Tuesday 23 January 2018

Taxpayers lose millions in Enterprise Ireland failures

GREAT EXPECTATIONS: Cork Webworks facility is almost empty
GREAT EXPECTATIONS: Cork Webworks facility is almost empty

Roisin Burke

A state-of-the-art hub of innovation to hothouse start-ups and create tech clusters was the intention: a big white elephant was the reality.

Webworks Galway is for sale for circa €4m by receivers – a fraction of the €35m Exchequer-backed cost to build it.

Worse still, the taxpayer has seen minimal return on millions invested in this and a similar centre in Cork.

"It's money that has basically been squandered," said one well-known technology industry figure. "It was a badly needed city-centre tech hub. The funding involved could have paid the rent for hundreds of start-ups for 10 years. It's a disgrace."

Completed in 2007, the impressive high-spec glass and steel building is all but dormant now, with as few as two paying tenants in its 42 offices. It has never been more than 20 per cent occupied.

The Cork Webworks is less than half occupied, and most tenants aren't start-ups or tech companies. One is a solicitor's office, one is the architect that designed the building and another is telecoms software giant Huawei.

The Cork Webworks facility was opened in July 2006 by then Enterprise Minister Micheal Martin, who said the project would create clusters of knowledge-driven companies and would act as "a catalyst in the development of a regional hub for technology and innovation".

While the accommodation and facilities at both centres were described as state-of-the-art, the nurturing environment that would stimulate innovation was lacking. "That friendly creative atmosphere found in hubs like those in New York, or London or Finland doesn't exist," said one occupant.

Previous tenants also talk of sky-high rents and a lack of start-up nurturing culture that should have been essential kit. "Rents were very expensive – not at all suitable for a startup," said one former Galway tenant.

Galway Webworks was built in partnership with bust developer Bernard McNamara's construction company. Enterprise Ireland invested €4.4m and Galway City Council put in further public monies.

Cork was a €25m build in public-private partnership with Nama developer Greg Coughlan's Howard Holdings, with Enterprise Ireland putting up nearly €4m.

Fatally, deals did not allow Enterprise Ireland any control over rents to keep them keen and start-up friendly. As the property market collapsed, firms could get much cheaper office space elsewhere.

One Cork renter said that they had been charged €25,000 a year for a large four-person office – an unsustainable rent for a small business and far more than the local market rate, even in better times.

More recently, a small office for six people was available at around €10,000 a year for rent and services – a high ask for an early stage company and more expensive than elsewhere in the city.

Webworks was to be a €300m countrywide initiative, with the aim of 10 centres being established nationally to nurture fledgling tech companies and create 8,500 jobs. A tender process began in Waterford and early stage planning was mooted in Dundalk and Sligo. Only Galway and Cork were delivered, with severely limited results.

The situation is reminiscent of the plight of Media Lab Dublin, the €35m hi-tech hothousing centre launched in 2000 with much fanfare in the Liberties area of the Capital. Heavily feted by Bertie Ahern and with Bono and The Edge on the board, it went into liquidation several years later. It was described by the Public Accounts Committee as having poor structures and "dismal" scientific output.

Enterprise Ireland's spokesman said that the Webworks centres were victims of the economic crash, when competing affordable space became widely available.

He acknowledged that the PPP model meant rents were outside the agency's control, and were set by developers.

"Last year we supported 150 start-ups all over the country," he pointed out. "We're probably the largest VC in Europe in terms of dealflow."

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business