Jim Power: SME sector must be at heart of government policy

A state agency should be set up with specific responsibility for SMEs

Of the total number of enterprises in the Irish economy in 2019, SMEs accounted for 99.73%. Picture: iStock

For some years Kinsale-based accountant Cormac Fitzgerald and myself have lamented the lack of coverage and understanding of the Small and Medium Enterprise (SME) sector in Ireland. 

Most attention tends to focus on the multi-national sector, and a lot less attention and support is devoted to the hundreds of thousands of disparate small businesses that generate so much economic activity and employment throughout the countryside. We sought to remedy this by collaborating over the past year to take a more detailed look at the sector in terms of its economic contribution; its characteristics; its behaviour, particularly during the Covid-19 crisis; the issues it faces; and the support that the sector should be given in order to ensure that the sector can expand and flourish, and become a more important and stable segment of the economy.

The result of our collaboration is a book entitled Smart Tips for SMEs – Understanding the SME Environment in an Irish Context. It is not the definitive textbook on this very important segment of the Irish economy, but hopefully, it will help people gain a better understanding of the contribution the sector makes to the Irish economy and employment; the regional economic contribution; the practical issues businesses in the sector face on a daily basis; the experience and solutions found during the Covid-19 crisis; the challenges ahead; and the things that can be done to help the disparate sector.

Different perspectives

The book is a collaboration between an accountant and an economist, so two very different perspectives are provided. It contains lots of economic analysis, but more importantly, there are numerous case studies included, and there are a number of very varied contributions from thought leaders, entrepreneurs, and business owners across Irish society. The book intends to provide an insight into the sector and give hopefully-helpful examples of evidence-based solutions for SMEs.

The statistics in the SME sector are quite astounding. A business employing less than 250 people is officially categorised as an SME. Of the total number of enterprises in the Irish economy in 2019, SMEs accounted for 99.73%, equivalent to 271,821 businesses; and for 66.4% of persons engaged in the business economy, or 1.16 million people.

There are just 710 ‘large’ businesses, who employ more than 250 people in Ireland. These 710 firms have 584,664 persons engaged. The average number of jobs in an SME business is 4.25 people, and the average employment in ‘large’ businesses is 823 people.

The book argues that the SME sector must be mainstreamed into the heart of government policy and has to become an integral part of economic and business policy formulation. A structure needs to be created at the heart of government policy to include the SME perspective on economic and fiscal policy measures. That perspective is lacking at the moment and SME issues are not reflected in a formal way at a policymaking level. 

State agency

It is time to adopt a more formal and professional approach to developing the SME sector. We recommend that Government should set up a state agency with specific responsibility for SMEs. It should drive policy change; develop and implement an SME strategy; and identify and address in a formal way the skill requirements for SME owners such as workforce and managerial skills, financial education, SME internationalisation, marketing, innovation, and R&D.

The book goes on to explore issues such as female entrepreneurship; the support that small to medium accounting practices provide to SMEs; the various barriers to growth and scaling up of SMEs; the need for more young entrepreneurs; the importance of mentoring and collaboration; the qualities of exceptional leadership; and much more besides. Other issues facing SMEs are also explored such as cyber security, R&D capability, insurance, poor productivity performance, remote working, access to capital; procurement; and of course, the emergence from Covid-19.

We see that the owner-managers of SMEs are incredibly resilient people, with strong entrepreneurial instincts. However, significant damage has been done to many SMEs and their owners over the past couple of years, and there is very definitely a strong dual structure now apparent across this very important segment of Irish business and social life.

Given all of the pressures on rural economic activity and the concentration risks facing the Irish economy, it was never more crucial to appreciate and support the contribution of small and medium-sized businesses. We hope that this book will make some contribution.

A final thought is that as we approach Christmas when consumer spending is ramped up in a dramatic fashion, we believe that it is particularly important for consumers in these straitened times to support local businesses and ensure they survive and contribute to the real fabric of Irish life.

• Smart Tips For SMEs – Understanding the SME environment in an Irish context by Cormac Fitzgerald and Jim Power will available in good bookshops over the coming week.

• Jim Power is chief economist at Friends First