Niall Collins (Limerick County, Fianna Fail)
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768. To ask the Minister for Jobs, Enterprise and Innovation her plans for potential investment projects to be submitted to the EU’s special task force on investment in the EU for the European fund for strategic investment with a view for investments in infrastructure, education, research and innovation in addition to risk finance for small businesses as a Brexit contingency measure; and if she will make a statement on the matter. [17641/17]

Mary Mitchell O'Connor (Dún Laoghaire, Fine Gael)
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The European Fund for Strategic Investment, EFSI, is an EU initiative launched jointly by the European Investment Bank and the European Commission. The initiative is designed to help overcome the  low levels of private investment in in key areas such as infrastructure, education, research and innovation, as well as risk finance for small businesses in the European Union by mobilising private financing for strategic investments. The EU contribution of €21 billion to the EFSI is expected to unlock a total investment, public and private, of €315 billion through a multiplier effect.

In September 2014 the Special Task Force on Investment in the EU was established in response to a request by the EU Economic and Finance Ministers. Its mandate included identifying potential investment projects. It was jointly led by the European Commission and the European Investment Bank (EIB) and included representatives of all EU Member States. The EU Task Force invited member states to submit proposals for potential projects. Four proposals were put forward by my Department to the Department of Finance, which collated the proposals across Government departments and submitted the national list to the EU Task Force. However, the proposals from my Department did not subsequently proceed.

In relation to assisting SMEs response to Brexit, my officials are also exploring the potential to provide further supports to SMEs and this is currently part of a deliberative process.

Budget 2017

The 2017 Budget contains many measures that will assist Irish business to become more competitive and cope with the impact of Brexit. My Department secured an extra €52 million in Capital funding, a 10% increase, to support further job creation, innovation and support Irish companies to respond to the challenges and opportunities from Brexit. These additional capital monies for 2017 will help to ensure that the Agencies are well positioned to deal with the challenges that Brexit will undoubtedly present to their clients.

This year, Enterprise Ireland will have an additional €7 million (+12%) in capital funding, bringing its general business supports to clients to €63 million. Enterprise Ireland’s Brexit strategy is to sustain and grow exports to the UK but also to support their clients to diversify into new markets outside the UK. A key focus is improving client capability around competitiveness, markets, marketing skills, innovation, risk management and strategic financial skills.

Local Enterprise Offices capital grants are up by €4m (+22%) in 2017 to a total of €22.5 million. This is the largest ever capital allocation to the LEOs (or their predecessors CEBs). The LEOs are working with non-EI client companies, providing support & advice services as well as bespoke services to foster new business opportunities in local areas.

My Department also secured an additional €3m in current funding for 2017 specifically to assist in our response to the evolving Brexit scenario. This funding will enable the Department and its Agencies to recruit an additional 40 to 50 staff to supplement existing staffing numbers for Brexit planning and contingency. This funding will enable Enterprise Ireland to recruit 39 extra staff for overseas offices and the Ireland-based team to support exporting companies in the context of Brexit. Staff will be assigned to:

- Markets that are growing and have scale (including China, India, Latin America, Africa);

- Markets where we are already well established but with potential for further growth (including UK, France, Benelux, Germany, US, Nordics).

Specifically, these 39 posts include:

- 17 new posts in overseas offices,

- 22 Irish based posts which includes;

- 17 to support internationalisation activities,

- 10 to support competitiveness and sectoral growth,

- 3 to strengthen the LEOs ability to respond locally to help micro-enterprises and

- 2 to Horizon 2020 Support Network which works with researchers and companies to maximise participation in Horizon 2020.

Hedging against Foreign Currency Fluctuations

Sterling currency fluctuations have created challenges for Irish business. My department is working with Agencies and stakeholders to develop appropriate evidence based response/intervention for firms with an exposure to the UK market which will be fully aligned with state aid rules.

Managing currency risk by means of hedging is an immediate issue for exporters to the UK.  For an exporter to hedge its currency risk, in the first instance, it must first have a foreign exchange line of credit from the bank.  This must be formally sought in advance prior to its use and, from the bank’s perspective, it is the equivalent of making a loan application, i.e. it requires credit approval.

The advantage of this instrument is that an exporter can bring certainty to the amount of euro that it will receive in return for a specified amount of sterling at this stated future date.  The primary disadvantage is that there is no opportunity to share in an upside in currency movement.

Most banks will have a maximum time period for which they will sell forward contracts to their customers.  In general, most banks will not provide forward contracts for periods beyond 12 months.  In some cases, the banks may require security to be provided in the form of charges over assets or guarantees.

A final point to note in hedging foreign currency risk is that there are non-bank providers of such services who tend to be less prescriptive in their dealings.  However, many borrowing agreements now specify that the borrower may only conduct foreign currency transactions with the lender.

Enterprise Ireland is providing important advice to client companies regarding managing currency risks.  Many have taken this advice and hedged to late 2017.  Others are naturally hedged by having operations in both Irish and UK markets.  I would point out, however, that pragmatic and forward looking firms should be looking into the feasibility of hedging in the current situation. While not for everyone it is something that growth oriented exporters to the UK should be examining in detail to see if it has the potential to mitigate the potential damage that might be done to their business by exchange rate fluctuations.

Export Finance Initiative

The proposed Export Finance Initiative, which is being led by the Department of Finance, will support the working capital needs of Irish exporters.  It is proposed that this Initiative will enable exporting SMEs to obtain necessary working capital that they would be unable to access without a guarantee. This will allow exporting SMEs to secure competitive financing, safeguard their exports, and win new export orders and markets.

My Department, along with other Government Departments and agencies are working closely to ensure that the initiative is made available to SMEs as quickly as possible.  It is expected that the initiative will be rolled out by the Strategic Banking Corporation of Ireland (SBCI) in the first half of this year.  The planned mechanism includes delivery through commercial finance providers.

APJ 2017

Responding to Brexit has been prioritised in Action Plan for Jobs 2017, which sets out 20 specific actions aimed at growing and diversifying markets for Irish exports and maximise opportunities in foreign direct investment and research and innovation.