Tuesday, 10 December 2019
OECD Report on SME and Entrepreneurship Policy in Ireland: Statements
This OECD report outlines serious deficits in this Government's policies vis-à-visthe SME sector. It draws attention to the fact that our over-reliance on foreign direct investment, FDI, has led to disparities in regional development. Our tax system is also over-reliant on a small number of multinational corporations, with 45% of the total corporation tax take in 2018 coming from just ten companies. Foreign-owned multinationals paid 77% of the €10.4 billion corporation tax intake last year. This has left our economy heavily exposed to changes in global markets and in the international political climate.
SMEs are a critical pillar of the Irish economy. The OECD report points to a 2016 estimate of approximately 250,000 active enterprises in Ireland, virtually all of which are SMEs. These firms account for 56% of manufacturing employment and 74% of services employment in Ireland but currently both wages and productivity are lower for domestic SMEs. Clearly we need to redress the balance because the current set up is unsustainable.
A key issue that must be addressed is strengthening the LEOs. This was identified in the OECD report which said that LEOs have an important role to play but that we need to provide additional supports to them, including building local enterprise networks, particularly in remote regions. We must increase the scale and ambition of the LEOs and my colleague, Deputy Quinlivan, and I have devised a plan to do just that. We propose to establish a new Irish enterprise agency which would incorporate the existing LEOs, with a national headquarters, board and executive committee established. We propose to recruit 100 additional staff for the agency's head office which would co-ordinate activities across all 31 regional offices. This new organisation would provide the Government with advice and guidance on what SMEs, retailers and other enterprises need in order to grow their businesses. The agency would ensure that the uptake of State support and assistance is of an equal standard across the State because currently there are significant variations across LEOs. We also propose to introduce 100 mobile business advisors who would travel to businesses to provide on-site advice on business plans, grants, investment strategies and so on. The reality for many small business owners and entrepreneurs is that they cannot afford to take time off to visit LEOs so this would ensure access to services for all businesses.
The OECD report identified key areas that must be addressed including increasing productivity growth, the business start-up rate and business dynamism in the SME sector. It also makes reference to facilitating entrepreneurship among women, young people and migrants; scaling up microenterprises; generating more medium-sized firms; and increasing SME activity in foreign markets. The report identifies the need for a strengthening of SME internationalisation and this is clearly an urgent priority in the context of Brexit. Our direct SME export levels are very low by international standards, with only around 6% of Irish SMEs directly trading across borders. On top of this, a high share of SME exporters trade only with the British market. This is the most exposed sector in the State, namely small exporting businesses for which Britain is their main or only market. We must support these businesses to expand their markets beyond Britain.
The Government's current policy of offering loans to businesses has not been a success.
We need to take the reality of SMEs into account when creating solutions for the challenges of Brexit. For many, taking on additional debt in a time of uncertainty is simply not feasible. Many SMEs have reflected this and this is also reflected in the low uptake of loans. We also need to incentivise start-ups. The Minister needs to change her priorities. Instead of lobbying for tax breaks for millionaire CEOs of foreign companies, perhaps she could consider lobbying for incentives and support for small start-ups.
Finally, I refer to the Border region, which I represent. The report notes strong disparities in the regions. Approximately 30% of the State's employees live in Dublin and income per head is substantially higher in Dublin than in the rest of the State. According to the figures presented in the report, disposable income per person in Dublin is 15% above the State average, and the Border region is 13% below this average. The Border region has the lowest rate of disposable income per person - 28% below Dublin. This, again, demonstrates the disparity between Dublin and the rest of the State. Given that the Minister represents a Border constituency, I ask that she might give special attention to business and enterprise along the Border. Amendments I tabled to the business section of the Brexit omnibus Bill have ensured that the Border gets priority in the allocation of business supports. The Government needs to take a similar position to ensure the region will weather the storm of Brexit, and outside of that, grow and thrive to improve the living standards of people living along the Border.