ISME has called for a fundamental shift in Ireland’s economic strategy to better support indigenous businesses and reduce the State’s reliance on multinational corporations.
In a new policy paper, ‘Indigenous Enterprise Policy’, ISME warns that Ireland’s growing dependence on a small number of multinational firms poses significant risks to both the wider economy and the sustainability of public finances.
ISME says the Government must now move beyond merely acknowledging these risks and promote the growth of Irish-owned businesses across all sectors. ISME’s policy paper argues that Ireland’s current tax and funding structures do not adequately incentivise entrepreneurs to scale their companies, limiting the development of larger indigenous companies and reducing the number of firms that grow into significant domestic employers.
Rather than focus on particular sectors, ISME recommends that Government improves the business environment for Ireland’s “everyday entrepreneurs” who employ the vast majority of the Irish workforce.
The organisation is calling for a range of reforms to address these challenges, including:
- A tax system that encourages entrepreneurs to scale their businesses rather than exit through sale
- Improved access to affordable capital for SMEs
- Reform of investment schemes to make them usable and attractive to investors
- Greater support for lifelong learning and workforce development
- A more strategic approach to FDI that strengthens linkages with indigenous enterprise
Neil McDonnell, Chief Executive of ISME, said: “The objective here is not to reduce Ireland’s attractiveness for multinational investment. FDI has been an enormous success for the Irish economy. But we must now ensure we are building a more balanced and resilient economic model alongside it, by strengthening our indigenous enterprise base and supporting Irish businesses to scale.”
ISME’s paper also highlights challenges around access to finance for smaller firms. Credit availability for SMEs has declined significantly over the past decade, even though large levels of capital remain in private and commercial deposits. This mismatch between available capital and SME funding access represents a missed opportunity to support business growth across the indigenous enterprise sector and increase household wealth.
The report points out the several structural imbalances within Ireland’s economic model. One of the most significant is the level of fiscal concentration within the economy. According to the analysis, just 237 companies account for 86% of Ireland’s total corporation tax receipts, this illustrates the extent to which the State’s public finances depend on a very small number of large firms.
The report stresses the vital role played by smaller businesses in Ireland’s economy. Micro businesses employ 47% of the workforce and generate more than 40% of total earnings, outlining their central contribution to employment, income generation and the broader economic ecosystem.
ISME said the Ireland’s economic success over the past decade has been remarkable, but long-term resilience will depend on building a stronger indigenous enterprise sector alongside the multinational economy.
Italy’s “Industria 4.0” strategy provides a template that Ireland can used to develop a diversified economy of artisan, crafts, food, fashion and services producers.
(Ends)
Issued on behalf of ISME by Heneghan
