Grants to end for companies in mideast counties

Tougher European Union rules will mean that industries setting up or expanding in counties Wicklow, Meath and Kildare will be barred from receiving State grants from early next year.

The European Commission's directorate general for competition is expected to reply positively to proposals recently lodged by the Department of Enterprise, Trade and Employment.

Under the new regime, the State will be unable to offer industrial grants to firms opening or expanding in counties Dublin, Wicklow, Meath and Kildare from January next, while the curbs would come into place in Cork at the end of 2008.

Industrial grants will be payable to firms setting up in the Border, midlands and west region throughout the 2007-13 period, though the sums on offer will have to be progressively reduced during the period.

Though not unexpected, the lack of State grants will make it more difficult for IDA Ireland to attract multinationals into the regions affected.

The politically sensitive information emerged in a written Dáil reply to Fine Gael leader Enda Kenny by the Minister for Enterprise, Trade and Employment, Micheál Martin.

The midwest, which is deemed to include Clare, Limerick, north Tipperary and Kerry, will be able to back large firms until 2008, but small and medium-sized firms will attract supports for the full term.

However, the Minister said the Government would continue to be able to pay other forms of State aid, including research and development, training and environmental protection grants, in all areas.

He said: "Given Ireland's economic performance since the current regional aid map was approved by the European Commission in 1999, it was to be expected that our scope to designate areas for regional aid for 2007-13 would be significantly reduced.

"As Dublin and the mideast continue to enjoy a more favourable economic situation, they cannot qualify for designation within the permitted population threshold ahead of other regions."

He added: "Nevertheless, Ireland has secured entitlement under the new guidelines to maintain regional aid qualification for areas accounting for 50 per cent of the country's population for the period 2007-13."

Firms establishing in the southeast region, including Wexford, Waterford, Kilkenny, Carlow and Tipperary south, will qualify for State aids because the region has an unemployment record 15 per cent above the national average.

Mr Martin's Dáil answer emphasised the role played by the Southern and Eastern Regional Assembly in formulating the new proposals. "The Southern and Eastern Regional Assembly was consulted by my department in relation to this designation. The assembly accepted the findings of an independent report that it commissioned from the National Institute for Spatial and Regional Analysis at the National University of Ireland, Maynooth, and proposed that the remaining areas to be designated for 2007-13 should be Clare, Limerick, north Tipperary and Kerry.

"The assembly also proposed that these areas, in addition to Cork, should, in line with the guidelines, be designated for a transitional period of two years [ 2007-08] during which they can also receive State aid for large firms.

"The Government recently approved the assembly's proposals, which Ireland will shortly notify to the European Commission," Mr Martin told Mr Kenny, in the Dáil reply.

A sharp reduction in State aid has been on the cards for some time, especially when Brussels made it clear last year that it would block State aid for Intel's expansion in Kildare last year.