Half of SMEs cancelling or freezing expansion plans because of Brexit uncertainty

HALF of SMEs in the Republic of Ireland say they are cancelling or freezing their investment and expansion plans because of Brexit uncertainty.

Today’s published AIB Brexit Sentiment Index underscores growing pessimism and, in some quarters, a sense of paralysis among small and medium-sized enterprises as the October 31 deadline nears.

The quarterly survey of 500 SME executives found just 30pc were sticking to their investment and expansion plans, while 20pc were reviewing them and 50pc had stopped them entirely because of Brexit, a 10-point increase since the last Brexit sentiment report in July.

The shift in mood is even starker in Northern Ireland, where 66pc of 200 firms surveyed said they have postponed or cancelled investment and expansion plans, up from 38pc just three months ago.

When asked if they had any formal plans for Brexit scenarios in place, firms on both sides of the Border increasingly admitted to having none.

In the Republic, 41pc said they had no plan, up one point since July; in the North, 53pc Brian Gillan, business chief at First Trust Bank in the North

said no, up two points. Only 7pc of SMEs in the State said they had formal plans, and 6pc in the North.

However the survey – conducted by polling firm Ipsos MORI – did show that strong minorities of SMEs in the Republic of Ireland were making smart moves to diversify trade.

It found 39pc of firms that export to the UK had started selling into new markets outside the UK and 45pc of importers had identified new non-UK suppliers.

Catherine Moroney, head of business banking at AIB, said the survey showed firms tended to become more pessimistic the closer they are to the Border because they “are particularly vulnerable to exchange rate swings”.

Ms Moroney said professional services was the only sector that did not see sentiment decline versus the previous quarter, while sectors particularly exposed to Brexit losses – manufacturing, transport and tourism – register “the most negative sentiment”.

She said the growing reluctance of businesses to invest “is translating into businesses also postponing bank borrowing for capital investment”.

The Border divides opinion north and south, with a majority of Irish SMEs – 59pc, up 21 points since July – now expecting a “hard” Border with fixed checks to emerge. But Northern Irish SMEs take a more benign view, with just 32pc anticipating a hard Border, up 18 points.

Brian Gillan, head of business and corporate banking at First Trust Bank in Northern Ireland, said the sharp fall in northern sentiment – most severely in manufacturing and tourism reflected growing confusion over “what a no-deal [Brexit] would mean”.

“Unfortunately for business,” he said, “this uncertainty continues to play havoc with their planning, decision-making and overall confidence.”