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This article is from our latest edition of MarketWatch.
16th November, 2018
The Brexit negotiations without doubt have dampened business expansion and investment across the island of Ireland. Although we believe the overall economy in the Republic of Ireland is growing at around 5-6%, the performance of the SME sector has not been as strong. The sector has spent the last number of years repairing finances after the economic crash in 2008 – its overall debt-to-turnover ratio has dropped from 75% to 28% since 2014. But Brexit worries mean that many SMEs are delaying investment and expansion.
As you may know I host the Business Breakfast segment on Newstalk on Friday mornings. From interviewing a number of senior management in the SME market I have discovered that despite the slowdown in growth in the sector after the financial crash, and current concerns about Brexit, some Irish SMEs have continued to invest and build successful businesses.
McElhinney’s department store in Donegal has annual sales in excess of €15m. Its general manager, Martin McElhinney explained that by carving out a strong reputation in occasion wear, it has developed a loyal customer base which travels from all over the country. More recently it has established an online presence, which currently accounts for about 20% of its sales and is continuing to increase. Interestingly, 25% of McElhinney’s online sales are going to addresses in the UK, European Union and even the US.
The chief executive of eShopWorld, Tommy Kelly explained that its business focuses on simplifying the sales process for retailers to sell across borders where they have to deal with varying currency, tax and localisation issues. It also provides payment and customer service solutions that help maximize online conversions and reduce abandoned online shopping carts. This business provides bespoke e-commerce solutions to premium brands, including Victoria’s Secret and Nike, which have customers in over 200 countries. It has recently diversified its customer base and signed a deal with a world leading florist and a high-end whiskey brand.
One of the world’s largest manufacturers of multi-directional forklift units, Combilift, has just opened a new 550,000 square foot manufacturing plant and global headquarters in Monaghan. The facility cost €50 million and is part of the company’s ambitious expansion plans. In addition, this 21-year old company spends about 7% of its sales on research and development annually, more than twice the national average. Chief executive Martin McVicar believes most of its products can be manufactured in Ireland, but one of the biggest production challenges going forward is to ensure suppliers – many in Ireland – can ramp up production in step with them.
Highfield Healthcare, led by Stephen Eustace has also bucked the trend in the SME market in terms of investment. Highfield, which operates in the elderly adult mental health market, has invested heavily in its business over the last few years. In 2012 it spent €33m expanding its Dublin facility and building a new adult acute day hospital which provides similar services to an adult mental health hospital but facilitates patients returning home every night so they can remain part of their family community network.
Obviously there are Irish companies and sectors of the economy that continue to suffer under the uncertainty of Brexit, but Irish entrepreneurs always seem to find a way to get on with business.