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Speeches

Speech at the Small Firms Association Annual Lunch

Royal Dublin Society, 10th October 2014

I am delighted to be here with you all at this Annual Lunch of the Small Firms Association. Gatherings such as this one are not only friendly, social occasions; they also offer an opportunity to take stock of the achievements of Irish small firms, and of the challenges still facing them several years into what has been one of the worst economic crisis in the history of the State.

Mar sin, is mian liom mo bhuíochas a ghabháil le AJ Noonan, Cathaoirleach, agus le Patricia Callan, Stiúrthóir Chomhlachas na nGnólachtaí Beaga, as ucht an chuiridh a bheith libh tráthnóna, agus libhse ar fad as ucht na fíorchaoin fáilte.

[May I, then, thank AJ Noonan, Chairman, and Patricia Callan, the SFA’s Director, for the invitation to join you this afternoon, and all of you for your warm welcome.]

When discussing the Irish economy, public commentary, perhaps understandably, tends to place great emphasis on Foreign Direct Investment by multinational companies. This sometimes can be at the cost of not giving sufficient recognition to the vital functions of small and medium enterprises. I think that all of you here will agree that the most desirable course for sustainable wealth creation in any economy is to acquire the capacity to grow it internally rather than rely too exclusively on attracting investment from the outside.

Because of their largely indigenous and employment-intensive nature, small firms are crucial to the achievement of sustainable economic prosperity. They are vital contributors to the crafting of a society where needs are met, jobs created and retained, and both environmental and territorial sustainability achieved.

As this particular audience is well aware, over 95 % of Irish businesses are small and medium enterprises (SMEs), and such SMEs account for two thirds of the people employed in the private sector. This situation is reflected across the European Union, where small businesses are, everywhere, the backbone of job creation and sustainable economic activity.

Unemployment is, without doubt, the most pressing challenge to be addressed in Ireland today, as indeed it is in every EU member-state – in particular obdurate levels of long-term unemployment, and an alarming level of youth unemployment, two categories which increasingly tend to overlap, with all the implications that this carries for social cohesion.

Within the European Union, Ireland has the largest cohort of young people under the age of 25 with a third level qualification. Yet, nearly a quarter of a million Irish people have left the country since 2008, and of those, almost half were graduates. We cannot be happy with the return of an old pattern of emigration that drains young people out of their own country and away from their own people, with all the harmful social consequences this generates.

Ireland needs the creativity, energy and optimism of its young people. The Young Scientist Exhibition, now in its 50th year, is but one among many examples of the tremendous creative potential of our young people. Most recently, I was delighted to see Sophie Healy, Emer Hickey and Ciara Judge, from Kinsale Community School in Cork, win the grand prize at the Google Science Fair in San Francisco, following their victory at the EU Young Scientist Contest last year.

Very often too we see significant results from the science and technology hubs in our third-level institutions. The best of our creative innovators, however, often have to yield intellectual property rights to those with the capacity to enter the global market.

We must, together, do our best to embrace such great talents and ensure that they have a future in Ireland.

The State, of course, has an important role to play in seeing that our young people’s potential, and the financial resources invested in their education, are followed on with strategies for seed capital and investment that will enable them to better serve Ireland.

Businesses are key allies in the achievement of this aim. Therefore I would like both to thank you for the jobs you provide for our young people, and to ask you to consider how you could, individually and collectively, reach out even more to these young people, and harness the fresh perspective and experience that those who return have acquired while they were living abroad.

All of our small firms in the European Union, and particularly in a small, open economy as Ireland’s, are exposed to new and expanding external challenges. As we address those challenges of the future, I believe that we need to distinguish clearly between what pertains to the real economy and what could be described as ‘fictive investment’, based on over-speculation.

Similarly, the easy invocation of “export-led recovery” as a description of Irish economy may mask the real level of job creation required. Indeed research conducted by the Central Bank of Ireland[1] shows quite clearly that exports and employment are not as strongly correlated as is often assumed; the fact is that a majority of our private sector workers are employed in non-exporting indigenous SMEs. From this it is surely reasonable to suggest that any growth model that prioritises full employment should place small businesses at its heart.

