Professor Peter Clinch:

That is a significant issue that I mentioned in my opening statement. I also mentioned vulnerability in the economy. For the four and a half years I have been chairman of the council it has been pushing heavily on the productivity picture. Originally we did not have data to demonstrate clearly the problem we had. Approximately the top 10% of firms in Ireland account for 80% of the added value in manufacturing and 94% in services. The top 15 commodities account for 90% of the total goods exported from Ireland. The top 100 traders account for 80% of exports value, with 10% of firms accounting for 90% of productivity. As I stated, we are flying on one big engine and must work strongly on the smaller engine.

In our challenge we place particular emphasis on narrowing the productivity gap between the best and the rest, which is our third theme. We focus very heavily on the challenges facing small firms which are the least likely to be able to invest in the management talent they need to make good decisions. They are also the least likely to be able to invest in having a good strategy and company training, which is incredibly important for productivity. They are least likely to be able to invest in research and development. There is also a hangover from the crisis as firms deleverage because they have run up large debts; it is arguable that they are not taking on enough debt to invest in the activities that would help them to develop.

We focus on the presence of the talent pipeline, in particular, and ensuring there can be such a pipeline in the higher and further education areas. This concerns support for low-skilled workers who are at risk of displacement by changing technology to retrain and upskill through the apprenticeship system. There is also a heavy focus on digital skills, as approximately half the population are not suitably equipped with digital skills. That is a threat not only to our firms today but also to employment in the future. It is a significant area of policy that we have emphasised for the Government.

There should be investment in infrastructure, an area in which we have lagged behind somewhat in comparison with other countries, although Project Ireland 2040 will result in much more infrastructure being built. What is of concern in that respect is the very low level of productivity in the construction sector. There are also delays and I am sure there will be mention of the national broadband plan. The delay in bringing broadband to towns is particularly challenging for smaller companies.

We have made specific recommendations on top of the more general recommendations. We have recommended that the Government produce a productivity action plan. It has been referred to in the Future Jobs Ireland 2019 plan and we are very pleased that has been taken on board. The plan should be developed further through the agencies in order to reduce our reliance on a small number of companies. We have also recommended aligning Ireland's capital gains tax entrepreneur relief which is aimed at entrepreneurs running companies so as to extend the lifetime limit of €1 million to €10 million on gains made in disposing of business assets. That would give smaller companies a greater fighting chance. An implementation plan should be prepared to intensify business research and development activity and there should be regular reviews of the barriers and enablers to increase investment in what we call knowledge-based capital but what is essentially innovation and research and development. We should also strengthen links between indigenous companies and multinationals. We have seen a decline in the spillover of knowledge from very high-end companies to the following companies.

We are not the only country where this is happening but we are a highly globalised economy and because of that we are quite reliant on this small number of large companies. There was always a reliance in the economy but we are very reliant upon a small number. We have also asked to review the effectiveness of the global sourcing initiative. This is the initiative that helps to introduce indigenous companies to those buyers from the multinational companies in order to create better and stronger linkages between our excellent multinational sector of large companies and our smaller companies. Those are our main recommendations for areas where Government needs to enhance policy.