Tuesday, 2 April 2013
In its Spring Economic Statement, the SFA says:
· SMEs must be positioned at the heart of economic policy
· No additional cost on employment
· Government deliverables – confidence, cashflow & costs
In its Spring Economic Statement, the Acting Director of the Small Firms Association, Avine McNally, has said that while the Irish economy still faces challenges, sensible policy decisions and strong political leadership will create a sustainable enterprise and economic future.
“Irish businesses and consumers have taken a harsh spoonful of fiscal medicine with increases in excise duties and taxes. Coupled with the fragile recovery in the global economy, especially the UK and the Eurozone, these factors are all impacting on the Irish economic recovery.”
“The only way to solve the fiscal and unemployment crisis is through generating economic activity. It is essential that Government place small businesses at the heart of economic policy. Small businesses are the drivers of innovation and a permanent source of prosperity, employment and economic progress,” said McNally.
McNally said, “If the Government is forthright in its ambition to create jobs then it must do everything to reduce the cost of employment in 2013.
“Government measures taken since 2010 have already added over €660million per annum to labour costs, through employer PRSI changes, pensions levy and most recently the changes to the redundancy rebate. The cumulative impact of this has been a 1.4% increase in labour costs, while at the same time both employers and staff in the vast majority of small companies have taken pay cuts.
“Every policy emanating from Government must be “job-proofed”, to analyse its likely impact on jobs. When employment costs rise small firms are less likely to take on new staff. The small business sector is the engine of the economy and it is vital that Government does not undermine its ability to drive growth and create jobs.
The SFA is calling for a small business derogation from the reduction of the employer’s redundancy rebate from 15% to 0%.
“The reduction of the employer’s redundancy rebate to 0% in last year’s budget was one of the most ill-thought out and detrimental measures for small firms. It has meant businesses, which are trying to turn themselves around or sell as a going concern, rather than close down, can simply no longer afford to do so,” Ms McNally said.
Irish consumers have faced difficulties since 2009. High unemployment and repaying of household debt are some of the key factors in the continued weakness in consumer spending. Higher taxes and the uncertainty of possible further taxes and exchequer expenditure cuts are also impacting on spending power.
Ms McNally said, “The biggest challenge for small firms, especially those trading on the domestic market, is confidence among consumers. In recent times it has been volatile, as many positive signs have been knocked by concerns over the Eurozone and higher taxes. It is vital that confidence is restored to Irish households and businesses, as when they become more confident about their prospects, economic recovery will gain greater momentum, especially at the domestic economy level.”
ACCESS TO CREDIT
The SFA stated that access to credit remains a challenge, with SFA research showing one in four small businesses in Ireland not accessing sufficient credit or financing facilities to support expansion and improve cashflow.
“Many firms have postponed investment decisions over the last few years and in 2012 we started to see signs of investment growth; however it is vital that finance is available to these companies to ensure further investment.
“We recognise that much progress has been made with the introduction of the micro-finance loan fund and the Government backed loan guarantee scheme. However, to solve the on-going credit challenges, the mainstream banks need to continue to improve their internal processes; to make less risk averse decisions; provide clarity around decision-making rationale and commit to faster decision-making with all declines being informed of the right of internal and external appeal,” said Ms McNally.
The SFA stated that for the main part, inflation is being driven by increases in public utility costs, such as, water, electricity, gas and transport and these costs are daily input costs for businesses.
“Small Irish businesses have taken steps to regain their cost base, yet many costs remain outside their control as they are Government influenced. As a result any competitiveness gains are being over-ridden by external Government costs. When these costs are passed on to the rest of the economy, competitiveness and jobs are lost.”
“Recent CSO figures indicate that GDP grew by 0.9% last year. Consumer spending and investment contributed to growth in the second half of 2012 and this bodes well for the domestic economy.
“The challenge is to ensure that the Irish economy and small businesses are in a position to invest and exploit growth when it occurs. It is therefore essential that Government place small businesses at the heart of economic policy. Small businesses are the drivers of innovation and a permanent source of prosperity, employment and economic progress,” concluded McNally.
For further information contact: Avine McNally, Acting Director, Small Firms Association. Telephone: 087 645 0205.