10 Nov 2017 | 05.04 pm
Guest Blog: Sue O’Neill, Small Firms Association
Ireland urgently needs a coherent strategy to support Irish small business
10 Nov 2017 | 05.04 pm
Edited extract from address by Small Firms Association chair Sue O’Neill at the SFA’s annual lunch, November 10, in Mansion House Dublin
Our business landscape is made up of many types of entrepreneurs and entrepreneurial business. There is much recognition of the stereotypical image of entrepreneurship, which is associated with new tech start-ups, risk-takers and businesses that strive to grow quickly. But amongst the Irish small business community there are lots of owner-managers that are out there running strong businesses that will not scale significantly, export globally or be classed as high potential start-ups; but they still deserve to be recognised, respected and celebrated.
They employ many people right throughout the country – half the private sector workforce, some 700,000 people – and are vital to the vibrancy of our communities and the sustainability of the overall economy.
An Ireland that is truly ‘open for business’ must encompass enterprises of all sizes, sectors and levels of ambition. A thriving business community needs diversity, it needs sole traders, family businesses, high street retailers, high-tech start-ups and fast-growing exporting companies. Still, efforts are needed from government and from all of us to develop a culture that recognises and supports all small business in Ireland.
This cultural shift is essential if we are to move closer to the SFA’s vision of Ireland as the most vibrant small business community in the world – supporting entrepreneurship, valuing small business and rewarding risk-takers.
Yes, we are here today to celebrate the diversity of our community, but also to acknowledge the many things that we share in common. We are part of that set that gets up early in the morning. We also stay up late at night working in our business. We enjoy what we do because we are in control of our own destiny. We are creative, agile, determined and resilient. We want to make a profit, and this is a good thing. Making a profit is essential, we need it to sustain our business, to grow and to create employment. This, unfortunately, may not always be understood in some circles.
Our latest survey has found other interesting things that we have in common. Six out of ten of us are in growing businesses, three quarters of us will invest in our business in the coming year and an incredible 71% will take on additional staff. Again, this highlights that we are employment creators and drivers of economic success.
We are fortunate that our economy is now experiencing growth after some very difficult years in recession. This is in no small part due to the perseverance, resilience and sacrifice of all of us gathered here today. While the recovery hasn’t been uniform, I’m happy to see that the majority of our members are feeling the benefits. In the last few weeks, 62% have told us that they feel the business environment is improving, and our survey respondents ranked domestic economic growth as the biggest opportunity for their business in the coming year.
This economic growth doesn’t, however, mean that we can become complacent. The biggest challenge we will face is a loss of competitiveness especially in light of Britain leaving the EU.
Moral Of The Boiled Frog
This brings to mind one very simple analogy that is used in many management textbooks: if you put a frog into a pan of cold water and turn on the heat, the frog will happily sit there without noticing that the water is getting hot. The result, inevitably, is one boiled, dead frog. But if you drop a frog into some warm water, the frog realises immediately that it is too hot and jumps straight back out again.
The moral of this tale is simply that people do not notice incremental change going on around them until it is too late. Like the doomed frog, we may not notice how changes in our environment such as wage increases, skill shortages, rising insurance costs and general business costs will affect our competitiveness until it is too late.
We cannot let ourselves be caught in this trap. Ireland urgently needs a coherent strategy to support Irish small business. As you know in your own businesses, strategies matter. In 1958 Government focused its efforts to develop a strategy to bring foreign direct investment to Ireland. Clearly, this proved very successful and is still evolving. We need that same focus now on a strategy for small business – a common vision that government and all of us can buy into for the medium to long term and that would shape all other policy decisions.
At the moment, in contrast, the rhetoric of support for small business is does not always permeate through the policy-making process. Let me give you a couple of examples.
Our Capital Gains Tax rate at 33% is the fourth highest in the OECD and this is having a negative impact on investment. We need to see this reduced to 20%. The limit on the 10% CGT Entrepreneur Relief is at €1m here compared to a limit of £10m in the UK and as a result we are losing out on mobile investment into Irish businesses.
For the entrepreneur, the SFA has been campaigning for decades to end the tax discrimination against the self-employed. The gap between the Earned Income Tax Credit and the PAYE credit now stands at €450 and we expect this to be closed in the next budget. Full tax equalisation, including the abolition of the USC surcharge that applies only to the self-employed, would be a concrete demonstration by Government that it supports entrepreneurship in Ireland.
Alongside these ongoing issues are new emerging challenges for small business such as attracting and retaining staff. All business owners know that success is not down to one person; it is very much dependent on the team that makes up the business.
It is getting harder and harder for member companies to recruit the right people and, in many cases, as soon as they have been trained up and become productive, they jump ship to work for a multinational. We must work together to drive people toward careers in small firms – all of us as employers alongside guidance counsellors, teachers, parents and policy-makers.
Legislative issues such as making the new KEEP employee share options scheme work in practice and resisting the constant barrage of employment law bills that make it more difficult and costly to create jobs, must be driven by a strategic vision for the small business sector.
Pic: Gary O’Neill