Mr. John McGrane:

I thank the committee for inviting us to speak on the issues that face family businesses and the communities they support in every townland in the country. I am the executive director of the Family Business Network, and I am joined by my colleagues Ms Ellen Kehoe, our chief development officer; and Mr. Aidan Finnegan, our policy and public affairs manager in the Gallery.

The Family Business Network of Ireland, FBN, was founded in 2013 by leading Irish business families. It represents family businesses throughout the country and has members from a broad variety of sectors, all essential to supporting and driving the Irish economy in every constituency around the country. Family businesses employ nearly a million people across every town and village in the country and that million is twice the aggregate of the State sector and the foreign direct investment sector combined. They provide billions of euro annually to the economy nationally and locally. Ireland’s family businesses have shown their resilience, not least in recent times. Their strength and importance to their communities was evident over the past two years as they weathered back-to-back challenges to their enterprises and communities. Brexit, the pandemic and now a crisis in the cost of doing business due to inflation, have all posed and continue to pose significant challenges to our family businesses. However, these businesses have shown that they are here to stay. They are here for good, supporting jobs and acting as the beating heart of towns and villages up and down the country. Our family businesses do not need hand-outs and they do not want them. They have never asked for them. What do they need and ask for is an economic environment in which they are allowed to create jobs, grow and contribute to their local communities. I want to detail today, the immediate challenges that threaten the viability of Ireland's family businesses. I also want to briefly touch on the macro challenges and opportunities that we all face. We want Ireland to be the best place to start and scale up an indigenous business.

In our most recent survey, our members gave the following areas as being of most concern to them: energy costs, labour costs, availability of labour, cost of raw materials and business insurance. Speaking to members daily, we consistently hear how input costs across their businesses have increased at a pace never seen before. Family Business Network members in the industrial sector have reported increases in their fuel costs of up to 80%, freight costs up at least 20% and basic raw materials like chemicals and steel up by 15% and 25%, respectively. Those cost increases have placed an unprecedented strain on their businesses and on their ability to employ. We have one member firm that recently reported the cost of the core raw materials in its manufacturing process has increased by a staggering 250% this year. Insurance is an area in which we have seen great work by the Legislature and our appreciation of that is genuine and comprehensive. However, that is not filtering down to businesses in a way we believe was intended. Members are familiar with that.

We thank the Department of Enterprise, Trade and Employment, in particular the Tánaiste, the Minister of State, Deputy Calleary, and Deputy Troy before him, for the huge focus they applied with colleagues on the issue of insurance reform. We note particularly the invaluable Cabinet subgroup on insurance reform, where the Government and Judiciary have delivered in terms of judicial guidelines, the Garda Insurance Fraud Coordination Office and the perjury Act, as well as the reform of the Occupiers' Liability Act 1995 and the Personal Injuries Assessment Board Act 2003, due this year. These measures have dramatically reduced the cost of claims and the future risk associated with every motor and liability policy in Ireland. In particular, we wish to thank this committee for its work in ensuring that the Personal Injuries Resolution Board Bill 2022 received such thorough and efficient scrutiny both at pre-legislative scrutiny and Committee Stage. However, while this work has helped deliver ongoing reductions in motor insurance premiums, precisely the opposite is happening in the less competitive business liability insurance market.

Renewals are increasing by an average cost of 16% since the guidelines were implemented in April of last year. It is up to Government to get serious with insurers to ensure the benefits of these reforms are passed on in premium reductions to family businesses, as well as voluntary and community groups, charities and sports and cultural organisations, which are all struggling with the costs of staying open. On the cost of energy, we welcomed the temporary business energy support scheme, TBESS, when it was announced in budget 2023 and we understand it needs EU approval. However, the particular details of this scheme cannot come quickly enough for our member businesses. We understand the drastic increase in energy costs is due to external issues, but we believe the scheme is a prudent and proportionate response to this price shock.

