Ability of small businesses to succeed and grow underpins future potential for jobs, growth and prosperity - Perry

Opening Remarks

A Chathaoirleach

I welcome the opportunity to be here today to discuss the importance of the small business sector to the Irish economy and to hear statements from Members of the House on the Report of the Advisory Group for Small Business – “The Voice of Small Business – A Plan for Action.”

I want to thank you, Cathaoirleach, for setting aside Seanad time to facilitate Statements from Members on the Report. I look forward to the valuable input of Senators and will listen carefully to your comments. I am sure that the members of the Advisory Group will be keen to hear your views and will reflect on them in the context of the future work of the Advisory Group. Your comments will also be constructive in future discussions with colleague Ministers and their Department Officials in addressing the various recommendations contained in the Report.

Background to the Setting up of the Advisory Group for Small Business

As Minister for Small Business, I want to be the voice of small business to Government to reflect the sector’s concerns and to bring forward proposals to assist businesses.

I believe it is vitally important that, as a Government, we communicate on an on-going basis, what we are doing for small business and that we hear at first-hand, what issues need to be addressed more urgently, and what measures can be considered to further support small business.

One of my first initiatives as Minister for Small Business was to look at the need to have continuing dialogue structures in place whereby the concerns of small businesses could be brought to the attention of the newly-appointed Government.

This led to the establishment of the Advisory Group for Small Business which was launched by the Taoiseach on 16^th June last. In my capacity as Minister for Small Business, I chair the Advisory Group.

The objectives of the Advisory Group are:

• to facilitate structured and regular dialogue with representatives of the small business sector on issues of concern.
• how to promote the economic development and job potential of the sector having regard to the current restraints imposed on the national finances, and,
• to recommend action points and follow up for onward reference to Government.

In identifying members to serve on the Advisory Group, I paid considerable attention to having a well-balanced representative group with an emphasis on individuals who had first-hand experience of running businesses as well as including representatives of the key State enterprise support agencies. Thus the Group’s membership includes individual business people, representatives from Chambers Ireland, the Credit Review Office, the Irish Hotels Federation, ISME, the Small Firms Association, the County and City Enterprise Boards, Enterprise Ireland, Forfás and officials from my own Department.

Forfás and my Department act as secretary to the Group and Forfás provide backup research and analysis.

I would like to acknowledge the hard work and dedication of all those involved in the Advisory Group for Small Business. Their involvement is entirely on a voluntary basis and involves no cost to the taxpayer. I thank them for their work to date and look forward to their further contributions in following up on the Report and in addressing new issues.

Report of the Advisory Group for Small Business

The Advisory Group addressed some key issues that they felt were important in assisting the small business sector cope with the current economic crisis and to prepare businesses for future growth and job creation.

The Group’s report was finalised and submitted to the Taoiseach and published on the 23^rd November 2011.

Senators will note that the Report addresses some big ticket items as well as more focused issues. The themes addressed include Lending Facilities and Access to Finance, Labour Costs and Flexibility, Local Authority Structures, Costs of Doing Business, Access to Public Procurement, The Hidden Economy, Competitive Practices, Improving Cash flow, Mentoring and Advice, Management Development, Access to Information and Insolvency and Debt Resolution. The Advisory Group has categorised recommendations under immediate, short, medium and long term actions.

Government is already working on many of the issues identified by the Group and others will be fully considered and determined in the coming months.

In relation to Lending Facilities and Access to Finance, Government, through the Minister for Finance, has taken action to reorganize, recapitalise and deleverage the domestic financial system in order to restore the banks to health and provide credit to business. In addition, the Government is committed to introducing a Temporary Partial Credit Guarantee scheme and a separate Microenterprise Loan Fund to supplement normal bank lending and to provide additional lending where specific measures are warranted. My colleague, Minister Bruton, is working to implement these two initiatives.

Initiatives also taken by Minister Bruton in relation to wage settling arrangements under EROs and REAs are addressing Labour Market Costs and Flexibilities. Local Authority Structures and Reforms are being advanced by my colleague, Minister Hogan.

As an immediate response to some of the other recommendations in the Report, Government has immediately committed to 5 recommendations for action.

