The environment for the country's small and medium enterprises (SMEs) is showing signs of strain, and will likely continue to do so irrespective of the outcome of Brexit.

This is according to a report by EY-DKM economic services for the Banking and Payments Federation of Ireland.

The group examines 15 indicators produced on a monthly and quarterly basis by the Central Statistics Office and some of the banks on consumer sentiment, sectoral activity and macroeconomic indicators.

"We feel that they're the key indicators in terms of assessing how the SME environment is doing. The sector is the backbone of the economy. It accounts for the majority of enterprises and contributes significantly to employment," Annette Hughes, Director of EY-DKM explained.


The report points out that the SME environment is already feeling the strain from negative movements in a number of indicators such as manufacturing, construction and consumer sentiment.

The Purchasing Managers' Index on the Manufacturing sector, published by AIB, moved into contraction in recent months while Ulster Bank's measure of activity in the construction sector followed suit in September.

"The SME environment is bracing itself for the biggest economic challenge of recent times, notably Brexit.

"But it's not just Brexit - conditions in the global economy are deteriorating, growth is subdued and there are challenges in terms of the indicators. 5 of the 15 are moving in the wrong direction," Ms Hughes said,

Annett Hughes said it wasn't simply a case that the indicators would automatically bounce back in the event of a Brexit deal being struck.

"The SME sector is bracing itself for no deal. You might see a bounce in sentiment with a deal but it's likely the bounce would be short lived as there are very difficult conditions in our trading economies.

"As we're a very open economy, any softening in the global economy would adversely impact the SME environment," she concluded.