Food and agribusiness business confidence drops to lowest level in five years
Confidence among small Irish food and agribusinesses falls to its lowest level in five years, according to food advisory group Ifac.
Inflation, high wage expectations and Brexit have contributed to this dip in optimism, the group’s latest report reveals.
“One of the biggest challenges is rising input costs and for many maintaining margins means implementing tough price increases,” said David Leydon, head of food and agribusiness at the ‘Ifac.
More than half of participants in the Ifac study said rising raw material costs are the biggest threat to growth, while the majority of companies are looking at ways to cut costs and plan to raise prices. The cost of inventory management has also risen dramatically due to disrupted supply chains, Ifac said.
Many businesses have tried to access bank financing over the past 12 months to help ease the burden of these cost pressures and 90% have been successful. However, the European Central Bank’s latest interest rate hike could impact corporate finances as borrowing costs rise.
Staff shortages also continue to put companies under pressure. Nearly 70% of respondents experienced difficulty recruiting for the fifth year in a row, citing the availability of skills as the main reason companies struggle to hire.
Some companies have stopped planning for the future as succession strategies have fallen off the priority list.
Half of respondents said there was no interest from the next generation in taking over a family business, while other business owners said they hadn’t thought about the future of their business after their departure.
“This is a difficult time for Irish food and agribusiness SMEs following a global pandemic,” Mr Leydon said.
The drop in confidence comes after a market rebound from optimism levels in 2021 to a four-year high, Ifac said. The latest report showed that the Irish food industry can be resilient in the face of challenges, with 82% of businesses maintaining or increasing their turnover in the last 12 months.
Many companies are managing the current headwinds by taking cost-cutting measures, implementing price increases, managing contracts with buyers and suppliers, and actively focusing on cash flow management.
Report participants were either owners, managers or senior executives in the Irish food and agribusiness industry.
Ifac is made up of chartered accountants and financial advisers who have been providing specialized advice to the agricultural, agri-food and agri-food community since 1975. It should not be confused with the budgetary observatory of the same name.
It is a co-operatively owned professional services business operating from over 30 locations across Ireland, with over 450 people serving 20,000 clients nationwide. Ifac is the ninth largest accountancy firm in Ireland by turnover and the largest by number of clients.