Announcement made as the Government hosts a high-level conference on Ireland’s SME and entrepreneurship strategy with the OECD.
Conference is the culmination of a consultation exercise, which will feed into the development of the new SME policy.
Initiative is a key part of Future Jobs Ireland, the new whole-of-Government plan to prepare our economy, businesses and workers for the future.
Minister Humphreys announces two new funds worth €3 million to enhance the productivity of our smallest indigenous firms.
An Taoiseach, Leo Varadkar, TD, Heather Humphreys, TD, Minister for Business, Enterprise and Innovation, and Pat Breen, TD, Minister of State for Trade, Employment, Business, EU Digital Single Market, and Data Protection today announced that the Government is developing a major new policy on SMEs and entrepreneurship under Future Jobs Ireland.
They made the announcement as they hosted a conference to discuss a draft roadmap for SME and entrepreneurship policy, which was prepared by the OECD for the Department of Business, Enterprise and Innovation. The draft was informed by extensive consultation and is the precursor to a wider review by the OECD.
The review, which will be published in October, will provide comprehensive analysis and recommendations to the Government to inform the development of the new policy. It will include comparisons with international best practice.
The conference brought together SMEs, policy makers, programme providers and international experts to look at a range of policy interventions in the area. Conversations had a particular focus on improving productivity among indigenous SMEs, a cornerstone of Future Jobs Ireland.
Some of the emerging OECD recommendations include:
- Draft an SME and entrepreneurship strategy document, which will take in entrepreneurship, start-ups and SMEs.
- Scale up current initiatives to support SME exports, such as Trading Online Vouchers, Enterprise Ireland’s Exporter Development Department and InterTrade Ireland’s grants and funding Advisory Service.
- Scale-up the policy focus of Local Enterprise Offices to include SMEs and incentivise them to reach out to local SMEs in their activities;
- Establish an interdepartmental committee on SMEs and entrepreneurship;
- Simplify the process for applying for Research and Development tax credits, to reduce the uncertainty and encourage more take-up by SMEs;
- Encourage a wider take-up of Skillnet Ireland programmes to develop management capabilities in Irish SMEs, with a particular focus on technology skills;
- Implement a simple online diagnostic assessment tool for micro and small enterprises by the LEOs to better match the enterprise with advisory and mentoring services;
- Promote the role of standards to drive enterprise competitiveness. Standards development and use can enhance productivity in SMEs, facilitate supply chain linkages and international collaborations, and enhance spill-overs from multinationals to SMEs.
An Taoiseach, Leo Varadkar, said:
Seventy per cent of people at work in Ireland, work for an SME. Small and medium enterprises are the backbone of our local communities, providing jobs and prosperity across the country. Through Future Jobs, the Government wants to nurture entrepreneurship and do what we can to assist small businesses and help them adapt to the needs of the future.
Every generation needs to shake up its enterprise and jobs model, otherwise it falls backwards. We need to change the way we work. Today we are focussing on how we can improve productivity. This includes doing things like encouraging more female entrepreneurship, targeted assistance for companies which need it through the Future Growth Loan Scheme and introducing an Operational Excellence programme to drive company transformation.
Employment is now at its highest ever level; with 2.3 million people at work and the lowest unemployment rate in 14 years. Through Future Jobs, we are focussing on the quality of those jobs, to ensure we all have better living standards. I want Ireland to be a country that works to live, not lives to work.
Minister Humphreys said:
Future Jobs Ireland is about securing Ireland’s economic success by protecting the hard-won gains of recent years. As we approach full employment, it is time to shift our jobs focus. It is no longer just a question of more jobs, instead we must focus on growing highly productive businesses that will sustain the jobs of tomorrow.
Ultimately we want to increase the living standards and quality of life of our people and increasing productivity levels is necessary to achieve this goal. Typically, our foreign-owned firms are highly productive, however, in recent years we have seen a decline in productivity in indigenous SMEs. We want to close this gap and our new SME policy will help us to do that.
Minister Humphreys also took the opportunity to announce two new funds worth a combined €3 million, which will enhance the productivity of firms in every region. Both funds will be operated through the network of Local Enterprise Offices, which means that they will reach our smallest indigenous businesses.
The first is the €2.5m Competitive Fund. The LEOs will compete for this on behalf of their clients, whether individually or through collaborating with other LEOs. Projects should focus on the priority areas identified in Future Jobs Ireland, and the Regional Enterprise Plans. For example, they could look at themes like innovation, Brexit readiness or market diversification.
The second is the Productivity Challenge Fund worth €500,000. This is for businesses who are not currently LEO clients. The funding will be used to address productivity gaps, including through the adoption of lean business practices. It will also incorporate business opportunities in the green economy.
