Enterprise Ireland sought beefed-up Brexit rescue package
Enterprise Ireland unsuccessfully lobbied Government to revive a large-scale business rescue fund that was used in the crash in order to help cope with Brexit, the Irish Independent has learned.
The head of Enterprise Ireland warned Government before the October Budget that it should create a funding pot of around €40m for Brexit-hit firms given the "gravity" of the situation. Julie Sinnamon said the Government would "very likely" need to revive the Enterprise Stabilisation Fund, that was introduced for a year during the financial crisis to provide loans to vulnerable, but viable, businesses.
Ms Sinnamon also warned that the Brexit loan guarantee scheme - which was announced in Budget 2018 - may not fit requirements, in part because it believed large companies would be excluded.
In a letter to then Tánaiste and Minister for Business, Enterprise and Innovation Frances Fitzgerald in September of last year, Ms Sinnamon warned that Irish exporters were facing an "unprecedented" challenge from both the devaluation of sterling, and having to prepare for a hard Brexit.
She noted that more than 1,500 Enterprise Ireland client companies export to the UK, and employ more than 100,000 people.
"These companies that are deemed to be particularly badly exposed employ 40,000 people," Ms Sinnamon wrote in the letter, which was obtained by the Irish Independent under Freedom of Information.
"The majority of this employment is in the regions outside of Dublin. Job losses in these locations would erode employment in indigenous industry and the employment would be very challenging to replace considering their rural locations, sectors, and the nature of the employment."
Ms Sinnamon set out four specific Brexit-related initiatives to help companies prepare for Brexit and "deal with the current crisis", including expanding the agency's footprint overseas, a campaign to support market diversification, extending business angel funding and rolling out a Brexit Enterprise Stabilisation Fund.
She estimated the additional spend required for these initiatives in 2018 to be €35m, including €4.5m to recruit extra staff and expand the agency's operations.
In Budget 2018, the agency received €1.3m in additional Brexit funding, in addition to an increase in its existing budget.
Ms Sinnamon also raised concerns about the proposed Brexit loan guarantee that will provide working capital at rates of around 4pc to small- and medium-sized businesses that are impacted by Brexit. The State, in conjunction with the European Investment Bank, will guarantee loans rather than provide the funds.
"In face of the increasingly challenging environment and considering the increasing concern being expressed by our clients this initiative [Brexit guarantee] may not meet the needs of all Enterprise Ireland client companies as normal credit scoring processes will still apply and large companies will also be excluded," Ms Sinnamon wrote.
She said the Government will "very likely" need a fund similar to the Enterprise Stabilisation Fund used in 2009/2010 to help firms. She said this could take the form of either a lending scheme for Enterprise Ireland companies, or the agency lending directly to firms following amendments to legislation.
"As a contingency, it would be remiss of me not to highlight than an initial €40m may be needed given the gravity, scale and potential negative impact of the current situation," Ms Sinnamon wrote. She said monies could be drawn over two years, with funding of €20m required in 2018.
An Enterprise Ireland spokesman said: "The four proposed Brexit initiatives outlined in the communication are now being looked at in the context of Enterprise Ireland's sustained existing budget, the €1.3m allocated in Budget 2018, use of own resource income, the introduction of the new €300m guaranteed loan scheme, €122m R&D capital funding and the Government's 'Global Footprint Initiative'."
Asked if Ms Sinnamon still holds the view that a stabilisation fund is required, the spokesman said it continues to closely monitor the impact of Brexit. The overall budget allocation for EI in 2018 is €146,676,448, according to the Department of Business, Enterprise and Innovation.
This compares with €143,380,248 in 2017. Funding is also received from other sources.
The Department said that most of the cost of the many EI Brexit-related activities has been met from existing resources. It said €3m was secured for the Department for its Brexit response, with €1.3m being given to EI for recruitment.
The Department also said that it is looking at proposals for a longer term business investment loan scheme to support firms, as well as working with the European Commission to look at schemes within state aid rules.
A rescue and restructuring scheme was approved by Brussels in November.