Azets Barometer: Geopolitical uncertainty now top concern for Irish firms
- 53% of small firms cite geopolitical volatility as top concern
- Nearly 4 in 10 (36%) of leaders say elevated labour costs are impacting operations
- 58% of firms in hospitality & retail sectors plan to pass cost increases on to customers
- Financial performance of Irish businesses (7.1) remains above average of six Northern European countries surveyed
Azets Ireland has launched a new quarterly barometer which reveals that geopolitical uncertainty is the top concern for leaders of small and mid-sized businesses in Ireland.
The Azets Barometer Survey, which polled 222 firms across Ireland between February and March 2026, found that 53% of small firms (10-49 employees) and 50% of micro firms (less than 10 employees) cited geopolitical volatility as their top concern. Amid the impact of an energy shock and inflationary pressures due to the conflict in the Middle East, findings show that rising energy and labour costs are placing increasing strain on Irish businesses. Geopolitical volatility has jumped from second position in the top concerns facing Irish businesses over the past 12 months.
With inflation now at 3.6% (CSO), reflecting these underlying cost pressures, the data suggests that the full impact on SMEs is only beginning to emerge. Large businesses rank geopolitical volatility fifth among their top concerns, indicating they may have greater capacity to absorb sustained cost increases and navigate disruption. In contrast, smaller firms are more exposed to these pressures, with limited ability to hedge against rising energy costs or absorb cuts to margins.
The barometer revealed that increased competition is the second highest concern for Irish businesses, rising sharply by 3 places over the past six months, as leaders navigate an evolving global environment. Inflation and high interest rates is ranked third among the top concerns.
Elevated labour costs are the chief concern for nearly 4 in 10 (36%) businesses, with an increase in the minimum wage and introduction of pension auto-enrolment putting further pressure on businesses in the first three months of 2026. The impact of high labour costs was particularly acute among firms in the manufacturing sector (50%) and construction sectors (46%) where leaders said it was their biggest concern. More than half (58%) of firms in the hospitality & retail sector plan to pass cost increases on to customers due to strong inflationary pressures.
Despite these challenges, findings show that financial performance among Irish firms remains resilient. Irish businesses rate their financial performance at 7.1 out of 10, slightly above the average (7.0) across the six Northern European countries surveyed. Firms in the manufacturing sector posted the strongest financial health (7.9) of the firms surveyed. This is followed by the financial & insurance (7.6) and construction (7.4) sectors.
The barometer shows that confidence among Irish businesses is slightly above the average across the six Northern European countries surveyed. Irish businesses rate their economic prospects at 6.9 out of 10, above the 6.7 average across Northern Europe. Businesses in Sweden are the most optimistic (7.4) out of the six countries surveyed, followed by Denmark (7.2), Ireland (6.9), Norway (6.9), Finland (6.0), and the UK (5.7).
Amid elevated volatility, 6 in 10 businesses plan on increasing investment in their operations to develop the capabilities needed to navigate the uncertainty ahead. 58% of leaders plan on increasing investment in automation and AI tools, while 56% intend on strengthening their organisation’s cybersecurity. More than half of firms (59%) are considering expanding into new markets to meet their growth targets.
The findings show that Irish businesses are making progress on succession planning. Irish firms have the second highest level of succession planning maturity (6.8 out of 10) among the six countries surveyed, behind only Sweden. 76% of Irish organisations surveyed are giving high consideration to their succession plans.
Commenting on the findings from the Barometer, Neil Hughes, CEO of Azets Ireland said: “The latest Azets Barometer provides a clear picture of how Irish SMEs are facing a period of sustained geopolitical and economic disruption.
“What the findings show is that we are in the early stages of a cost shock that has not yet fully worked its way through the system. Rising energy prices linked to the conflict in the Middle East are now feeding into the wider economy, with inflation likely to surpass the 3.6% recorded in March.
“For many SMEs, that impact is only starting to be felt. Larger firms have the scale to absorb these shocks. Smaller businesses don’t. And unless there is a near-term easing in geopolitical tensions, the reality is that conditions are likely to become more challenging in the months ahead.
“We are also seeing early warning signs at a sectoral level. In aviation, disruption to jet fuel supply chains could begin to impact operations from next month if current conditions persist. In agrifood, pressures on fertiliser supply and input costs are likely to follow. The risk is that these initial disruptions do not remain contained within individual sectors but begin to ripple across the wider economy in the months ahead.
“With margins of many SMEs being eroded, they could be facing a cliff edge scenario without targeted and timely intervention. Measures such as introducing a TBESS-style scheme and bringing forward a VAT reduction for hospitality would provide some breathing room for businesses as they navigate what is likely to be an increasingly challenging operating environment.
“Despite the scale of these challenges, we welcome the fact that certain sectors of the economy continue to demonstrate considerable resilience and are entering this period of volatility from a position of relative financial strength. Findings show that firms in the manufacturing sector are expanding at pace, driven by increased global demand.
“At Azets, we pride ourselves on our ability to understand and meet the needs of entrepreneurial, owner-managed, and family-owned businesses as they navigate the challenges ahead. We continue to expand our team of professional advisors and experts to support ambitious businesses around the country overcome obstacles and fully unlock their growth potential.”
For more on the latest Azets Barometer Survey, visit our report on how UK and Irish businesses are prioritising action amidst chaos.