Costs are too high for citizens and business

While the Irish economy maintained an upward trajectory in 2019, it has been a trickier year for SMEs.

Costs are too high for citizens and business

While the Irish economy maintained an upward trajectory in 2019, it has been a trickier year for SMEs.

Twice we were marched up the hard Brexit hill, and twice marched back down again, sapping confidence as well as working capital.

The thumping victory for Boris Johnson in the British general election means more certainty in the process but it also means it is likely to be a harder Brexit than that planned by Theresa May.

One of the fundamental changes Irish businesses must make in 2020 is to radically rethink their marketing to the continent.

The UK and the US are very big markets for Irish firms but both are likely to undergo structural changes in access over the next few years.

In second place in the Eurostat consumer price index, Ireland remains too expensive a place to live for its citizens and small businesses.

Although Denmark is more expensive than here, it is at the heart of the EU and borders the largest member state. As a peripheral island, we do not enjoy its advantages.

The new government in the 33rd Dáil after the next election must focus on the reduction of costs, most especially rents if we are to remain a viable, competitive economy.

For SMEs, that also means we need easier access to cheaper finance. The weighted average interest rates on Irish SME borrowings, at 3.58%, is among the highest in the EU.

More worryingly, business deposits increased by €4bn in the second quarter — a solid indication of reduction in business sentiment.

The OECD launched its report into SME and Entrepreneurship policy in October.

It chimes with Isme’s policy on small enterprise over many years.

Areas that require particular attention include simplified access to affordable finance; improved entrepreneurial activity; increased awareness of finance and treasury; improved productivity; and financial incentivisation of innovation and internationalisation.

In short, the OECD acknowledges the long-held Isme view that it isn’t just Irish workers who need upskilling: Irish entrepreneurs also have to climb the learning curve if they want to be the best in the OECD class.

We expect the Government will follow up with the actions necessary to deliver on the OECD’s 11-point roadmap for SME policy in Ireland in the near future.

However, if Irish businesses are to make the step-change indicated by the OECD, we will need a radical plan to upskill owner-managers.

With this in mind, Isme asked economist Jim Power (a columnist of these pages) to prepare an economic and business case for a basic syllabus of education for business owners.

This would be delivered via a tax-incentivised, accredited diploma, similar to that provided to farmers.

We will be formally asking the next government to adopt this as part of their strategy for indigenous enterprise.

Defamation is the fastest-growing tort in our courts, and actions against small businesses are rampant.

Small shop owners are being told to let thieves steal goods, as the theft will usually cost far less than the €7,000 to €10,000 settlement which follows asking someone to open a shopping bag.

Earlier this year, Isme asked Justice Minister Michael Flanagan to amend our blatantly unjust defamation laws.

Given how long the insurance crisis has lasted, the fact that ministers looked like rabbits in headlights over the creche insurance issue is surprising.

The departure of 250 insurance companies from Ireland in the last five years leaves a survival-of-the-fittest market, where only a few underwriters remain and charge extortionately for the privilege.

Mr Flanagan castigates insurers, while Minister of State Michael D’Arcy begs more of them to enter the Irish market.

Part of the solution to the insurance problem will be the formation of more captive and mutual insurers and Isme is testing the market for these at the moment.

Last year, Isme looked towards 2019 with some unease, as the signs of recession were there.

We’ve weathered a year without downturn, but we remain concerned at the economic indicators, as well as the state of global trade and the World Trade Organisation.

We have probably passed “peak globalisation” and international trade will become increasingly difficult.

This will present challenges for Ireland but with a greater focus on preparing and improving our indigenous businesses, we can overcome them.

Neil McDonnell is chief executive of business group Isme

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