Recent trends in SME investment in Ireland: exploring the pandemic and barriers to growth

Abstract

The substantial negative impact of the Covid-19 and associated economic restrictions on turnover and employment in the overall economy, and in the small and medium enterprise (SME) sector in particular, have been well documented since the onset of the pandemic in March 2020. This report looks in depth at how SME investment activity has fared throughout 2020. The immediate pressure of adjusting to the dramatic change in economic circumstances arising from the pandemic might have reduced incentives and resources available for investment for many SMEs across a range of asset types. At the same time, however, adjustments to business models to provide goods and services in new ways to continue trading through periods of health restrictions may have resulted in increased need for some types of investment. This report provides a detailed examination of the information available on SME investment across a range of asset categories, how this investment is financed and the investment challenges faced by SMEs in the current environment. Although SMEs make up the bulk of firms and employment in Ireland, aggregate statistics on investment activity tends to be dominated by larger firms. This report addresses the resulting data gap in order to provide a statistical review of the key trends in the data using firm-level data collected as a specific module on the Department of Finance Credit Demand Survey. The report presents survey data for the year 2020, with time series comparisons back to 2016 for context and comparison. The main findings in each of the analytical chapters are provided below. To review trends in investment, we draw on a number of metrics. First, we look at how many Irish companies invest by presenting the percentage of firms investing. Second, we gauge the magnitude of investment by looking at a) the typical value of investment and b) looking at how large investments are relative to the firms’ existing assets. All of these indicators are presented across different types of assets namely: fixed assets including buildings, transport equipment, machinery, intangible assets and staff investment.