27 May 2020 | 12.57 pm
Government Cocoons While Small Firms Die
Finance minister in an echo-chamber cocoon, says Neil McDonnell
27 May 2020 | 12.57 pm
ISME fears the government is retreating into its cocoon with big business, big unions, the civil service and the semi-state sector, writes Neil McDonnell
ISME recently surveyed our membership and found that increasing numbers of SMEs would go out of business every week as normal trading is simply not possible.
ISME’s survey also found that the average business owes €78,000 to its trade creditors. These are the butchers, bakers, cleaners, plumbers, carpenters and electricians who are the mainstay of your town or village.
Against that background, ISME issued four public calls for liquidity for small business, and wrote to An Taoiseach and the Minister for Finance to explain the plight of small businesses throughout the country. We received no meaningful response.
ISME has set out its three main requirements for business to get through Covid-19:
• A workable liquidity solution for viable business
• Access to the examinership process for smaller businesses in trading difficulty
• A clear operational plan for safely restarting the economy.
While there has been some movement on our third requirement, progress on the other two has been lacking. We have made it consistently clear that businesses need grant assistance, not increased debt. Where debt is provided, it needs to be on the most favourable terms, and at low, zero, or indeed, negative rates.
This has yet to materialise, and the figures produced by the Department of Business and Enterprise on the take-up of business supports show how risible government support has been.
This would be explicable if the government and the Exchequer was not dependent on the SME sector for employment and taxes. The reality is that:
• More than half of all PAYE, PRSI and USC comes from the SME sector
• Almost two thirds of VAT is paid by SMEs
• And almost three quarters of all workers in the productive economy, some 1.5m workers, are employed by SMEs.
If we fail the SME sector and allow a large number to go out of business, the pain down the road for the Exchequer and our public servants will be severe. Government must engage with the SME sector, and start to address its needs, quickly.
Dialogue on the commercial needs of SMEs, and the recent return to work safely protocol, has been non-existent. Now more than ever, dialogue must be two-way. Government can’t interact with the small enterprise sector when the Labour Employer Economic Forum is the only standing forum for government, employer and trade union dialogue. This forum excludes small business representation.
It is more vital than ever, when government ability to interact with the wider business community is so compromised, that they do not retreat into their cocoon with big business, big unions, the civil service and the semi-state sector, who are all unwilling or incapable of challenging the government’s thinking.
A litany of avoidable errors has arisen from this disengagement with small business. Constructive engagement with small business could have avoided missteps that have cost us time, and further undermined what little confidence small businesses have in the caretaker administration.
ISME calls on government to engage with the SME sector, and provide it with vital working capital before lasting damage is done to the most systemically important part of the Irish economy.
+ Neil McDonnell (pictured) is CEO of ISME, the Irish SME Association, which has c.10,500 members nationwide.