It is not solely because of their employment intensity that SMEs are vital to the very fabric of Irish society. The SME sector in Ireland is also one that is very diverse, encompassing many different types of activities, and regionally redistributive. Indeed SMEs have the capacity to deliver balanced territorial development, so that not just a few urban hubs, but also our rural communities can thrive.

The role of business in society has never been a purely commercial one: their employees, the local communities to which they are tied, the environment within which they operate or from which they draw their resources, are essential dimensions of companies’ activity. All these dimensions underpin the values which animate you, as owners or employees of small firms.

Those values, the ethical rules in use everyday within your companies, are ones which are important to us as a society. ‘Trust’ is not an abstract concept: it is a principle that is essential to the flourishing of economic life. Small company owners are usually people who are concerned with their company’s good name, its reputation among peers, community and family. They often have a long-term perspective grounded in a determination to pass on a healthy and well-respected business to their successors.

Proximity to the local community and to their workers also means that small company owners are more likely to be animated by feelings of care and responsibility towards their employees than distant managers usually are.

Such an ability to run a firm in a way that is sensitive to human needs is of crucial importance to what is, in my view, one of the great issues of our times – that of the future of work, and of the question of ‘good work’: are workers to be seen as isolated units of labour, or can work be conceived of as a wholesome activity within a social context? Can the life of a worker be reduced to labour cost whose fluctuations are ever more defined by casualisation and precariousness? How do conditions of work impact on demand in the wider economy? Small businesses are particularly well positioned to respond to such questions, and must play a key role in contributing to defining and delivering the conditions for sustainable, decent jobs.

Finally, all of us here are well aware that innovation – the discovery, evaluation and development of novel business opportunities – requires judgment, character and imagination. Irish small entrepreneurs have demonstrated that they have those qualities. Yet Ireland’s SMEs have been hit especially hard by the crisis, and, despite very positive signs that our overall economic situation is improving, they currently face into an uncertain future.

Our levels of indebtedness, both public and private, the low levels of domestic demand and the slow growth in the rest of Europe, are issues that affect directly our small entrepreneurs. It is therefore of the utmost importance that the sector is offered adequate support – that the necessary resources, both public and private, and at local, national and European level, are mobilised.

An important constituent of that support infrastructure is, of course, access to credit, the lifeblood of all businesses. Since 2008, Irish SMEs have been facing particular difficulties in accessing finance[2] – the rise of banks’ funding costs having been reflected in tighter lending standards and higher borrowing costs for firms and households alike.

At the same time, and in the same way as Irish mortgage holders have found themselves in a difficult situation, too many of our small firms are struggling with historical debt. And we must remain mindful of the vulnerability of those indebted SMEs, across the EU, to what have been described as “vulture funds”. In seeking new indicators for the health of their economy and the welfare of their citizens, member states of the European Union might well assess the vulnerability of their economies to predatory asset stripping by speculative funds who are neither transparent nor democratically accountable.

For SMEs, lack of access to finance not only has a very negative impact on employment, it also creates significant barriers to investment. The action of the European Investment Bank (EIB), through its partner institutions at the national level, and the government’s declared will to address the issue through the establishment of a Strategic Banking Corporation (SBCI), are therefore most welcome developments.

Europe’s future prosperity, in its economic, social and territorial dimensions, depends critically on the ability of our small businesses to thrive, innovate, and provide good jobs to more people. Strengthening the SME sector must therefore be, and remain, a frontline objective, both here in Ireland and at European level.

Gabhaim buíochas libh arís as ucht fáilte a fhearadh romham inniu, agus guím gach rath ar bhur saothair sa todhchaí. Tá bhur n-uaillmhian, bhur n-obair dhian laethúil, bhur gcúram leo siúd lena mbíonn sibh ag plé, bhur samhlaíocht agus bhur gcruthaitheacht lárnach do rathúnas na hÉireann ina iomlán.

[I thank you again for welcoming me here today, and I very sincerely wish you great success in your future endeavours. Your initiative, your hard work every day, the care you show to those who work with you, your imagination, skills and creativity are fundamental to the shared prosperity of Ireland.]

Go raibh míle maith agaibh go léir.

[1] Fergal McCann (CBI), 2013

[2] “SMEs in Ireland: Stylised Facts from the Real Economy and Credit Market”, paper presented at the Central Bank of Ireland conference The Irish SME Lending Market, February 2012.