These are pragmatic ideas which are capable of early implementation to help troubled small businesses obtain supports, address some of the challenges of the hidden economy, assist their cash flow by promoting prompt payments, and seek ways to reduce administrative burdens.

The initial actions to be delivered are: -

1. Develop a simple one page guide setting out warning signs to encourage small businesses to ask for help and outline services available; this is aimed at supporting business that are in crisis and are unsure where to turn for help and advice.
2. Audit and review the multiplicity of licences required by businesses to assess the potential for discontinuing some licences and for amalgamating licences; this is aimed at reducing the Cost Burden of Regulations.
3. Introduce additional scanning at ports to combat the illicit tobacco trade, which has such a detrimental impact on small retailers.
4. Make available an Official Notice regarding the Government’s current 15 day Prompt Payment Practice, to support full compliance for all public sector bodies and agencies.
5. Develop a Voluntary Code of Conduct on Payments within the private sector, with the aim of reducing payments terms from the current average of 70 days.

The remaining recommendations will be considered and discussed with relevant stakeholders to determine which ones may be advanced. The Report will also feed into the development of the Action Plan for Jobs being finalised by Minister Bruton.

In parallel with the establishment of the Advisory Group for Small Business, I have also established an Inter-Departmental SME Liaison Group. This is to ensure that each Department of State clearly identifies the importance and concerns of the SME sector and ensures that actions taken have full regard for their impact on SMEs. This Group will also focus on those recommendations of the Advisory Group which require cross-Government implementation.

What the Government is currently doing to assist small business

This Government is fully committed to Small and Medium-sized Enterprises, as evidenced by our Programme for Government, our Jobs Initiative,Budget 2012, and the Government’s action Plan for Jobs which we will announce shortly.

Government is acutely aware of the importance of the small business sector and its potential for generating employment.

Our challenge has been, and continues to be, where to target our efforts and financial supports and interventions to best effect over the coming months.

In these constrained economic circumstances, this requires difficult choices to be made in the face of enormous challenges – choices to ensure that we do achieve change and make a real difference to, not only the business community, but also to balance the human, social, and economic effects, so as to protect and enrich the living and working conditions of all the people we represent.

Importance of Small businesses to the Economy

My aim, as Minister for Small Business, is to ensure that small businesses will continue to play a central role in our economic recovery.

Their ability to succeed and grow underpins our future potential for jobs, growth and prosperity.

There are almost 200,000 small businesses in Ireland, involving over 650,000 people throughout the country. They are currently operating in a particularly difficult environment, and I believe it is vital that we continue to focus on actions that achieve positive improvements in the operating environment for small businesses.

In the context of budgetary allocations for 2012, even at a time of declining resources, my Department’s Budget is being broadly maintained, with current spending at €366million slightly lower than the 2011 allocation but capital spending at a record high of €514million. This will directly support the enterprise sector.

Over the next two years, the Government will commit approximately €1billion in enterprise capital supports.

The Government recently committed to a Multi-Annual Action Plan on Jobs, with quarterly targets and a strict implementation process. This will be key to delivering a rolling set of reforms across the economy and Government to support the Government’s number one priority of job-retention and creation.

Access to Finance

Access to Financeisthe key issue forthe small business sector.

We need a financial system that is better suited to the needs of our smaller company sectors. Financing the productive capacity of the economy is critical to long-term economic success.

While large businesses have various options open to them, including the capital markets, small businesses are heavily dependent on the banking system.

The initiatives taken by my colleague, Michael Noonan T.D., Minister for Finance to restructure and re-capitalise the banking system were the principal responses to making credit available.

The recent restructuring of the domestic banking sector creates capacity for the pillar banks to lend in excess of €30 billion over three years to the SME and other important sectors.

The Government has imposed lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013.

Both banks are required to sanction lending of:

• at least €3 billion in 2011,
• €3.5 billion in 2012 and
• €4 billion in 2013

for new or increased credit facilities to SMEs. Each bank has informed the Department of Finance that they expect to have met their lending targets for 2011.

A number of targeted initiatives are being developed by my colleague, Minister Richard Bruton within the Department of Jobs, Enterprise and Innovation, in order to build on the recapitalisation platform and ensure a flow of credit to businesses in order to sustain jobs and generate new employment opportunities. These initiatives include: