The Government will no longer be able to give regional aid to companies wishing to set up or expand operations in Dublin and the surrounding counties from 2007.
It will also face a phased reduction in the amount of aid it can offer firms in poorer regions following a major shake-up of EU regional aid policy announced yesterday.
Under new guidelines agreed by the European Commission and the Government for the period 2007-2013, firms in the border, midlands and west region (BMW) can receive State aid worth 30 per cent of an investment between 2007 and 2010. This will fall to 15 per cent in 2011, representing a major reduction in the current level of State aid that can be supplied to firms, which stands at 40 per cent of a project.
Covering nearly half of the State's landmass but holding just 27 per cent of the population, the BMW region is composed of Donegal, Leitrim, Sligo, Mayo, Galway, Laois, Offaly, Westmeath, Longford, Roscommon, Cavan, Monaghan and Louth. It suffers from the highest unemployment and lowest investment levels in the State. However, it is considerably richer than many regions in the new EU member states.
The new State aid plan reflects Ireland's growing prosperity by cutting the amount of aid that can be provided to support investment. It will force the Government to change the way it seeks to attract investment.
Under the new State aid plan, Dublin and the surrounding counties of Meath, Kildare and Wicklow will not be able to offer any regional aid grants due to their relative prosperity. But State agencies such as IDA Ireland and Enterprise Ireland will be able to award research and development grants to firms involved in cutting-edge research.Cork, Kerry, Limerick, Clare and North Tipperary will all be granted a two-year transitional period during which projects can receive State aid to the tune of 10 per cent of an overall project. Large-scale investment projects will become ineligible for grants after December 1st, 2008.
However, State aid at a level of 10 per cent of a project will still be available to support small and medium businesses until 2013.
The level of State support in the southeast region, encompassing Wexford, Waterford, Kilkenny, Carlow and Tipperary South, will fall to 10 per cent of an investment, compared to 20 per cent at present. Projects on the islands of Bear, Cape Clear, Dursey, Heir, Long, Sherkin, Whiddy will also be eligible for 10 per cent aid.
Changes to the regional aid guidelines in Ireland have been expected due to rapid economic growth, which has transformed it into one of Europe's richest countries. The plan, agreed in sensitive negotiations between the Government and the EU, means that half the Irish population will live in regions that qualify for any State aid support between 2007-2013. In comparison, all Irish regions qualified for some level of State aid between 2000 and 2006 to encourage inward investment.
