Optimism among businesses in Ireland's SME sector increased in the final quarter of last year, according to new research from Linked Finance.
The latest Linked Finance SME Confidence Index stands at 60.2, up from 59.7 in the third quarter of 2022.
The data shows that optimism levels are translating into improved profitability, with a return to pre-covid levels.
Profitability moved into net positive territory in the final three months of last year, with 73% of businesses stating that profit is the same as or higher than this time last year.
Looking ahead, 65% of SMEs expect trading activity next quarter to be the same or better, compared to just 35% with this view two-years ago during the height of pandemic restrictions.
Inflation continues to be a pinch point for businesses despite falling energy prices, resilient global demand and easing inflationary momentum.
Despite positive signals, businesses are looking to try recoup dipped profits by passing prices on to customers.
Over the past two years, Irish SMEs saw reduced profits, with 52% of business reporting lower profits in 2020 and 28% in 2021.
This is on a positive trajectory, as 73% of SMEs cited higher or level profits in 2022, and only 25% saw lower profits.
Responses show that the proportion of businesses looking to increase prices has now surpassed the level of those seeking to maintain prices.
46% of SMEs increased prices in the final quarter of last year, compared to 30% who raised prices during the same period in 2021, indicating that more businesses passing rising input costs into the consumer.
"Although we are still seeing pockets of the economy that are slower to rebound, overall, the picture is moving in a positive direction with almost three-quarters of Irish SME businesses expecting to trade at higher activity levels in 2023," said Niall O'Grady, CEO of Linked Finance.
"The recent CSO Labour Force Survey showed a story of sustained employment growth and as an economy there is much to be hopeful for," he added.
