Ireland’s small and mid-sized firms are bracing for continued cost pressures in 2026, with cumulative labour cost increases, minimum wage hikes, and new statutory entitlements squeezing profit margins. 

Azets Ireland partners Alma O’Brien and Catherine McGovern stress the importance of proactive financial planning and strategic advisory support.

O’Brien said, “For many businesses in sectors already struggling to stay afloat, the next six months will be crucial. The reduction in VAT rate to 9% from July 1 will help to alleviate some of the immediate pressure facing firms in the hospitality sector. However, without a proactive response there is a real risk that many businesses could face closure in the months ahead.”

She added that SMEs are central to the Irish economy, employing two-thirds of the workforce, and that rising costs, compliance burdens, and geopolitical risks are eroding resilience. 

The Azets Barometer shows confidence among Irish businesses has fallen below the Northern European average for the first time, with 41% of small firms and 52% of medium firms citing labour costs as their top concern.

McGovern noted, “With PAYE and PRSI thresholds remaining static Share and Share option schemes, can provide tax-efficient measures for employees to take a stake in the business and better attract, retain, and motivate high calibre talent. From flexible working arrangements to tax-efficient benefits, firms should continuously review their talent offering over the coming months to ensure it remains competitive and meets their talent needs into the future.”

The partners advise firms to move beyond quarterly budgets to long-term financial forecasts that account for projected labour cost increases and inflation. Strategic planning, early preparation, and expert advisory support are key to overcoming financial pressures, retaining talent, and unlocking growth.

Explore the full guidance from Azets on safeguarding margins for Irish SMEs in the complete article.

(Photo credits to Azets Ireland’s official website)