Enterprise about more than the creation of jobs for today
We need to incentivise risk-takers and invest in the long-term development of indigenous business
TO create wealth and jobs, we need commerce. We must start and scale more businesses and create an environment that fosters the risk-taker.
At the recent Global Irish Economic Forum, there was much discussion about the things we need to do to assist on the road to recovery and to create more jobs. A video showcasing the IDA and the multinational firms it had secured and helped set up in Ireland was shown. We have, in Ireland, a unique opportunity, in that we have punched above our weight in attracting Foreign Direct Investment (FDI) and with that we have an ecosystem that could see us start up and scale many more businesses.
Many people talk about the importance of enterprise, yet too often it is easier to focus on "job creation" rather than investing in the long-term development of an environment in which businesses can start, grow and scale. If we create an environment that rates jobs over enterprise, we are taking a short-term view. We must therefore create an environment in which "enterprise" can grow.
But first things first. Jobs are created when businesses execute their plans. This generates commerce, the trading that occurs between people, communities, nations – it binds us together. It is the activity that generates the need for jobs. Jobs do not exist for jobs' sake.
While we can increase commerce by attracting overseas businesses to Ireland, we also need people who will take risks – leave a job, recruit another sales person, enter a new market, rent more office space, develop a new product, etc. So if we want more jobs, then remove any obstacles and create incentives for risk-takers to start up and grow their businesses.
We must demonstrate that we really want an entrepreneurial environment and support that with tax incentives – such as the UK 10 per cent entrepreneur tax. People must be incentivised to the point of taking action. We must create a capital gains tax that draws a clear distinction between speculative and enterprise capital gain, with the latter taxed at a far lower rate. This would be a major catalyst for enterprise creation, particularly in the tech sector, that has thousands of highly skilled and talented people.
Having a strategy to grow FDI and indigenous enterprise is sound. Both are critical strands on the road to recovery and they can create great synergistic overlaps in the ecosystem. In the technology sector, there are on-going issues with overemployment and the availability of staff for both local and foreign businesses. Such initiatives as Open Ireland are key to getting more people working in Ireland.
For indigenous firms, we should create a new enterprise growth share option scheme. Such a scheme should be Revenue-approved for capital gains tax with standard terms published so firms do not need to recreate such schemes at considerable costs. Firms could sign up to qualify for the scheme via Enterprise Ireland. This would remove the unnecessary costs associated with creating such schemes and incentivise staff to far higher levels of ambition. Such a move would be transformational and would create a long-term multiplier effect of more wealth and attracting more people to take more risk and grow more businesses.
Having a low rate of entrepreneurial tax and simple share options schemes would position Ireland as not just the best place to locate an overseas business but also a great place to start and scale an indigenous business.
Underpinning every business is the concern that costs rise constantly. On the road to recovery, we must maintain constant vigilance on being a low-cost producer.
As noted earlier, staff costs can, in some sectors, be high given the demands of both multinational and indigenous firms who need more talent. However, the issue also extends to the cost of professional services – which are sometimes fuelled to excessive levels. A good example of this is the costs associated with leasing offices in Dublin that are Nama-controlled, these are excessive and the process is overly complex.
A more recent issue to emerge is the availability and accessibility of office space in Dublin. This market is artificial and is now an impediment to enterprise growth. We need to create a real market and remove the supply of such property from Nama so a normal commercial landlord/tenant environment can be restored.
Which brings us to the importance of culture and self belief in scaling indigenous businesses. When creating a plan for enterprise growth, we can identify the steps we can take to improve the environment and implement changes in the tax structures – all of which would result in more tax revenue.
However, we need to go further as a nation and really prove that we mean what we say about growing – particularly when it comes to indigenous businesses.
Do we celebrate the local successes and present these people as role models? We must show that as well as bringing overseas businesses to Ireland, that we can in tandem grow and scale our own. Use the presence of both overseas and local businesses to create an overall business environment that fuels growth, commerce and risk-taking.
Perhaps the biggest dilemma is the time factor. Investing in the development of enterprise growth takes time and the rewards will accrue over the long term, while attracting more overseas businesses to create jobs will have an immediate positive impact.
These two strategies can coexist. We know we excel at FDI, so now it's time to focus on indigenous enterprise growth. The first step is that we must demonstrate that we all believe and aspire to making Ireland the best business environment to start, scale or locate a business.
Colm Lyon is the founder and CEO of Realex Payments and Realex Financial Services