Irish entrepreneurs willing to expand despite Brexit worries

‘Wall of money looking for investments’ in Ireland, KPMG partner says

Olivia Lynch, partner at KPMG: “A hard Brexit is terrible, but not preparing for it is just as bad.”

Olivia Lynch, partner at KPMG: “A hard Brexit is terrible, but not preparing for it is just as bad.”

 

Most entrepreneurs who run small and medium-sized businesses believe the State’s tax system favours foreign multinationals over companies such as theirs, according to a study for KPMG.

Despite their taxation gripes, Brexit fears and difficulties such as attracting staff due to housing shortages, however, two-thirds of entrepreneurs still have expansion plans, according to the KPMG Entrepreneurs Barometer, based upon research conducted by Red C.

The researchers surveyed 200 businesses with fewer than 100 staff each over a range of issues early in the summer.

Views were sought from owners and managers of businesses in seven sectors that are considered “entrepreneurial” by Red C and KPMG. These included the medical devices sector, renewable energy and engineering.

The responses revealed a mixed bag of positive and negative perceptions of issues facing their businesses, as well as a lack of awareness over other issues, such how to access funding for their endeavours.

Brexit risks

Olivia Lynch, a KPMG partner in its private enterprise division, said she was “surprised” to see how optimistic entrepreneurs are given the risks of a hard Brexit. She was also critical of some entrepreneurs, however, for failing to prepare properly for Brexit and others for their failure to understand the breadth of funding options available.

The study found that two-thirds of entrepreneurs expect sales to go up over the next year, with smaller companies and Dublin companies most optimistic. More than four in 10 expect to hire more staff.

The majority fear Brexit will harm their business, but only 17 per cent have done a full Brexit risk analysis, while 60 per cent have done some form of preparation. A third of these incurred higher costs preparing for Brexit.

“A hard Brexit is terrible, but not preparing for it is just as bad,” Ms Lynch warned. “Low-hanging stuff they should be doing [to prepare for Brexit] is not getting done.”

She said Ireland is “awash” with money: “There is a wall of money looking for investments.”

Options

Still, she believes many entrepreneurs, especially those with smaller businesses, are not utilising all options available for various forms of equity and debt financing, as well as liquidity financing options such as invoice discounting.

“There is something to address there . . . Also, as the companies get bigger, we find that sometimes they are so delighted to be able to access funding, they forget to do it on the right terms.”

She said the tax regime for multinationals is in “pretty good shape” and 75 per cent of entrepreneurs say these larger foreign companies get a better overall deal than smaller indigenous companies.

In the upcoming 2020 budget, she said certain reforms for smaller entrepreneurs are a “must have”, such as alignment of personal tax rates for self-employed with PAYE and reform of taxation of capital gains tax and the taxation of dividends.

“Often, entrepreneurs don’t want to keep more of the money for themselves, they want it to reinvest it in the business,” said Ms Lynch.