Friday 28 July 2017

Ireland not doing enough for SMEs: EU

The Commission warned of the gulf between multinationals based here and homegrown businesses, whose concerns can be overlooked by government. Photo: Reuters
The Commission warned of the gulf between multinationals based here and homegrown businesses, whose concerns can be overlooked by government. Photo: Reuters
Colm Kelpie

Colm Kelpie

The State hasn't done enough to address the regulatory concerns of Ireland's small and medium-sized businesses, the European Commission has said.

While measures have been drawn up to ensure that the interests of SMEs are taken into account, European officials warned they haven't yet been fully rolled out.

The Commission also warned of the gulf between multinationals based here and homegrown businesses, whose concerns can be overlooked by government.

"Specific regulatory concerns of SMEs remain insufficiently considered," the Commission report said. "A number of measures are in place to ensure that policymakers take SME interests into account, including through consultations. However, implementation is incomplete."

Productivity in small Irish firms lags that of their much larger foreign counterparts, with R&D (Research & Development) activities dominated by the latter, Brussels said in the report.

The report says that while Ireland conducts regulatory impact assessments, the number has been low in recent years and issues remain regarding their quality and timeliness.

"In addition, key 'think small first' principles are yet to be fully implemented, including the SME test and common commencement dates," the Commission said.

The report was one of several from member states across the EU that was released on Friday. However, its publication was delayed until after polls closed on Friday night, "out of respect for Ireland's democratic process".

Although highlighting the strength of the economic recovery, the report criticises the lack of funding in education, the high cost of childcare and pointed to problems in housing, the inadequacy of the State's infrastructural spend and public transport in Dublin.

The Commission told the Irish Independent that the decision to delay the report's publication was taken by the "relevant members" of the College of Commissioners, thought to mean those with an economic brief including Economics Commissioner Pierre Moscovici.

"Issuing the report while voters were still casting their votes last Friday would have raised even more questions," a Commission spokeswoman said. "All member states were informed about publication time, including Ireland."

The Commission report also raises concerns about the productivity of Ireland's SME sector, saying there are significant differences in business conditions and performance between home-grown firms and the Irish operations of big multinationals.

This echoes concerns from the Organisation for Economic Cooperation and Development (OECD). Chief economist Catherine Mann told a conference in Dublin late last year that multinationals based in Ireland are far more productive than their home-grown peers. And she warned that the gap is widening.

The Commission also pointed to the limited links between multinationals and indigenous businesses. "Multinational enterprises operate partly as an enclave, with limited linkages to indigenous firms," it said.

"A rising share of multinationals' business services is sourced from abroad. As far as business services are concerned, there has been an increasing disintegration in trading between Irish business services providers and multinationals established in Ireland."

R&D activities are also dominated by multinationals, with SMEs "highly dependent" on public R&D support for their own innovation, Brussels said. "This makes them vulnerable to the significant reduction in public R&D spending that occurred during the crisis," it argued.

But the Commission said efforts are being made to foster R&D. It also notes that turnover, profits and employment in Irish SMEs are recovering.

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