Just over half (51%) of Ireland’s agri-food SMEs reported a fall in sales this year as a result of the COVID-19 pandemic, according to a report by farming, food and agribusiness accountancy firm ifac.

This is the first time in three years that most agri-food SMEs have reported a fall in turnover, illustrating the major impact COVID-19 has had on the Irish economy.

Ifac’s food and agribusiness report for 2020 also found that more than a third (37%) of agri-food SMEs have seen a decline in profit margins this year as a result of rising costs. Some companies reported as much as a 10% rise in costs this year.

Optimism

The increase in costs, loss of sales and resulting hit on margins means optimism among agri-food SMEs has dropped to a three-year low. According to ifac’s research, only 55% of agri-food SMEs are optimistic for the future, down from a peak of 74% in 2018.

The report also shows that six out of 10 agri-food SMEs have availed of one or more of the Government’s suite of COVID-19 supports. The most popular support among businesses has been the Temporary Wage Subsidy Scheme, with almost 40% of agri-food SMEs availing of this.

A further 17% of agri-food SMEs availed of a temporary break in loan repayments from their bank

A further 28% of businesses also availed of the Government’s Pandemic Unemployment Payment (PUP).

A further 17% of agri-food SMEs availed of a temporary break in loan repayments from their bank.

The pandemic has also driven more agri-food businesses to begin trading online. According to ifac’s report, there has been a 54% increase in the number of agribusinesses trading online this year, with 37% of Irish agri-food SMEs now involved in some form of online trading.

Brexit

While it has been overshadowed by COVID-19 for the last six months, Brexit remains a major threat to Ireland’s economy. With just weeks left for the UK and the EU to negotiate a deal and the threat of a no-deal Brexit growing by the day, almost half (48%) of Irish agri-food SMEs still feel they are not prepared for Brexit.

Despite the twin challenges of Brexit and COVID-19, as well as the lack of optimism, most agri-food SMEs are confident of retaining, or even growing, employee numbers

In its research, ifac found that 33% of companies feel Brexit will result in increased costs for their business, including tariffs. A further 17% are worried about the potential for a hard border on the island of Ireland, while 14% of businesses fear Brexit will lead to a significant disruption in the transport of goods.

Despite the twin challenges of Brexit and COVID-19, as well as the lack of optimism, most agri-food SMEs are confident of retaining, or even growing, employee numbers. Over two-thirds (68%) of businesses say they will maintain employee numbers, while almost a quarter (24%) of agri-food SMEs say they plan to increase employee numbers. In contrast, just 6% of businesses say they plan to reduce employee numbers.

On a positive note, there is real resilience in the sector as can be seen with nine in 10 businesses saying they expect employee numbers to stay the same, or even increase

“As you might expect, SME businesses in the agri-food sector in Ireland are less optimistic about the future compared to previous years. We’ve seen optimism levels fall to just 55% of businesses, with more than half of all SME businesses in the agri-food sector reporting a fall in turnover so far this year,” says David Leydon, head of food and agribusiness at ifac.

“On a positive note, there is real resilience in the sector as can be seen with nine in 10 businesses saying they expect employee numbers to stay the same, or even increase, in the coming year. Additionally, businesses have taken a positive approach to dealing with the COVID-19 pandemic that will help sustain the business through this unprecedented challenge,” he added.