Exploring SME investment patterns in Ireland: New survey evidence

Abstract

An empirical profile of SME investment in Ireland is critical to understanding the growth possibilities and productive capacity of Irish indigenous enterprises. However little is known about SME investment activity outside the more aggregate information. This paper uses new survey evidence compiled as part of the Department of Finance SME Credit Demand Survey to profile the types of assets SMEs are investing in, how firms are financing these investments and what barriers firms face to investment. We provide a detailed exploration of the trends across firms looking at different size classes, age groups, exporting status and sectors. A number of findings emerge. We find that two in every three SMEs invested in their staff; one-in-two invested in fixed assets; and less than one-inten invested in intangible assets in 2016. SMEs were in general satisfied with their investment levels or their current capacity with only one-in-five facing a capital gap. For those with perceived insufficient investment, a lack of internal funds, rather than access to external finance, was identified as the main reason. Finally, SMEs reported having significant liquidity levels in 2016. These findings suggest that any perceived sluggishness in borrowing or investment appetite could potentially be demand-side in orientation.

Annual Report on Migration and Asylum 2020: Ireland

“…1 As the Irish economy recovered rapidly from the financial crisis, a clear feature of the SME market was a slow recovery in capital investment and an apparent low appetite for external borrowing. This is evident from previous research which has indicated sustained increases in firm turnover and profitability but a continued low share of external finance usage with internal funding of investment dominating (Gargan et al, 2018;Lawless et al, 2020b). This context in the period just prior to the onset of the pandemic led to questions being raised around whether demand-side factors (such as uncertainty or risk appetite) were outweighing supply-side investment determinants (such as the cost of, and access to, financing).…”

“…This change also highlighted a marked increase in the share of firms self financing activities, a feature which has continued to date. More recent research has indicated a rebound in investment such as Gargan et al (2018) and Lawless et al (2020b). However, investment is still lower than would be expected with such a fast growing economy.…”

“…Results from previous waves of this survey were presented in Gargan et al (2018) and Lawless et al (2020b). The aim of this report is to provide a statistical update on the indicators presented in this article and to review trends in investment across SMEs over time.…”

Quarterly Economic Commentary, Autumn 2020

“…The primary data source we used for the analysis of SMEs in this paper is the Credit Demand Survey (CDS), carried out twice a year by the Department of Finance. The survey is documented in detail in Gargan et al (2018) and Martinez-Cillero et al (forthcoming). It contains a wide range of financial and credit indicators, which we briefly overview here.…”

SME investment report 2019: Developments between 2016 and 2018

“…The first results of this survey were presented in Gargan et al (2018). The aim of this report is to provide an annual statistical update on the indicators presented in this article and to review trends in investment across SMEs over time.…”