A new survey shows that the unprecedented uncertainty arising from Brexit is finally affecting the Irish SME sector.
The latest BPFI SME Market Monitor, prepared by EY-DKM Economic Advisory Services and published by Banking & Payments Federation Ireland, tracks trends which are important for the performance of the SME sector.
The monitor outlines how, despite weathering the initial uncertainty, the continued indecision around the UK leaving the European Union is negatively affecting SMEs who now need to ramp up their preparations for the possibility of a no-deal Brexit.
According to the survey, SMEs are concerned about the sharp fall in consumer sentiment as well as a fall in retail sales for the third month in a row.
They are also worried about the level of visitors here from the UK, which have been overtaken by visitors from mainland Europe for the second quarter in a row.
"In the midst of continued improvements in disposable income and widespread job opportunities, consumer confidence since July last year has fallen off considerably, as the likelihood of either a no-deal Brexit scenario or indeed an extension of Article 50 have progressively increased," commented Annette Hughes, from EY-DKM Economic Advisory.
"Our analysis shows that consumers are struggling to balance the possibility of an undesirable Brexit outcome with the reality of favourable macroeconomic conditions," Ms Hughes said.
She said there is evidence that this is starting to impact the sectors where SMEs tend to operate, such as retail, food and accommodation.
These sectors are arguably also some of the most vulnerable to Brexit, she added.
Despite the strength of the Irish economy, a healthy labour market and double-digit growth in new lending to SMEs, Ms Hughes said the short-term outlook for SMEs is a growing concern.
"Ultimately, the prospect of a no-deal Brexit or indeed an extension of Article 50, in tandem with a slowdown in some of the euro zone's largest economies remains a serious downside risk.
"As a consequence, and notwithstanding Ireland’s strong macroeconomic performance, a great deal of caution is warranted in regard to the short-term outlook," she added.