Eight-in-ten Irish SMEs invested in 2016

New research by the ESRI and the Department of Finance reveals that eight-in-ten Irish SMEs invested in fixed or other assets in 2016. Using new survey data, compiled to address knowledge gaps around the investment activity of small Irish companies, the research shows a wide and varied pattern of investment across companies.

Just over half of Irish SMEs invested in fixed assets (i.e. buildings, machinery or transport), while a much larger percentage (70%) invested in staff training. However, only 7 per cent of SMEs reported investing in intangible assets (such as R&D and patents). While intangible assets constitute an important component of overall investment in the Irish economy, this type of investment is less prevalent among smaller Irish indigenous companies.

Furthermore, the research reveals that businesses are funding a high share of investment using internal funds rather than borrowing. Irish SMEs also had high liquidity levels in 2016 with liquid assets representing 35 per cent of their turnover on average.

At the same time, almost 80 per cent of SMEs reported satisfaction with their investment levels or current capacity and a capital gap exists in only one-in-five enterprises. This suggests most Irish SMEs are investing sufficiently. For those with a capital gap, a lack of internal funds, rather than access to external finance, was identified as the main reason.

Conor O’Toole, ESRI researcher and author of the report, commented: “Investment is critical to the success of Irish businesses and their ability to grow. This study shows that many SMEs are investing with fewer than one-in-five having less capital assets than they would wish. Irish firms also have a high level of internal funds which would give them scope to expand investment if they wished.”