Irish companies ‘should be born and killed at a greater frequency’
Department of Finance chief John Moran criticises SMEs’ record on innovation and online trading
John Moran, outgoing secretary general of the Department of Finance. Photograph: Eric Luke/The Irish Times
Irish companies should be born and killed at a greater frequency if Ireland is to become a truly entrepreneurial culture, the outgoing secretary general of the Department of Finance told a gathering of small business owners in Dublin today.
The Government’s strategy to improve the flow of credit and funding for enterprises can only work “if businesses have good business plans” in the first place, John Moran said.
“In a way, we don’t have enough companies born and we don’t have enough companies that die. I think we hang onto companies too long,” he told the annual lunch of small and medium-sized business lobby group Isme in Croke Park earlier today.
“If you don’t have enough businesses that are born, die and reborn, you don’t actually have an entrepreneurial society, which is what we want to create.”
Mr Moran said that on a “roadshow” around Ireland a few years ago, he had been “shocked by the number of companies that weren’t doing a cash-flow analysis”, and said this was one of the fundamental issues that the Irish small business sector had to tackle.
It is a matter of urgency that Irish SMEs embrace online trading, and benefit from the sales growth, exports and employment potential that would follow from establishing an online presence, Mr Moran also said.
Less than a quarter of Irish businesses “engage in any meaningful way with online commerce”, with the result that 70 per cent of online purchases in Ireland are from overseas retailers, he noted. “That is just not sustainable going into the future.”
He also criticised the SME sector’s track record in innovation and creativity, suggesting that domestic companies, unlike multinationals based here, were too keen on “doing the same thing we did yesterday”, rather than making incremental improvements in the way they did business.
Mr Moran said the Government wanted to reform how taxation works for entrepreneurs and work to build a more pro-business environment in Dublin, “because frankly without Dublin, the rest of the country isn’t going to work either”.
He admitted that he had been frustrated that the Department of Finance had not yet “cracked” the way it communicated with the SME sector about funding supports. The Department was “not happy” with the way that the support schemes were working. “We want to know how to fix it.”
The Credit Review Office, which examines business credit applications that have been declined or reduced, is of critical importance to the Department of Finance, Mr Moran said, because it is how it gets to learn in detail about the nature of credit blockages.
Lack of access to finance has been a long-running bugbear for the SME sector since the financial crisis.
“Isn’t it amazing that we actually have to get evidence that we’re not getting loans?” Isme chief executive Mark Fielding asked his members after Mr Moran finished his speech. “The answer is we’re not getting loans,” he insisted. “Banks need to learn how to lend on risk. It’s not just one-sided.”
Isme chairman Eamonn Kielty also identified “unsustainable costs” and “excessive red tape and bureaucracy” among the areas of concern to small businesses. “It is of the utmost importance that the fragile revival in the economy is nurtured and that there is a continued acceptance that there is a long way to go,” Mr Kielty said.
“We in the business community will continue working to bring the country back from recession. All we ask is for the Government to play its part.”
But Mr Moran, whose successor is due to be in place by mid-July, rejected criticism that his Department had not formed a coherent economic strategy since the departure of the Troika. “Nothing could be further from the truth,” he said.