Irish SMEs too dependent on domestic market

The European Commission has warned that home-grown Irish firms are too dependent on the domestic market, which could leave them vulnerable.

In a comprehensive report focusing on the SME sector, the European Commission commented that the Irish Government needs to do more to ensure SMEs are consulted on business-related legislation.

The Brussels-based body also alerted the Government to their high interest costs for SME loans. But, on the whole, the report maintained that Ireland was one of the friendliest SME environments in the continent.

In response to the European Commission report, Ged Nash, Minister for Small Business, said: “We won’t be resting on our laurels [as one of Europe’s top performers].

“As the Minister with responsibility for SMEs I want to ensure that we remain at the top. We are already examining the areas where the Commission have suggested we need to do more work, such as access to finance and prompt payment and procurement.

“In order to maintain this leading position our SMEs must continue to be paramount in our minds in everything that we do.”

The Commission noted that Ireland’s SME sector was one of the hardest hit by the economic crisis. Although it acknowledged “significant and sustained” recovery since 2011, the report also stated that employment and value added were not back to pre-recession levels.

Ireland’s economic performance was rated above the EU average in six categories; and was the top performer when it comes to internationalising business and ensuring entrepreneurs that experience bankruptcy emerge quickly from financial trouble.

Areas for improvement included a drive for increased overseas custom. The report stated that “Irish indigenous businesses are overly dependent on domestic demand”.

“This makes them especially vulnerable to changes in market demand, a fact that became very evident in the aftermath of the economic crisis.”

The report confirmed progress had been made in supporting Irish businesses wishing to export or expand internationally, in particular through the enhancement and extension of the Foreign Earnings Deduction.

“However, much more is needed to help educate and change the mind-set of Irish companies so as to encourage them to internationalise their horizons, ambitions and client base,” the report added.

One of the areas where Ireland had made the least progress was in consulting SMEs on business-related legislation.
The report said all new proposals for any such legislation should involve SME input from the outset, to ensure new laws are fit for purpose for the majority of businesses.




Image: Yanni Koutsomitis

Date published 23 Nov 2015 | Last updated 23 Nov 2015