Survey finds BES benefited businesses

A Government survey of companies that raised cash through the Business Expansion Scheme (BES) challenges the case made by trade unions against its extension.

Last month Minister for Finance Brian Cowen announced that the Government intended extending the scheme, which largely provides seed capital for small and developing companies.

The Irish Congress of Trade Unions (Ictu) then lodged a complaint with the European Union (EU) claiming it was illegal State aid and arguing that it was a tax shelter for wealthy people that did not benefit the wider economy or create extra employment.

However, a Government report due to be published this week shows that almost 60 per cent of businesses that benefited from the last scheme were involved in manufacturing, a key productive sector that a number of economists have warned needs the support of tax incentives.

The report shows that 40 per cent of the 1,400 companies that were surveyed used at least some of the cash raised to create new jobs.

This indicates that 560 businesses surveyed added to their staff as a direct result of raising BES money.

In addition, it shows that one in three of them used the money raised to fund research and development.

The majority of the businesses who raised the cash were small and/or developing and the amount raised varied between €50,000 and €1 million.

It also indicates that the majority of investors also did well. Close to 70 per cent of those who put up the money were either satisfied or very satisfied.

In his Budget speech, Mr Cowen said that following a suggestion of the Government's Small Business Forum, he was extending the scheme, which was due to end on December 31st last.

He increased the limit on how much individual companies can raise under the scheme to €2 million from €1 million.

The Minister also increased the maximum that any investor can put into a BES fund to €150,000 from €31,750.

In his speech, he pointed out that the EU would have to approve the extension of both the business expansion and seed capital schemes.

Business people and organisations enthusiastically welcomed the scheme extension on the grounds that it would primarily support small firms, which make up 90 per cent of all employers in the Republic.

Later that month, the Ictu, which is one of the social partners and represents trade unions with 700,000 members, said it would challenge the extension in Brussels.

The trade unionists' move was widely condemned.

Minister for Enterprise Micheál Martin expressed "utter disbelief" at the news.

Business groups also hit out at the trade unionists. The Irish Small and Medium-sized Enterprises Association (Isme) accused Ictu of attempting to sabotage the economy.

But the trade unionists' economic adviser, Paul Sweeney, claimed that its extension would cost more than the €178 million estimated in the Budget and argued that taxpayers would have to shoulder that burden.