LinkedFinance CEO Warns on Rising Inflation

LinkedFinance is warning businesses to “avoid feeding dangerous 1980s inflationary spiral.”

LinkedFinance is a peer-to-peer lender serving Irish SMEs. While business optimism remains high, nearly one-third of Irish companies are charging higher prices as the labor market tightens, states the company.

According to the Linked Finance SME Confidence Index, based on research conducted by Behaviours & Attitudes, 30% of companies charged higher prices in Q3 compared to the prior year, more than triple the level of companies raising prices a year ago, and at a record level in a data series going back to 2011.

The report indicates that inflationary pressures are increasing, mostly in larger SMEs (10+ employees) where 41% charged higher prices, and also businesses in the retail and wholesale sector where 58% increased prices.

Additionally, 25% of surveyed firms believe that climate change regulations will drive their production costs even higher.

The Climate Action Plan targets emissions reduction for multiple sectors to reduce overall greenhouse gas emissions by 51% by the year 2030. LinkedFinance states that attitudes towards the Government’s plans are mixed, with 42% of businesses concerned that they will pose challenges for their business.

51% of businesses said current trading activity was higher, compared to just 16% a year ago, at 41% in Q2.

Employment trends are also positive, with expectations of hiring staff at their highest level since 2014.

Linked Finance’s own loan data shows that hiring more staff being identified as the purpose of a loan is double the number of applications year to date compared to the same period last year.

The challenge today is one of labour shortages and wage inflation.

Niall O’Grady, CEO of Linked Finance, said:

“This quarter’s index shows that economic trends for the SME sector are positive, with strong current trading sentiment and future expectations improving. The biggest cause for concern is the accelerating pace of inflation, which is shown both in our survey and the CSO data. I’m old enough to remember the horrors of double-digit inflation in the 1980s and notwithstanding the need businesses have to protect margins as input costs rise, it’s also vital they don’t also not douse the rising consumer sentiment that is evident by feeding a dangerous inflationary spiral. We all know that the threat of climate change is real, but when it comes to adapting your business to new regulations it’s not straightforward. SMEs clearly need help and practical guidance as to how they can make their contribution to the new targets the Government has put in place. We must be mindful that there will likely be a cost burden for businesses in reducing their carbon footprint.”

Year to date Linked Finance has issued over €30 million in loans, compared to €19.9 million for the whole of 2020. Lending was driven by the easing of Covid restrictions, with most all sectors experiencing an increase in financing: retail (+23%), construction (+41%), and transport & logistics (+133%).

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