Thursday 21 September 2017

Ken Norgrove: Progress of SMEs will be the true barometer of recovery

The sector has a major part to play in creating wealth and spreading it throughout society, says Ken Norgrove of Zurich Insurance

Cornerstone of recovery: The SME sector is absolutely critical, says Zurich’s Ken Norgrove. Photo: Shane O'Neill/Fennells
Cornerstone of recovery: The SME sector is absolutely critical, says Zurich’s Ken Norgrove. Photo: Shane O'Neill/Fennells

Ken Norgrove

AS a major general insurer operating in Ireland for many years, Zurich engages with all sections of the economy -- from individuals wishing to insure their homes and cars, to leading multi-nationals looking to manage the risks associated with operating major manufacturing plants and other important facilities.

In between, is one of our most important customer groups -- the SME sector -- and the thousands of small- and medium-sized businesses spread across every city, town and village in Ireland.

While SMEs are very important to Zurich and our business, the sector is critical to Ireland's future success as we navigate the road to recovery.

The figures speak for themselves. There are somewhere between 200,000 and 250,000 enterprises of varying scale within the category of small- and medium-sized enterprises who, between them, employ close to 650,000 people.

Every year approximately 12,000 new small businesses are set up in Ireland, highlighting the dynamic nature of the sector and how it contributes to economic activity.

With good reason, there is now considerable focus on the importance of job creation to the economy as a whole, as it is the single most effective way of creating wealth and spreading it throughout society. And the SME sector has a major part to play in this regard.

Last March, Zurich was delighted to announce the creation of 112 new high-value jobs in two new IT hubs in Dublin -- in addition to the over 1,000 people already employed across Zurich's Irish operations. There is little doubt, however, that under the radar probably hundreds of small firms across the country were at the same time in the process of confirming their own decisions to expand operations or recruit new staff.

International research consistently identifies that small businesses are the largest contributor to new job creation every year -- whether in periods of economic recession or growth.

A 2010 study by the Kauffman Foundation in the US, for example, found that without the jobs created by start-ups in their first year there would have been no net job growth in the United States economy in all but seven of the 34 years between 1977 and 2010. It also found that in any given year, fast-growing young firms, which account for less than 1 per cent of all US companies, generate roughly 10 per cent of new jobs. The researchers concluded: "Start-ups aren't everything when it comes to job growth. They're the only thing."

Likewise, in Ireland, indigenous SMEs remain the backbone of our economy, and growth in the SME sector will be the true barometer of our economic recovery. And there are strong grounds for optimism in terms of the future potential of small business to lead Ireland's economic upturn.

In 2012, for example, Enterprise Ireland supported a record 97 new start-up companies, which between them expect to employ over 1,600 new staff and to generate over €300m in annual sales.

We in business, especially larger businesses, along with Government, have a responsibility to foster and develop the creation and sustainability of smaller businesses.

But the reality is that it is a tough environment for SMEs. Out of every 10 new companies formed in Ireland, probably two or three will thrive and prosper, a few more will manage to establish themselves over time without necessarily achieving their owners' dreams for them, while more than half will inevitably struggle and eventually fail. That is the nature of the business cycle.

The challenges facing smaller businesses, in particular, has been recognised at an EU level with the recent commencement of a public consultation process on how to better assist these businesses, especially when they run into difficulties.

As European Commission vice-president, Viviane Reding, the EU Justice Commissioner, commented at the launch of the consultation process last year: "Europe needs a 'rescue and recovery' culture for all viable businesses. . . Honest business owners should get a second chance. . . if things go wrong. SMEs, which are the backbone of our economy, are particularly important."

We owe it to all the entrepreneurial individuals, who give their time, commitment and, above all, their energy and enthusiasm to their businesses, to give them every opportunity to be winners.

Their success will be Ireland's success through the employment opportunities they create and the income thus generated through taxation. Our aim should be to encourage and support these entrepreneurs in every reasonable way that we can.

In this respect, measures introduced in the latest Budget by the Government, targeted at the SME sector, are very welcome.

The incentives include increasing the Credit Review Office threshold to facilitate requests from a broader range of SMEs, and increasing awareness of the full suite of development supports for businesses, which total approximately €2bn.

In addition, the Budget measures included an imaginative programme of expert mentoring designed to equip SMEs with the important tools to improve their ability to secure financing for their businesses.

Creating a climate in which all businesses, and small business in particular, can flourish will be important in facilitating Ireland's recovery.

As a global company with deep Irish roots and a strong presence on the ground throughout Ireland through our network of more that 400 local brokers and intermediaries, we see first hand the value that SMEs create through their entrepreneurship and ambition. And we work closely with them day in and day out to help them achieve their ambitions.

We also recognise what the Government brings to the table through its pro-business approach and support for global companies, like our own, but as importantly, local indigenous companies, large and small.

In conclusion, it is beyond doubt that SMEs have made a huge contribution to Ireland's development and the onus is on all of us to ensure that this continues to be the case as Ireland continues on its path to recovery.

Ken Norgrove is chief executive of Zurich Insurance and president of the Insurance Institute of Ireland

Irish Independent

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