Comment: Ireland's 190,000 small businesses have been the foundation of our economic strength. The sector accounts for over 60 per cent of GDP and 51 per cent of private sector employment. Small firms are crucial to the enhancement of competitiveness and growth and have created more than 550,000 jobs in the past decade.
About 24,000 new enterprises are created each year, which makes them a major vehicle for change. The sector's adaptability, contribution to product innovation, processes and services enables small businesses to help Ireland keep pace with challenges posed by our competitors.
However, this will only be possible if the business environment encourages success. Our entrepreneurs need to have the right fiscal and administrative conditions to develop and launch their products and to have an environment that encourages reinvestment of their gains when they are successful.
While this involves removing the obstacles to entrepreneurial activity and arranging appropriate technical and financial support, it is also a question of getting backing from those who work with entrepreneurs. Small firms' contribution to innovation and employment is widely recognised, but what is less recognised is the growing influence of small business on all our lives.
As large companies offer less employment and as the public sector increasingly outsource services, more people will be employed in small business, while many more will start their own business.
We are moving towards an entrepreneurial society, yet so many assumptions and practices reflect old economic structures and hinder new enterprises. It is time we put the needs of enterprise at the centre of policy making.
Small business owners take risks with their own money, not on behalf of financial institutions or shareholders.
It is imperative that the sector has an opportunity to engage directly with policymakers on small business issues. For that reason, the announcement earlier this week by Minister for Enterprise Trade and Employment, Micheál Martin, to establish the Small Business Forum to review issues relating to the sector is a welcome initiative. While the economy is structurally sound, major frictional issues are emerging and the forum provides an opportunity to focus on the small business sector's requirements.
The adage that you sow the seeds of your downfall at the height of your success should be heeded. Ireland cannot be complacent about its place in the world economic order. The forum presents a timely opportunity to review the State agencies' enterprise development strategies; the international comparisons on small business growth; the availability and access to finance for small business, and small firms' ability to engage in R&D activity.
However, the forum must also look at the cost of doing business in Ireland relative to our competitors. As a trading nation, Ireland must export 84 per cent of everything we produce and input costs are important because Ireland is a price taker, not a price maker, on international markets.
On the plus side, Ireland has historically low inflation, interest rates and unemployment levels and high GDP growth relative to our competitors.
However, on the negative side, Irish wage costs are 134 per cent of the euro-zone average and VAT and energy costs are 4 per cent and 25 per cent above the euro-zone average.
Higher insurance and distribution costs, rigid labour and business markets and waste, water and local authority costs rising by multiples of inflation are making Ireland a less attractive place to do business. However, we can solve these issues and the forum should help to put forward recommendations in this critical area.
While it is important to praise ourselves for past achievements, we must also take an honest look at the challenges facing us and the forum's work will be central to the sector's continued success, but it will have to convince the Government to act on the most pressing issues.
One of the main issues is the pursuit of a more rigorous, efficient and equitable means of delivering local authority services. Local authority and environmental charges must be tackled rather than offset by price hikes, which are borne mainly by small businesses.
In addition, the forum should encourage more small companies to engage in research and development, either through the taxation system or by undertaking a greater level of R&D, technology transfer and licensing.
If we are committed to strengthening the small business sector to ensure that its contribution to wealth and employment creation is developed fully, then reducing bureaucratic costs is a good place to start.
Micheál Martin has presented the small business sector with an opportunity to engage directly with policymakers, which it must grasp. It is over a decade since the last review of the small business sector.
The Task Force Report on Small Business 1993 was an outstanding success in shaping policies and recommendations that were acted upon. I expect no less from the Small Business Forum.
Pat Delaney is director of the Small Firms' Association
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