Policy shift needed to address urban-rural imbalance, says KPMG

Ireland is one of the world's most globalised countries and one of the most prosperous. Last year almost 60,000 people moved here and, for the first time since 2008, more than two million people are at work in the Republic, according to the Central Statistics Office.

Yet the country still faces serious imbalances. With more economic activity, congestion and affordable accommodation have become major challenges, particularly in the greater Dublin area. Meanwhile, depopulation is a feature of many rural areas and their adjoining towns and villages, with great social and economic cost.

KPMG managing partner Shaun Murphy sees this urban-rural imbalance as neither desirable nor sustainable and believes the regeneration of rural Ireland requires economic policies that prioritise entrepreneurship and technology infrastructure as well as the obvious focus on agriculture and tourism.

“In Ireland we have pursued a successful policy of attracting high-value inward investment and that will continue,” he says. “But we have to recognise that whilst we have been very successful in attracting major FDI projects, they will tend to locate in big urban areas for many reasons. So we need an equally robust and innovative approach to our rural economy if we are to reach our full potential.”

Commuting

According to Murphy, the benefits of such an approach include the creation of a viable future for many towns and villages, reducing the pressure on the greater Dublin area, and a reduction in unsustainable commuting patterns that are both environmentally damaging and impair quality of life.

Murphy believes there is need to support entrepreneurs with a level playing field in terms of technology access – especially broadband. This should be combined with a more pro-entrepreneur tax environment, he argues: “Ireland could achieve a lot in terms of addressing the regional imbalances and help more people reach their full potential – regardless of where they live.”

He cites the high-speed digital resources available at centres such as the KPMG-supported Ludgate Hub in Skibbereen in west Cork and the PorterShed in Galway as examples of digital infrastructure having a positive impact on the economy and local communities.

“We’re involved in these projects as there’s lots of evidence that technology hubs act as a catalyst for creativity, collaboration and commercial success,” he says. “They also show that it’s possible to build a successful business wherever the technology infrastructure allows it.”

He points to a recent Amárach study carried out on behalf of Vodafone which contends that nearly two in three businesses (62 per cent) would expand if faster broadband and better mobile coverage were available.

While acknowledging that it is hard to be certain about the job numbers at stake, he says: “With almost 70 per cent of those in private-sector employment in SMEs, it is inevitable that failure in this area will hinder employment potential.”

SME digital deficit

Murphy also highlights a digital deficit among many smaller Irish businesses that hampers growth opportunities: “Over 20 per cent of Irish SMEs still have no website and a large number of these state that broadband challenges are the main cause of them still being offline.”

He also believes that in addition to a 21st-century technology infrastructure, policymakers need to further prioritise rewarding entrepreneurship – particularly in a Brexit environment. He highlights the fact that Ireland ranks around or slightly below the European Union average on many key measures of start-up activity including the number of people starting a business, the number who aspire to start a business, and the perception of opportunities for starting a business.

"The UK has made it clear that whatever their eventual post-Brexit agreement with the EU, they will be one of the most dynamic, business-friendly locations in Europe. " This raises the prospect of this country losing young entrepreneurs to opportunities across the Irish Sea. "If you start and grow a business in Ireland and then sell it to move on to something else, you are faced with unattractive capital-gains-tax penalties", he points out.

Murphy welcomes Government commitment to reduce the rate of capital gains tax for entrepreneur relief to 10 per cent and the increase in the lifetime limit to €10 million of capital gains. He also makes the point that Central Statistics Office data highlights the fact that the vast majority of emigrants from Ireland had jobs before they left.

“Are we doing all we can to make Ireland an attractive place to live and work? If people are leaving because they see their hard work rewarded better elsewhere or they can’t do business here because of infrastructure deficits then we have to find better solutions. We need to give more priority to both technology infrastructure and rewarding enterprise to maximise home-grown potential, as the benefits for every part of Ireland are highly attractive.”