Small and medium businesses are less optimistic about the outlook than they were six months ago as costs continue to rise, according to new survey released by Chartered Accountants Ireland (CAI) and GRID FinanceOnly a quarter of SMEs reported increased profit over the last six months, the lowest number since the inaugural CAI business sentiment survey in April last year. A total of 84 per cent of small and medium enterprises (SMEs) say their business costs have risen over the past six months, with just 14 per cent saying they were stable and 3 per cent recording lower costs. Most of the results from the survey follow a negative trend, with 71 per cent of businesses less optimistic about the economic environment than they were six months ago, up from 54 per cent in October. However, amid the downturn in profitability, Grid Finance chief executive, Eoin Christian said it was “notable that the demand for borrowing remains largely unchanged”. “This suggests that while their economic outlook has weakened, the demand for borrowing has not slowed down.”Asked what they considered to be the biggest challenge for their business over the next 12 months, 48 per cent of SMES named geopolitical uncertainty and its associated cost and supply chain impacts. Following global fuel shortages in April due to conflict in the Gulf, one-third of small business said energy costs and security had the greatest impact on their business infrastructure. The biggest challenge identified was staff costs (38 per cent), while the major challenge associated with competitiveness was rising costs (54 per cent).Cróna Clohisey, CAI director of members and advocacy, said: “These findings point to a worrying trend for SMEs, with cost pressures intensifying and profitability declining compared to six months ago.“SMEs are being squeezed from all sides – by rising wages needed to retain staff, persistent increases in day-to-day operating costs and energy and regulatory pressures, making it harder to maintain margins and retain staff.“These are no longer temporary headwinds; they are embedded challenges that are eroding margins, weakening competitiveness and driving a much more cautious business outlook,” Clohisey continued. “More businesses now expect to be worse off (29 per cent) than better off (28 per cent) in the months ahead,” she said.The priority for SMEs was reducing regulatory and compliance burdens, with 54 per cent of those surveyed identifying this as the area where Government support was most needed.Small companies also called for simplification of EU regulatory requirement in advance of Ireland’s upcoming Presidency of the Council of the EU.Clohisey noted “clear evidence that existing Government supports are not reaching businesses effectively”.“While almost half of SMEs (47 per cent) say that they need energy cost supports – up 19 percentage points in a year, less than one in 10 have applied and half (50 per cent) of SMEs say these supports are not effective.”“Making these supports more accessible and more effective must now be a priority.”, Clohisey added.