The Irish economy is reportedly on its strongest footing since 2001, with an interest rate on government debt below 3 per cent, and a rapidly growing economy. Ireland’s debt burden has dropped to 70 per cent of GDP last year, down from a peak of 123 per cent in 2013. This is significantly stronger than the wider euro zone average, which comes in at 88 per cent of GDP.However, not all is as well as it seems.
Ireland’s debt load is at 269 per cent of government income, ranking behind weak EU economies like Greece and Cyprus. Additionally, Ireland is currently forced to pay 7.8 per cent of government revenues toward interest, compared to the EU’s 4.8 per cent average. Experts also warn that US tax reforms, Brexit, and a relatively stronger euro will result in slower growth and harder times for Irish businesses in 2018. This could spell trouble on the horizon for the Irish economy in 2018, and for small Irish businesses.
Slowing foreign investment
In the past decade, Irish business has benefited enormously from foreign direct investment. While this hasn’t abated recently, experts expect this investment to slow significantly in the coming year because of a relatively strong euro, and the US’ recent tax reforms.
The pound sterling is weak, and the euro strong
The pound has lost significant value against the euro in the past year. While this makes it easier to invest in the UK, it also means UK investors can’t invest as effectively in Ireland. The pound simply doesn’t have the same purchasing power as it did in past years, meaning that British investors don’t have the same opportunities in the country that they had in the past.
US tax reform
While Ireland attracts many investors from all over the world, some of the most significant are major US technology companies like Google and Facebook. The US’ recent tax reforms massively benefit businesses like these, cutting corporate tax rates from 35 per cent to 21 per cent. This effectively eliminates much of their incentive for operating in Ireland in the first place. While this won’t necessarily result in American business investors pulling out of the country, it is likely to slow or halt new investments.
Slowing foreign investment hurts SMEs
The amount of investment brought in by large US tech companies might not seem immediately relevant to a small business owner in Ireland, but all investment matters. Large foreign businesses directly and indirectly support a lot of other industries, from their suppliers, to local electricians and construction companies, to whatever establishments their employees frequent on their lunch break. Even just the wages they pay to their employees enable that segment of the Irish population to purchase goods and services in the first place.
A loss of foreign investment hurts everyone, and SMEs need to be prepared to manage any resulting impacts on their own business. Different industries are impacted differently; some might lose important clients, while others might find that their customer base simply can’t afford their products and services as well as in the past, resulting in fewer and lower cost purchases.
Businesses need to stay on top of cash flow
Fundamentally, these kinds of disruptions first present themselves to business owners as cash flow interruptions. Businesses that can’t manage these kinds of interruptions in the short term may not even survive long enough to attempt to address and adapt to the larger situation. Because of that, the most important preparations that businesses need to make are about maintaining sufficient working capital in an otherwise unreliable financial environment.
A simple and fast way to come up with additional funds for your business is to use invoice financing. Invoice financing allows you to trade in an outstanding invoice for most of its value up front. This makes it an excellent way to give yourself an advance on future revenue. The amount of funds you can access this way is only limited by the value in outstanding invoices that you have available.
Unsecured business loans
An unsecured business loan can provide additional funds when invoice financing doesn’t produce sufficient capital in the short term. These work more like traditional loans, but if you’re working with a financial institution like Fifo Capital, you’ll be able to access your funds in less than 48 hours instead of the usual weeks or months that businesses are typically forced to wait when working with a traditional bank.
There are many additional financing options that businesses can take advantage of to make ends meet when dealing with a cash shortage. It’s a good idea to take the time to reach out to a representative with your financial institution to discuss which options are best suited to your particular situation before making any final decisions. By ensuring that you and your business recognise incoming cash flow issues, and are prepared with solutions in advance, you can give your business the tools it needs to survive and thrive while competitors struggle.