New ESRI research explores trends in investments among small and medium-sized enterprises (SMEs) in Ireland

May 02, 2025

Macroeconomics
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The Economic and Social Research Institute (ESRI) has released a new report, co-authored and funded by the Department of Finance, titled SME Investment Report 2024: Developments Between 2016 and 2023. The report provides an analysis of investment trends among small and medium-sized enterprises (SMEs) in Ireland using data from the Department of Finance Credit Demand Survey.  

Key Findings:

Investment Trends:

  • Nearly 60% of SMEs invested in capital assets in 2023, an increase from 2020 and 2021 (55% of SMEs) but still below the pre-pandemic levels (64% of SMEs).
  • In nominal terms, the mean and median investments have increased and recovered to pre-pandemic levels. However, after accounting for changes in price levels, the mean and median are below 2019 investments.
  • Investment by type of assets varied, with 18% of firms investing in buildings, 28% in transport equipment, and 42% in machinery and equipment.

Investment Constraints and Adequacy:

  • The large majority (79%) of enterprises are content with their current level of assets and investments.
  • Willingness to expand operations has decreased slightly compared to 2021, indicating increased risk aversion among some firms.
  • Access to financing as a major barrier has decreased, with 27% of firms reporting it as a constraint to investment compared to 34% in 2021.

Investment Financing and Credit Developments:

  • Internal funds remain the predominant source of investment financing for SMEs.
  • Among those SMEs that obtained a loan, the median interest rates increased from 3.6% in 2021 to 5.6% in 2023.
  • Among those SMEs that did not seek a loan, 6% of SMEs cited high costs of borrowing as a reason for not seeking a loan. In 2021, only 2.3% cited high costs of borrowing.

Digitalisation and Decarbonisation:

  • 36% of firms invested in digital assets in 2023, down from 41% in 2021. Among those who invested in digital assets, the median spend was €6,000.
  • Climate- and energy-efficiency–related investments fell in 2023, both in terms of the proportion of firms and median expenditure from €34,000 to €20,000. At the same time, the proportion of SMEs indicating that climate change adaptation is important for their business fell across all sectors and SMEs of all sizes.

Dr Conor O’Toole, the leading author of the report, said:

“Investment in SME sectors has recovered compared to pandemic lows. However, in real terms, the levels have not reached pre-pandemic peaks. This is concerning given the importance of investment for long-term growth. In particular, a notable fall-off in climate-related investments represents a challenge for the decarbonisation pathway.”

Commenting on the release, Minister for Finance Paschal Donohoe said:

“The government is committed to supporting the SME sector in Ireland. This research will add to our understanding of the Irish SME investment environment and prove invaluable to the formation of policy, not only for my Department, but a number of other important financial bodies in Ireland.”