How Cork firms can thrive in difficult landscape

The latest economic forecast from Bank of Ireland painted a positive picture for the Irish economy in 2025. It reported that we outperformed expectations in the first half of 2025, prompting the bank to revise its GDP growth forecast to 8.1%, up from 3.5% for the remainder of the year.

This was a statement of confidence in the Irish economy, but behind the numbers, many Cork SMEs (Small to Medium-sized Enterprises) are trying to navigate an increasingly complex business environment.

Geopolitical tensions, tariff uncertainty, and increasing domestic regulation are making life as a business owner more daunting despite the positive economic outlook.

The VAT hospitality rate merry-go-round

For Cork SMEs in particular, the looming decision by the government on whether to reinstate the 9% VAT rate for hospitality is keeping many holding their breath.

Walking around Cork city this summer, it was great to see many tourists from all parts of the world continuing to see it as a tourist destination. It reinforced to me the vital role tourists play in our local economy and the need for cafes and restaurants to remain the heartbeat of our city.

It is Xeinadin’s view that reinstating the 9% VAT rate should ease some of the pressure for those owners. Not only does this protect the viability of local hospitality, but it will also have a positive impact on the wider economic activity that other Cork SMEs depend on.

The noise from the government, however, seems to be mixed on what decision they will ultimately make.

Our advice to clients is to prepare for no change and get control of your business model as quickly as you can. Where can you reduce costs? Where can you improve margin? How can you increase your turnover?

A number of small changes might make a big difference to the long-term viability of the business.

Costs continue to rise

For the wider business community, operating costs continue to rise and remain a major concern. Increases in insurance, rents and compliance costs have been a cause of concern for some time, and energy costs, which seemed to have eased for a period, are back in the mix.

Some SMEs have made savings by changing providers, for example, but these are more ‘quick wins’ than long-term solutions. Owners need to look at their businesses holistically and see what parts they can restructure.

Areas we have advised, which been successful, are looking at labour costs, payroll, and operating hours. Take a closer look at customer patterns and see what times of a week or day your footfall increases and decreases. Some clients have made big changes on this front, which have made their operating model more efficient and sustainable in uncertain times.

The battle for talent

A common thread we see throughout our client base is the battle for talent. Attracting new hires, retaining current staff and external factors such as a lack of accommodation are causing enormous strain on Cork SMEs.

Despite the barriers, what we’re finding encouraging is the innovative ways SMEs have fought to keep their staff. Benefit packages with bonus schemes/share options, work flexibility, greater annual leave options and greater emphasis on training and long-term career development have all been used in an attempt to stem the tide of staff shortages. The more that SMEs can align workforce planning with their overall commercial goals - and communicate that clearly - the stronger their position will be in what remains a very competitive labour market.

New era of technology

A recent insight report by FRS recruitment showed 8 out of 10 employees in Ireland have used AI in the workplace. The advent of tools such as ChatGPT is changing the way we work and live, but also causing headaches for business owners when it comes to compliance and security risks.

Whether it’s automation, data analytics or generative AI, owners are aware technology has the potential to improve their productivity, but are unsure where to begin.

We advise our clients to be proactive when it comes to investing in emerging technology. Embrace it and don’t fear it. You need to look at where you are, where your market is, and where the market is going. Find pain points within your business, do extensive research and see what pieces of software will benefit those. Businesses should see it as an investment towards increasing efficiency.

It doesn’t need to be large-scale either; something as simple as data dashboards can give you a small change with big advantages. Once those areas are identified, it becomes far easier to choose a solution that is proportionate to the size and needs of the business.

It is also worth noting that a staged approach to technology adoption allows SMEs to bring staff with them on the journey, building confidence and capacity as new systems are embedded. If you’re not willing to innovate, you can be sure your competitors will be.

Resilient future

SMEs are facing a period where pressures on costs, people and technology can’t be ignored. Add red tape and regulatory pressures, such as auto-enrolment, to that, and an uncertain period remains. However, businesses across Cork have shown resilience before and will show it again. We see daily a willingness to make tough decisions, embrace technology and come up with innovative solutions that will stand the test of time.

The rest of 2025 will demand focus and flexibility to navigate the current landscape, but we believe that with the right planning and a willingness to adapt, the Cork business community can and will continue to thrive and play a central role in the region’s economic success.