Minister Humphreys added:
As we work to boost productivity levels in our enterprise base, these new funds, combined with existing supports, will ensure that we can reach even the smallest business in the most rural area Supporting micro-businesses right across the country will be central to our success.
Minister Breen said:
Ensuring that our policies and programmes focus on and deliver real supports to businesses across the country has been a central focus of mine as Minister. My involvement with this ongoing OECD Review has been extensive. The level of expertise in the OECD will ensure a quality policy framework for Ireland into the future. We have already begun to implement some of the recommendations.
I now chair the new Consultative Group with over 40 members including representative groups, programme managers, policymakers and SMEs themselves. We will push forward with the recommendations of the OECD Roadmap and their integration into actions within the Future Jobs framework.
Discussing the new LEO funds, he added:
These funds will provide vital support to our businesses. On the one hand, the €2.5m fund will support the competitiveness of firms in line with the Future Jobs Ireland strategy and the new Regional Enterprise Plans. On the other hand, the €500,000 productivity fund will help them to address gaps in this space, embed “lean” practices, green their business and reduce waste. This initiative will also focus on training and capability development thereby enhancing customer experience, time and performance management.
Speakers at the SME conference included Claudia Dorr-Voss, State Secretary from the German Federal Ministry for Economic Affairs and Energy, and Ulrik Vestergaard Knudsen, Deputy Secretary General of the OECD.
Notes for Editors:
The Department of Business, Enterprise and Innovation commissioned the OECD in March 2018, to conduct a Review of SME and Entrepreneurship policies in Ireland.
This is an 18-month project and it aims to provide tailored analysis and recommendations to DBEI and the Irish government on how to improve the design and implementation of national SME and entrepreneurship policies and programmes, based on an assessment of the country’s current SME and entrepreneurship performance, framework conditions and policies based on international comparisons.
This is a collaborative body of work and involves considerable input from wider Government and stakeholders. This review will be published in quarter 3 of this year. This will assist DBEI to develop an SME Strategy as part of the Future Jobs Framework.
Key review Objectives of the report
- Provide an assessment of current SME and entrepreneurship policies and programmes
- Strengthen policy design and implementation through recommendations and dialogue stimulation, including through a policy roadmap
- Provide international comparison of successful SME and entrepreneurship policies
While the Review will be a comprehensive and detailed Report, the Roadmap will be a shorter document, which identifies the key priority recommendations that should receive the most immediate focus for implementation. The first draft of the Roadmap is being discussed at today’s conference.
- Future Jobs Ireland
Future Jobs Ireland 2019, the first step as part of a multi-annual framework to achieve priority ambitions to ensure a resilient the economy taking into account the opportunities and challenges ahead arising from technology, international risks and the transition to a low carbon economy. Future Jobs Ireland was developed on foot of a comprehensive consultation process the highlight of which was a national summit in November 2018.
Central to Future Jobs Ireland is a re-orientation of policy from the numbers of gross jobs created in the economy, to the creation of more productive and sustainable quality jobs. It focuses on the challenges ahead in terms of ensuring we have skilled people working in quality jobs in sustainable sectors. Future Jobs Ireland will also ensure our enterprises and workers are well positioned to adapt to the technological and other transformational changes our economy and society will face in the years ahead.
Future Jobs Ireland 2019 focuses on five Pillars namely:
- Embracing Innovation and Technological Change;
- Improving SME Productivity;
- Enhancing Skills and Developing and Attracting Talent;
- Increasing Participation in the Labour Force; and
- Transitioning to a Low Carbon Economy.
Pillar 2 of Future Jobs Ireland on improving SME productivity
A driving goal of Government policy is to increase the living standards of our people. Increasing productivity levels is a key enabler of achieving this goal.
Headline productivity figures in Ireland have seen overall increases over the last fifteen years – labour productivity increased by an average of 4.5 per cent annually between 2000 and 2016 (3.4 per cent for 2000 to 2014). A 2018 OECD-Department of Finance paper shows a productivity gap between Ireland and the euro-area average in Ireland’s favour of 26 percentage points on a GVA per hour worked basis.
Despite these headline figures, there is significant variation in productivity across sectors and between firms. The gap between the most productive firms and the least productive firms is widening, and most of the productivity gains have been concentrated in a small number of sectors that are largely foreign-owned, and in some of these sectors, in just a small number of large multi-national firms. The majority of firms, generally small and indigenous, have experienced a decline in productivity over the last decade. Productivity in Ireland is lower than the euro area average in a number of domestic sectors such as construction, retail, accommodation and food services all of which are labour intensive.
