Wednesday, 6 November 2019
Report of Seanad Public Consultation Committee: Statements
It was my honour in my role as Leas-Chathaoirleach to chair the proceedings of the Seanad Public Consultation Committee on SMEs, ably assisted by our excellent rapporteur. I welcome the Minister of State for this important debate. I acknowledge the work he is undertaking to bring about improvements in this challenging brief. I specifically acknowledge the input of the Minister of State at the Department of Finance, Deputy Michael D'Arcy, at the public hearings on this topic.
SMEs are the main source of jobs in the economy and it is important we do everything to support the sector, which is such a key source of employment. I was a businessman before I entered national politics and I know only too well that the operating environment for business Ireland, particular SMEs, can be challenging. Business owners are men and women who take significant risks to develop their passion. Many of the contributors to the public hearings of the committee spoke about the contribution of SMEs to the social fabric of a community, their importance to sustaining communities through job creation, particularly in rural communities, and their potential role in environmental sustainability. It has been found that the majority of family-owned SMEs measure success beyond profit and growth to a long-term commitment to communities and employees. This underpins the value of SMEs to local communities on whose support they rely.
Many of the contributors to the public consultation felt there was a lack of support for family businesses. Business owners often work well over 100 hours per week, risking all they and their families have, including their homes and personal assets and finances. As a small open economy, Ireland is, and always has been, exposed to factors outside its control. While SMEs have seen sustained growth in recent years, the potential impact of Brexit looms large as a new challenge for the sector. The importance of safeguarding Ireland's trade interests with the UK is paramount as Brexit unfolds because it will have an enormous effect on SMEs that export goods to the UK. We are inevitably moving towards a less competitive and more expensive trading relationship between Ireland and the UK and SMEs will need time to transition, depending on the nature of the new trading arrangements. While the final shape of Brexit is not yet known, Ireland wants as close as possible relationship between the EU and the UK, including on trade, to minimise the impact of jobs and businesses. I wholeheartedly support this aim.
The committee heard the increasing cost of doing business in Ireland and a tax system that puts smaller businesses at a disadvantage are major issues for SMEs. The increasing cost of rent, insurance and rates are of particular concern to SMEs as they threaten the very viability of their businesses and are a barrier to business growth. The capital gains tax rate of 33%, increased from 20%, is at odds with other countries throughout the world. This can adversely impact people who wish to retire or sell on their businesses. An improvement in tax rates would allow SME owners invest in their businesses or new businesses. The committee has made recommendations in the report on finance and funding supports for SMEs.
It is a well-known fact that banks have become extremely risk averse since the downturn. The committee heard that the need to sign personal guarantees to get finance to start a new business can be a major deterrent to somebody thinking of starting up, balanced against the risk of giving up a regular salary and removing the safety net of the social welfare system. Ultimately, the fear of failure can become a stronger emotion than the hope of success. The committee has made a clear recommendation in its report that the requirement to sign personal guarantees as collateral should cease.
Public procurement policy was another issue raised. It was identified by the Construction Industry Federation and other witnesses as a barrier to SMEs tendering for big contracts that should be simplified. The committee has made recommendations in the report to address some of the challenges in this area.
In line with Europe, Ireland has a rate of 9% female entrepreneurs. The committee heard Ireland could become the best in Europe for female leadership opportunities. Six years ago, 8% of start-ups were female-led whereas last year, 28% were female-led. The committee has made recommendations in the report calling for the development of a national strategy on female entrepreneurship.
As we all know, SMEs generally start on a small scale but they have the opportunity to become global players. For example, Kerry Group has enjoyed phenomenal success since commencing operations in 1972 on a greenfield site in Listowel, County Kerry. The company has evolved from modest beginnings to become a leading player in the global food industry. Dairymaster, an Irish company based in Causeway, County Kerry, is a leading dairy innovation and technology companies in the world. We have also had the phenomenal success of Fexco, which was started, and is headquartered, in Killorglin. These companies are a perfect illustration of the importance of innovation, which is key to growth.
The committee heard that entrepreneurial education should be made part of the school curriculum, starting at primary level. The committee acknowledged the great Kerry entrepreneur, Mr. Jerry Kenneally, who started the junior entrepreneur programme.That programme has made an impact on young students and their thinking. Mr. David Walsh, chief executive officer of Netwatch, reminded the committee that the entrepreneurial mindset comes at an early age when families discuss business at the kitchen table. The Government has a key role in creating the appropriate conditions to support the SME sector. The committee is of the view there should be a stronger unilateral focus at government level on SMEs and recommends in this report that there should be a dedicated Minister of State for SMEs to develop a policy that fully embraces the diversity of the SME population and the challenges and opportunities this brings, particularly in the context of international developments. The recommendations set out in this report are a valuable and timely input into identifying and addressing the challenges faced by the SME sector and I look forward to engaging further with the Minister of State, who I know takes a strong interest in this issue.
I pay particular tribute to Senator Ó Céidigh for proposing this topic for discussion and for acting as rapporteur in the drafting of this report. The Senator's practical expertise and insight to business start-ups and job creation was invaluable to the committee during the course of this public consultation. His passion for encouraging and supporting SMEs in starting and developing their businesses was the reason he proposed this topic for public consultation. I also thank our excellent secretary, Ms Bridget Doody, who kept us all on track and made us attend to detail, particularly the Chairman. I acknowledge that as well. I thank all the members of the committee for their engagement in this public consultation. I again sincerely thank all those who sent submissions to the committee and I thank the witnesses who appeared before the committee.
I have great pleasure in calling on our rapporteur, Senator Ó Céidigh, to address us.