by Cormac Fitzgerald FCPA Accountant & SME Specialist with economic data supplied by Jim Power.
Where to now for the SME Sector as we once again sail into unchartered waters ? Do you leave businesses closed and hibernated and wait for the storm to pass or put back up the sails and head for destination unknown.. a question I get asked a few times a day by my clients in all sectors…
- The government has done a super job showing great leadership in the pandemic. A great multi- agency approach to solving this crisis demonstrating resilience and leadership . Now that the health crisis is subsiding and in retreat we have an economic one now to face. According to data from leading Economist Jim Power in numerical terms, Ireland has a preponderance of Small and Medium Enterprises (SMEs) spread across Industry, Services & Distribution, and Building & Construction. SMEs are firms that employ less than 250 people. Such firms dominate the Irish economic landscape. In overall terms they account for 99.8% of the total number of business enterprises in the private business economy; they employ 1.06 million people, accounting for 68.4% of the total employment in the private business economy. In recognition of concentration risks in the Irish economy, where a small number of large companies make an inordinate contribution to the economy, it is vital that a strong indigenous sector is developed and nurtured and that SMEs in particular can play an increasingly important role in firstly rebuilding the Irish economy post-Covid-19, and secondly in helping to ensure the longer-terms sustainability of the Irish economic model
- The SME sector played a very important role is pulling the economy out of the labour market crisis in 2012, and with proper support and policy recognition, it will play a very important role in pulling the economy out of the Covid-19 employment crisis. A range of measures is now necessary to ensure that all of these businesses survive the shock posed by Covid-19 as they will play an essential role in re-building the Irish economy once the virus passes and the economy is re-opened. Specific ongoing measures are required to keep those businesses solvent during the crisis, but once the crisis ends, economic recovery will not be possible without those businesses. Longer-term support will be required once Covid-19 passes, because it will take some time for business levels to return to normality and most entrepreneurs predict it could take at least twelve months. We need a stimulus package now that can be delivered quickly to save the sector from collapse. Perhaps in the form of a SME Stimulus package combining large and small business. My colleagues and fellow CPA’s have a suitable SME stimulus package we have been working on that could be a potential solution to help in the recovery phase which is being shaped and has been well received in drafting phase of it’s committees.
- The only formal standing engagement forum for industry and the Department of the Taoiseach and the Department for Finance is the LEEF (Labour Employer Economic Forum). If government departments want to fully understand the issues facing the economically significant SME sector, a more formal interaction between Government and SMEs which positions them as equal partners with larger enterprises and labour is essential. SMEs will have to be put at the top and centre of the effort to re-boot the economy over the coming months and become a central part of the policy-making agenda. That has to be the case in the past, but that must change with immediate effect. The SME sector is too significant to ignore. It is the lifeblood and engine of each small village, town and City in Ireland. I deal with hundreds of SMEs as a business advisor and helping them to access supports, working capital and survive. There is an emotional intelligence piece that requires psychological understanding in mentoring business owners to safety yet to play out.. Uncertainty is now the big concern in the minds of SME owners.
- Specific Covid-19 measures need to be introduced to cover issues such as liquidity and solvency supports, fiscal grants, lower VAT rates, a commercial rates holiday for 12 months, a commercial rent scheme, and insurance cost alleviation measures. The supports thus far are most welcomed but a major SME stimulus package in the form of a grant is needed to help SMEs recovery, stabilise and grow again. Significant and unorthodox measures need to be implemented immediately to prevent viable businesses from becoming vulnerable. The measures contained in the May 2nd Covid-19 business rescue package represent another positive step in helping business survive the Covid-19 crisis and successfully re-commence operations once the economy is opened up again. However, the measures cannot be implanted until a new government is in place; the serious liquidity issues for SMEs have still not been adequately addresses; and further measures will be required.
- The Irish government will have to accept a higher level of government borrowing in the medium-term. There cannot be a return to policies of fiscal austerity. Government spending on the public services will have to be maintained and the tax burden cannot be increased. The agenda of the incoming government should include a number of priorities to nurture, support and grow the SME sector, which makes such a strong regional and national economic contribution, and which will play an essential role in re-building the economy. The SME sector must be mainstreamed into the heart of government policy and it has to become an integral part of economic and business policy formulation. A structure needs to be created at the heart of government policy to include the SME perspective on economic and fiscal policy measures. There needs to be an urgent SME task force set up with Entrepreneurs and experienced SME owners. Time is not on our side on this. It is hard to plan more than 400 days out in the new world with global major issues now becoming more frequent. We need to now plan for the unexpected. It is refreshing to see positive community projects happening showing the great Irish resilience.
- A specific action plan needs to be included in the programme for Government that gives recognition to the very significant role the sector plays in Irish economic life at both the national and the local level. Given the challenges now facing the economy from Covid-19 and the pressurised FDI model, it is time to create a more formal and professional approach to developing the SME sector. The IDA is a State agency with specific responsibility for attracting FDI into Ireland. Enterprise Ireland is a State agency with responsibility for the development and growth of Irish enterprises in world markets. Both organisations fulfil an important role in achieving their objectives, but there is no such agency for SMEs. Government should set up a State agency with specific responsibility for SMEs. The new body should become an engine to drive urban and rural regeneration, based on an evidenced based strategy; build social capital; deliver a circular economy; and be heavily driven by community aspirations. This is what SMEs are very effective at doing, but the model needs to be developed in a very significant way. If this sector collapses the fallout will not be pleasant and result in liquidations, receiverships, insolvencies and loss of employment. It can be saved with quick , decisive and an experienced SME task force that can help in policy making and shaping of stimulus packages that could work.