A new report reveals that the Irish SME sector is showing strong signs of recovery from the challenges caused by the Covid-19 pandemic.

Facebook's latest State of Small Business report said SMEs reported a significant increase in sales and confidence on the back of the latest easing of restrictions and the successful roll out of the vaccination programme.

The report found that 78% of Irish SMEs surveyed in July were operational and generating revenue, up from 68% in the last report in February.

Of these, 36% reported higher sales, showing businesses are getting back on their feet since last surveyed when only 10% reported higher sales.

Irish SMEs are also ahead of the global average with only 28% of businesses reporting higher sales, the Facebook report noted.

The outbreak of Covid-19 saw a shift in how SMEs around the world and in Ireland do business and half of Irish SMEs said that at least 25% of their revenue is now generated by digital sales, up from 35% of SMEs in February.

Of the 30 countries surveyed, Ireland showed the second biggest gain in terms of the share of SMEs using digital tools to support their growth, today's report stated.

But today's research also shows a divergence in the pace of recovery for women-led SMEs compared to male-led businesses, with 32% of women reporting higher sales compared to 43% for men.

However, overall employment trends were positive, with just 18% of business owners having to reduce their workforce compared to 25% in February.

The future outlook for employment may also be helped by a surge in hiring for Christmas, with 18% of SMEs here saying they plan to increase temporary employment over the next six months with seasonal hires.

Oliver Sewell, Director of Business, Ireland and UK at Facebook, said it was "fantastic" to see the significant increase in sales and confidence among Irish SMEs in the company's latest report.

"It's clear that the easing of restrictions have contributed to a crucial boost in economic activity, and in turn have had a positive impact on customer demand and employment outlook for small businesses," Mr Sewell said.

"Online sales were a critical lifeline for many SMEs through the pandemic, and the shift online is set to endure. Half of Irish SMEs are now making at least 25% of their sales online, even as physical stores have reopened," he added.

Mr Sewell also reminded consumers that shopping online does not mean they have to turn their back on small Irish businesses.

"They have worked incredibly hard to keep afloat and establish digital storefronts over the past year. These businesses deserve to be found, and they can be found online in a matter of seconds through our platforms no matter where they're located," he added.