One in five Northern Ireland businesses report contraction this year, according to the 2025 Enterprise Barometer, signalling that while ambition remains strong, real pressures are forcing many entrepreneurs to “hit pause” on growth. The findings reveal a worrying backdrop in which financial fragility, rising costs and widening digital and skills gaps are placing unprecedented strain on small, micro and self-employed firms.
The Barometer, now in its seventh year and the most comprehensive dataset of its kind in Northern Ireland, shows that although many firms continue to demonstrate impressive resilience and report improved turnover, a significant minority are slipping backwards. With one in three experiencing weak cashflow, and persistent challenges around funding, skills and technology adoption, the report paints a picture of an enterprise ecosystem under sustained pressure.
Despite this, optimism and ambition remain evident across sectors. 56% of businesses have stated that they are optimistic about growth in the coming year, a marked improvement on last year (43%). Businesses continue to express a strong desire to grow, demonstrating the determination that has long characterised the region’s entrepreneurial base, but this aspiration is being compromised by a convergence of complex and compounding challenges.
The cost of doing business has been cited as a major concern, with costs having increased for 78% of businesses in the last 12 months. Utilities (87%), raw materials (85%), and insurance (85%) were cited as the top rising costs. 72% of businesses have seen wage costs increase, with one-third seeing increases over 10%. With one-in-three businesses stating that their cashflow position is weak/critical, borrowing and financing costs have risen for over half (57%) of businesses. This seemingly embedded rising cost of doing business is stressing and disabling business models causing ambitious entrepreneurs to put the brakes on.
Vacancies in the labour market and skills and digital gaps are among the most pressing of challenges for Northern Ireland SMEs, with 18% having persistent/hard-to-fill vacancies and two-thirds of businesses saying the labour market is putting their business under operational strain (68) and limiting growth (67%). 54% of business are finding it difficult to find the right skills for their business, with the top five skills development gaps being in: marketing and communications (47% of businesses); sales, exporting, and business development (31%); embracing new technologies (26%); understanding and embracing artificial intelligence (24%); and market/customer research (24%).
Enterprise Northern Ireland said the findings must serve as a “red flag moment”, emphasising that the issues identified cannot be solved in silos.
Entrepreneurs surveyed consistently called for: reduced cost burdens and red tape; clearer, more flexible routes to finance; accessible digital and AI adoption support; stronger skills and apprenticeship pathways designed for small business realities; and coordinated action on energy, premises and trade barriers.
With AI transforming how firms operate, grow and compete, the Barometer also highlights an urgent need for support systems to keep pace. Recruitment challenges, capacity pressures and gaps in digital confidence are constraining ambition at a time when global competitors are accelerating.
Minister for the Economy, Dr Caoimhe Archibald MLA, said:
“The Enterprise Barometer remains a robust real-time indicator of how our micro and small businesses are performing, and it provides invaluable insight for shaping the decisions we take as an Executive. As cost pressures continue to mount, the resilience and ambition shown by our entrepreneurs continues to impress.
“My Department remains committed to driving local economic growth and promoting regional balance. We will work closely with Enterprise NI, LEAs, councils, and the wider enterprise support ecosystem – and through Invest NI – to ensure businesses have the clarity, confidence, tools and support they need to seize opportunities and overcome the challenges identified in this year’s findings.”
Michael McQuillan, Chief Executive, Enterprise NI, said:
“Our entrepreneurs are sending a very clear message: the ambition is absolutely there, but pressure is halting progress. One in five businesses contracting should be ringing alarm bells.
“Businesses want simple, visible, joined-up support. They want clarity, consistency and a system that moves as fast as they need it to. A ‘one front door’ model for enterprise support, hybrid, digital-first but backed by real advisers, is not optional; it is essential.
“It would be reckless not to listen to them. Without a coordinated, fit-for-the-future support system in place – one that brings councils, Invest NI, Enterprise NI, Local Enterprise Agencies and the Department for the Economy around the same table – Northern Ireland risks opening up a productivity and digital divide that becomes impossible to close.”
Maureen O’Reilly, Independent Economist, said:
“This year’s Barometer provides one of the clearest indications yet that the pressures facing our small and micro businesses are becoming deeply embedded. The resilience and ambition shown by many firms is remarkable, but we cannot ignore the fact that one in five are now contracting and a significant number are experiencing prolonged financial strain.
“The data shows that cost inflation, weak cashflow, skills shortages and barriers to digital adoption are converging in a way that is stalling progress. These are not isolated challenges; they point to a system under real stress.
“If we are to prevent a widening and potentially unbridgeable productivity and digital gap, the voices of local entrepreneurs must be central to how policy and support are shaped.”
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