Promoting innovation and sustainability among SMEs

The Small Firms Association (SFA), the main representative body for small businesses in Ireland, has just launched a new strategy that will guide and drive its work for the next number of years. “We will use our new Small Business Ireland’s Future 2025 strategy to support small business owners to be leaders in areas such as innovation and sustainability as well as connecting businesses to other businesses, harnessing their expertise, and helping them win new customers,” explains SFA deputy chair Geraldine Magnier who is also co-founder of advanced analytics and AI specialist firm Idiro Analytics.

“Small businesses have been under a lot of pressure for the past three years as a result of the pandemic and now they have to contend with increasing costs and other disruptions as a result of the war in Ukraine and other factors,” she adds. “Our new strategy will help them respond to those challenges.”

She points to the importance of the small businesses to the Irish economy and explains that government has a role in supporting the sector. “Small businesses make up 98.4 per cent of businesses in Ireland and they employ nearly half [46.1 per cent] of the private sector workforce. Small businesses also contribute about 47 per cent of gross value add to the economy. We have a number of key policy asks for government and other stakeholders as part of the new strategy.”

The first of these relates to the cost of doing business. “Costs are mounting in a few areas and there is the added cost of new legislation and regulations,” Magnier explains. “Auto-enrolment pensions, statutory sick leave, minimum wage increases, the right to request remote working are all cost increasing. We are asking government to co-ordinate these measures and pieces of legislation in a planned way so that they are not hitting businesses at the same time. Government should apply the SME test across government departments to reduce the regulatory burden on small business.”

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Access to finance is a related issue. “There is a need to improve access to bank and non-bank finance for small businesses, boosting competition and reducing the high interest rates paid by Irish businesses compared with those in other EU countries,” she adds. “There is also a need to improve competition in the insurance market and address rising employer liability and professional indemnity insurance costs.”

Tax and talent come next on the list and the SFA is calling for a reduction in the capital gains tax rate to 20 per cent and an increase in the Entrepreneurs Relief limit to €15 million from €1 million.

“Simplifying the R&D tax credit application process for small businesses is also very important,” she adds. “More and more firms are on a digital transformation journey, but the R&D tax credit process is cumbersome, costly, and a heavy burden. Lots of small businesses don’t apply for it because of that.”

Other key asks are the introduction of tax relief for non-domiciled new hires by small business; an increase in the approved profit-sharing scheme limit of €12,700 to encourage employee retention; and the introduction of a workable share option scheme for small businesses.

Preparing small firms for the future is also high on the agenda. “Upskilling is very important and training in leadership, digital readiness and financial management skills must be available for small businesses. There is also a need for meaningful voucher schemes that cover investment in hardware, software and cybersecurity as well as online presence.”

Critically important is the creation of a dedicated state agency with responsibility for the administration and development of supports, programmes and resources for small business. “That would be potentially transformative in terms of support for small businesses,” says Magnier. “There is a need for an agency to support small businesses in the same way as FDI and Irish manufacturing and exporting companies have.”

Public procurement also requires attention. “This comes up year after year. We need better access for small businesses to public contracts. Their size puts small businesses on the back foot even if they have the capacity and capability required. The cost of tendering can be anything up to €7,000 and there is no guarantee that projects will go ahead even if you’re successful. You’re just told you’re on a framework.”

Turning to climate change she says small businesses want to be part of the solution. “We want policymakers to give clear targets and timelines to allow small businesses time to plan their decarbonisation journeys. Government and state agencies must put in place supports to level the playing field and help small firms make a just transition.”