Labour, business supports and regional development must be addressed to keep start-up recovery on track

Ireland’s path to economic recovery began meekly in 2013, continued on more confidently in 2014 and found a firm stride in 2015.

Last year was a remarkable one of resurgence and growth.

Indeed, it was the best year for start-up companies since the millennium.

A total of 19,472 were established in 2015, beating 2006’s record of 19,306.

In terms of start-ups and insolvencies, growth and sustainability have been felt in most major industries across most of the country.

Sectors that were hit especially hard in the recession — most notoriously construction, as well as hospitality, real estate and retail —have grown consistently throughout 2015, and in the current climate, should continue to do so in 2016.

Take construction: in 2015, the sector grew by 24% on 2014, with 1,643 start-up companies compared to 1,323.

Compare the number of start-up construction companies in 2015 to 2011, deep in recession time, and the difference is profound.

Just 924 were established in 2011, a difference of 719 start-ups.

Furthermore, in line with an overall drop in insolvencies in 2015, construction insolvencies decreased by 24% year-on-year.

In 2015, construction insolvencies amounted to 15.5% of all insolvencies, down from 20% in recession-era 2011.

The Government’s decision to invest €27bn in national infrastructure will serve to further bolster this sector this year and have positive knock-on effects in manufacturing, leasing, utilities and other inter- dependent industries.

Despite the good news, we can’t get complacent. While we are recovering, we have only just staggered back from the precipice of the biggest economic disaster in the history of the state.

If we grow too quickly, banks and the Government risk playing loose with credit and repeating the mistakes of the past; if we grow too slowly, we risk the embers of our recovery dying out.

Striking a careful balance, built on long-term sustainability and economic diversity, is essential.

The Economic and Social Research Institute (ESRI) expects a healthy 4.8% per cent rate of GDP growth in Ireland in 2016 and a drop in unemployment to just under 8% by the end of the year.

The reality of globalisation means we are tied in many ways to our trading partners in the EU (an exit of the UK from the bloc has considerable implications) and further afield.

However, there are steps we can take to make sure we come as close to this forecast as possible.

Remaining competitive in the skills market is one such way.

In 2015, Ireland continued to attract investment from foreign multinationals, including Apple, EMC and Huawei.

These companies are huge employers, yet some need to look abroad for labour to fill particular knowledge gaps.

In the coming years, Irish professionals must continue to improve in foreign language learning (compared to our EU neighbours, our capability with European languages ranks poorly) and particular emerging STEM (science, technology, engineering and math) skills, like data science and cloud computing.

While we’ve come a long way in addressing our skills gaps in recent years, continued investment in all levels of the education system by the Government and by industry is necessary.

We must also continue to support indigenous start-up business.

Almost 70% of all Irish private sector employees are employed by a small-or medium-sized business.

Business debt remains a live issue and a growth inhibitor.

For the self-employed and entrepreneurs in particular, access to credit remains a thorny problem and in many cases kills off viable ideas before they are given a chance to flourish.

Budget 2016 went some way to aiding start-up growth in Ireland, but a great deal remains to be done, particularly in terms of capital gains tax reductions and tax relief for the self-employed.

For start-up companies in regional areas, fewer investment opportunities and a generally poor infrastructure continue to limit growth potential.

The gap between urban and rural economies simply refuses to close.

As we highlighted throughout the year in our monthly reports, Dublin, Cork and Galway were the focal points for growth in 2015, while more rural counties failed to keep pace.

Dublin, alone, accounted for nearly half of all start-up companies last year.

The outlook for 2016 is positive.

2015 was, in many respects, a record-breaking year for growth and new business, and at our current pace, we look set to surpass it this year.

But, to make the recovery truly long-term, many systemic problems in labour, business supports and regional development must be addressed to prevent the Irish economy dipping back into recession.

Christine Cullen is managing director of Vision-net.ie, a leading business and credit risk analyst


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