Lastly, labour cost and availability remain the key immediate challenges facing our members. Issues that face the whole country, such as the housing crisis, are directly impacting the ability of businesses to attract and retain talent in key areas where the crisis is most acute. Family Business Network welcomed the announcement of the key employee engagement programme, KEEP, in budget 2018 and its extension in budget 2023 as a positive step in the right direction. However, over the past four years, feedback from our member businesses is that start-ups, SMEs and family businesses are unable to avail of the scheme in a practical way due to the restrictive nature of its conditions. The poor takeup of the scheme indicates the structure is not yet fit for purpose.

Our members are also worried about the increased cost of creating jobs that has been suggested by the Commission on Taxation and Welfare. This potential increase in the cost of creating a job leads on to the topic of macro challenges and opportunities for our members. We note the findings of the Commission on Taxation and Welfare and acknowledge the consensus that our ageing demographics require a re-examination of how we generate Exchequer revenue. It was a grave mistake this was not examined in tandem with examining public expenditure on the other side. It is now vital a commission on public expenditure be established. Increasing the cost of creating jobs impacts the ability of our indigenous businesses to create these jobs, which will impact our communities and corporation tax for the Exchequer. The more costly it is to create and sustain a job, the more likely that job is not going to be created or that it will be created elsewhere. Under the OECD’s incoming base erosion and profit shifting, BEPS, agreement, where a company’s workforce is located will influence where it pays its corporation tax. The tax will be paid where the company has a significant presence. If jobs are lost from Ireland, which we are already seeing, this will affect the amount of corporation tax the Exchequer can book here.

It is exceptional that Ireland is the best small country in the world for attracting foreign direct investment, FDI. Hats off to the IDA and the officials across that endeavour. Corporation tax receipts from those FDI firms have allowed the Government to increase public expenditure by nearly 50% over the past ten years. It is the result of a deliberate national strategy which has grown Ireland’s economy into the powerhouse it is today. We continually advocate that similar foresight and ambitious thinking need to be shown by our Government to allow our indigenous family businesses to grow, innovate, compete with their global peers and support their local communities in the unique way they do. The turbulence in the technology sector in recent weeks and the resulting job losses show just how exposed Ireland now is to global shocks. Over recent years, Family Business Network and others have warned that Ireland has become overly reliant on foreign direct investment, while the Exchequer has become dependent on volatile corporation tax revenues. Foreign direct investment has got our economy to where it is today, and we appreciate that, but the bedrock of this economy is the family-owned indigenous business sector, represented by us and other like-minded bodies here today. Those businesses will never relocate to another jurisdiction when global shifts occur. It is to the disappointment of our indigenous, non-exporting businesses that they have not enjoyed the same world-class, world-leading national strategy that is enjoyed by their foreign direct investment and export-focused peers. We have brilliant State agencies in the IDA and in Enterprise Ireland for implementing our FDI and export-led strategy. They are helping, along with the local enterprise offices, LEOs, to incubate businesses at the start-up phase. What is missing from this equation is a body to support non-exporting businesses, the small medium-sized indigenous businesses that may be unsuited to exporting but which could benefit from advice and assistance as they seek to scale their businesses and create more jobs in their communities. They are an essential supply chain for our FDI community and State sector. Be it under the umbrella of Enterprise Ireland or a stand-alone agency, we encourage the members of this committee and the Government to examine the feasibility of such a dedicated agency. This agency could also deal with the worrying contention that Irish SMEs have lower productivity than their continental peers, according to the OECD.

It is critical that Government policy is focused on both dealing with challenges that face businesses immediately and on seizing the opportunities that lie ahead, even now in the midst of a crisis, by looking forward to the medium to long term. The Government should aim to make Ireland the best small country in the world in which to establish, scale up and pass a successful employment-sustaining community business onwards to the next generation of Ireland’s job creators. I thank the committee for its time. My colleagues and I are happy to take any questions.