Business costs not moderating in line with cooling of inflation, ISME says

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Business costs, including energy, rent, commercial rates, and other overheads, have been ranked as the single biggest issue facing small and medium sized enterprises.

ISME has published the results of its latest member survey identifying the priority issues facing its members in 2026, with business costs and labour expenses “overwhelmingly dominating concerns”.

Business costs were ranked the top concern for 78 per cent of respondents, which ISME said have been subject to “sustained and significant” inflation in recent years.

“ISME notes that despite easing inflation in some areas of the wider economy, these structural business costs have not moderated,” it said.

Labour costs follow closely behind at 76 per cent of respondents. This includes employer PRSI, auto enrolment, statutory sick pay and related “payroll burdens”.

ISME said the survey findings underline the need for Government to focus on “structural cost competitiveness” in 2026, rather than layering “additional obligations” onto small businesses already operating on tight margins.

Neil McDonnell, chief executive of ISME, said: “There is a clear and consistent pattern in our survey results. Business costs and labour costs remain the dominant concerns for SMEs, year after year.

“These are not new issues, and the fact that they persist at such high levels should concern policymakers. It is also deeply worrying that long-running problems such as the cost of insurance remain unresolved for so many businesses, despite repeated reform commitments.”

Employee taxation ranks third, with 46 per cent of members citing it as their biggest concern. Businesses highlighted the “combined burden” of PAYE, PRSI and USC on workers, as well as the comparatively low income threshold at which employees enter the marginal tax band.

“ISME notes that this creates upward wage pressure, as employers are often required to increase gross pay simply to protect employees’ take-home income,” the group said.

Some 39 per cent of respondents cited the cost of insurance as their primary concern. Despite extensive legal reforms in recent years, employer liability, public liability, professional indemnity and motor insurance “remain stubbornly high”.

“In many sectors, businesses struggle to secure more than one quote for employer or public liability cover, effectively leaving them with a take it or leave it position,” ISME said.

About 38 per cent of respondents said their biggest concern for the year ahead is the use of artificial intelligence in the workplace to improve productivity and workforce efficiencies, and the ongoing challenge of recruitment and retention of talent.