:
“There was an encouraging recovery in the Retail Sales Volume index in July to its highest point in over seven years. While much of this performance reflects the trends in Motor Trade volumes, the Retail Sales Volume index excluding motor trades moved up a notch in July after declines in the previous two months. However, there needs to be a more solid recovery across all retail sales if there is to be a sustained improvement in the performance of SMEs in the medium-term.”
The report also highlights positive performance in the tourism sector where SME firms serving and supplying the sector are benefiting from exceptional tourist numbers. Commenting on these positive trends in the tourism sector, Annette Hughes states that:
“With 2.11 million (SA) overseas trips to Ireland in Q2’15 – almost 60% from Great Britain and North America – the current tourism strategy, which envisages 10 million overseas visits by 2025 compared with 7.6 million in 2014, seems achievable. The retention of the 9% VAT rate, introduced as a temporary measure in June 2011, in the next Budget will be seen as central in moving towards this target.”Download Report
The DKM/BPFI SME Market Monitor, March 2015, prepared by DKM Economic Consultants (DKM) and published today (Monday, March 30th) by Banking & Payments Federation Ireland (BPFI), sees a reasonably healthy set of economic indicators as boding well for SMEs in 2015.
Tracking trends across 15 different indicators which are important for the performance of the SME sector, this latest DKM/BPFI SME Market Monitor points in particular to the upturn in domestic demand in 2014 – making its first real contribution to GDP growth since 2007. This is evident in both consumer and government expenditure which were marginally higher in 2014 over 2013 and in total investment which expanded by 11.3%. As its author, DKM’s Annette Hughes, states:
“This development is very encouraging for all SMEs, but especially for those SMEs which rely solely on the domestic economy – some 92% of micro SMEs (employing less than 10 persons) are dependent on the domestic economy for their customer base. The continued strengthening of domestic demand and a confident consumer in 2015 will be vital for their sustainability.”
The DKM/BPFI SME Market Monitor also points to the declining value of the euro as presenting real opportunities for many of our SMEs: those operating in the tourism sector here at home as well as those engaged in international trade. Courtesy of a weaker euro, they can expect to generate increased export sales, particularly in the UK and Asia. On this point Annette Hughes concludes:
“Increases in export and tourism activity will contribute to economic activity. Then through various output and employment multipliers, the activities of other Irish firms supplying SMEs back through the supply chain and the additional wages generated and spent on goods and services in the wider economy can generate an even greater contribution to the economic recovery.”Download Report Download Press Release
The DKM/BPFI SME Market Monitor November 2014, prepared by DKM Economic Consultants (DKM) and published today by Banking & Payments Federation Ireland (BPFI), strikes a note of modest optimism around the prospects for the SME sector.
Tracking trends across a range of indicators which are important for the performance of the SME sector, this latest DKM/BPFI SME Market Monitor is associated with the best set of indicators for almost six years. As its author, DKM’s Annette Hughes, states:
“The performance of virtually every indicator in the Monitor has improved, with the possible exception of earnings and disposable income, which have yet to display signs of recovery…..The sustained increases in employment appear to be finally feeding through to consumption as all components of domestic demand increased in Q2 2014.”
Other notable positive trends identified in the DKM/BPFI SME Market Monitor include:
• Construction is bouncing back on foot of the renewed focus on the sector and should see substantial gains arising from the social housing measures in Budget 2015
• All components of Domestic Demand increased quarter on quarter in Q2 2014. Personal consumption increased by 0.3%, government consumption increased by 3.8% and investment increased by 9.1%.
• Overseas tourist numbers were up strongly and reached the highest number in any quarter since Q4 2008 in Q3 2014. The retention of the 9 per cent VAT rate in Budget 2015 will continue to support the sector, where many SMEs are active in the form of hotels, B&Bs, restaurants, bars and retail outlets.
• New lending to SMEs was up strongly in Q2 2014 (+55.7% year on year), albeit from a low base; while outstanding SME debt continues to fall.
The DKM/IBF SME Market Monitor can be viewed on the web at www.bpfi.ie and www.dkm.ieDownload Report Download Press Release
The DKM/IBF SME Market Monitor July 2014, prepared by DKM Economic Consultants (DKM) and published by the Irish Banking Federation (IBF), points to construction SMEs as having a key role to play in driving economic recovery. This is because SMEs account for 95% of persons employed in construction, generating 88% of total turnover and 96% of total value added in the sector.
As DKM’s Annette Hughes, the report’s author, states:
“There is real opportunity to grow turnover in the construction sector and deliver much needed jobs, housing and other infrastructure………….Then, through the various output and employment multipliers, the activities of other SMEs can receive a boost as Irish firms supply these firms back through the supply chain and the additional wages generated are spent on Irish goods and services in the wider economy.”
At the same time as profiling the better performing indicators of an improving economic environment for SMEs – including increasing employment and a rebound in the volume of certain categories of retail sales - the DKM/IBF SME Market Monitor points to the ongoing relative weakness of all-important domestic demand. Linked to this is the demand for funding from SMEs which, despite some positive news on the economic environment, is not increasing to any noticeable extent. For Annette Hughes the explanation is clear cut:
“As previously highlighted, SMEs require substantial and sustained increases in disposable incomes, consumer spending and domestic demand if there is to be a significant change in their attitudes towards seeking funds for investment and expansion as opposed to working capital purposes.”Download Report Download Press Release
The DKM/IBF SME Market Monitor Q4 2013, indicates that the year ahead could well mark a turning point if the momentum of existing positive trends can be sustained. However, challenges still remain for some SMEs around domestic demand and retail sales.
The report highlights the positive performance seen across a number of indicators for SMEs including increased consumer sentiment, growth in employment, sustained performance in manufacturing and expansion in construction activity, all of which suggest that the economy is now entering a recovery phase. However, the report highlights that challenges still remain and that, in order to see a meaningful increase in SME activity, improvements will have to be seen in the all-important indicators of domestic demand, retail sales and disposable income, which have yet to display any real signs of sustained recovery.Download Report
This issue of the DKM/IBF SME Market Monitor finds that there is evidence of an uplift in some indicators which could augur well for the prospects of SMEs in the months ahead. However, trends in others, which are most relevant for SMEs, notably domestic demand and retail sales, suggest that the trading environment for many SMEs remains difficult.Download Report