OECD to Government: Do more for Irish SMEs

The OECD — the international think tank — said the Government should do more for Irish indigenous SMEs as it highlighted small firms here pay among the highest borrowing costs in the eurozone.

Small firms’ industry groups long argued foreign-owned multi- nationals are showered with tax incentives, while Irish-owned small and medium companies are relatively less well supported despite employing hundreds of thousands.

That stance — unexpectedly — appears to have won the backing of the Organisation for Economic Co-operation and Development, which in its economic update published yesterday, said the Government would be best advised to re-direct its business incentives to local firms.

Government business policies “should aim to make growth sustainable and inclusive”, said the influential think tank.

“Public support to business research and development, which is skewed towards R&D tax credits, should be rebalanced towards more direct support for domestic SMEs,” it said.

The OECD will also please small firms here as it highlights the high costs of their business loans, which it puts down to the still-high levels of bad loans on the balance sheets of the Irish banks.

“Financial conditions have improved on the back of monetary easing by the ECB,” said the think tank.

“The full return to normal credit supply is, however, hindered by the persistence of nonperforming bank loans.

"The lending interest rates for SMEs remain among the highest in the euro area. New lending, although accelerating, is still outpaced by debt repayment in both the non-financial corporate and household sectors,” it said.

After the economy surged by 7.8% last year, the OECD projects GDP will grow 5% this year and by 3.4% in 2017.

Those forecasts compare with the Government’s own projections for growth rates of 4.9% and 3.9% in 2016 and 2017.

The OECD warns, however, that if the UK were to vote later this month to exit the EU that in time the Irish economy would be “significantly” hit, if trade barriers were raised across the Irish Sea and sterling were to slump against the euro.

It points out that British markets account for a fifth of all Ireland’s exports of goods and services.

On the theme of spreading the fruits of the economic recovery, the OECD said the Government should “prioritise” reducing unemployment through so-called activation schemes “which would spread the benefits of increased prosperity widely across society”.

It forecasts an average jobless rate here next year of 7.6% — high compared with the rest of the eurozone.

It also gives a nod to the Central Bank’s controls over mortgage lending for having “tempered” property price increases even as “very low interest rates and housing supply shortages risk boosting prices again”.


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