The OECD highlights that, ‘the resilience of the Irish economy hinges on unblocking the productivity potential of these local businesses.’ The productivity “problem” is a multi-faceted one and through Future Jobs Ireland we will adopt measures to increase the productivity of indigenous SMEs over time.
Progress towards this goal will be made by diversifying our enterprise base, promoting links between high performing firms and SMEs to increase positive interaction and collaborative working, ensuring existing supports for Research, Development and Innovation are useful for smaller business, enhancing business framework conditions for firm creation and growth and investment in digital and managerial skills.
Overview of Pillar 2
Future Jobs Ireland will target an annual average increase in multifactor productivity (which captures how efficiently we use our labour and other resources) in the domestic sectors of the economy by 1% per year to 2025.
To reach this target, a number of key ambitions have been laid out under this pillar to improve SME productivity, such as;
- Diversifying our enterprise base to ensure the Irish economy is more resilient and adaptable
- Promoting enterprise productivity as a driver of economic prosperity
- Enhancing business framework conditions for firm creation and growth
- Encouraging enterprises to exploit technology and business process improvements to increase productivity
- Improving leadership and management skills in SMEs
- Strengthening linkages between SMEs and multinational enterprises and our tertiary education institutions
Each year, deliverables with measurable outputs are set out so that Ireland reaches these ambitions. Some of the key deliverables under this pillar of Future Jobs Ireland 2019 are;
- Increase the impact of Local Enterprise Offices (LEOs)
- Increase SME take-up of Enterprise Ireland (EI) and LEO productivity supports
- Develop a new investment funding facility to assist indigenous Irish companies in scaling their businesses
- Encourage the growth of clusters where enterprises can grow and help each other and deepen linkages between foreign and Irish owned businesses
- Drive productivity growth in the construction and retail sectors
- Improve leadership and management skills in SMEs
- Strengthen the impact of the National Competitiveness Council through its role as the National Productivity Board
- Deliver a new female entrepreneurship strategy and
- Progress an SME Strategy
The five-Pillar structure helps frame different dimensions of the challenges we face; however, it is important to acknowledge the high level of inter-dependence between them. The challenge of productivity is closely related to the innovative capacity of enterprises, especially regarding the application of existing and new technologies to improve work processes and output efficiencies, to create new and better products and break into new markets. Better productivity will also improve enterprise sustainability and enable them to adapt more easily to the broader transformations occurring in the economy as we move away from fossil fuels towards a low carbon future. Also, greater productivity is highly influenced by having a talented workforce working in an environment which encourages ongoing training and lifelong learning.
Implementation of Future Jobs Ireland 2019 is ongoing and the Government today published the first Future Jobs Ireland 2019 Progress Report. The Report provides a summary of progress towards implementing the outputs for each deliverable in Future Jobs Ireland 2019 due in Quarter 1 and Quarter 2. The Report is available here.
- More on the new €3m LEO Funds
LEO COMPETITVE FUND
The objective of the LEO Competitive Fund is to encourage LEO projects aligned with the pillars of the recently announced Future Jobs Strategy and the Regional-Enterprise-Plans. It supports LEOs to collaborate within your network and enterprise eco-system. However, LEOs also have the option to pursue projects without collaboration.
The overall budget is €2.5m with applications through an online application process.
Priority will be given to new approaches that build on and strengthen the entrepreneurial ecosystem throughout the country. A prerequisite for proposals is the need to demonstrate innovative solutions to fostering and creating employment. In line with the national remit of LEOs, the specific objectives of this fund are:
- To deliver projects aligned with the Future Jobs Strategy:
o Pillar 1. Embracing Innovation and Technological Change
o Pillar 2. Improving SME Productivity
o Pillar 3. Enhancing Skills and Developing and Attracting Talent
o Pillar 4. Increasing Participation in The Labour Force
o Pillar 5. Transitioning to a Low Carbon Economy
- To foster Regional Enterprise Plan focused projects promoting increased collaboration, networking and a joined-up approach to national, regional and local micro-enterprise capability building, growth and job creation.
- To strengthen microenterprise locally, regionally and nationally in order to create jobs, grow enterprise and support the progression of LEO clients to Enterprise Ireland.
Competitive pilot scheme: - “Ireland’s Small Business Productivity Initiative” with a fund of €500k.
This additional funding will be made available to the Local Enterprise Offices to support domestically focused small businesses examine their current operations to identify opportunities to address productivity gaps.
In line with the Government’s Future Jobs Initiative the Productivity Vouchers will support the engagement of a Consultant to embed Lean practices and improve processes, Green your business and reduce waste. Whilst also focusing on Training and Capability Development enhancing customer experience, time and performance management.
The scheme will open for applications in October.