Finance Minister Michael McGrath has been urged to allocate €2 billion for a fund to support training initiatives for small businesses in Ireland. This recommendation comes from business advisory firm Azets, formerly known as Baker Tilly Ireland, as part of its submission for the upcoming budget in October. Azets also proposes that the government intervene to limit the increase in the national minimum wage to approximately 5%, rather than the recommended 12%, in order to alleviate the burden on SMEs. This call for targeted funds to address specific areas of the economy is in line with other business services and lobby groups. The exchequer has been generating significant revenue through various taxes, particularly from corporation tax, prompting Mr. McGrath to pledge the financing of investment funds from these windfall receipts. However, economists have questioned his proposal to establish an infrastructure fund.
Azets CEO Neil Hughes believes that an SME fund would enable small Irish businesses to train their staff, retain personnel, and contribute to an economy that currently favors foreign-owned multinationals. Hughes stated, “The pre-budget submission includes a proposal to set aside €2 billion to establish an SME innovation fund so Irish SMEs can harness the opportunities of the twin digital and green transition. Taken in conjunction with other measures, the fund would present an opportunity to begin diversifying Ireland’s economic model.”
According to Azets, the fund would be administered jointly by the government, its agency Enterprise Ireland, Local Enterprise Offices, employment bodies, and small firms. Its primary objective would be to develop a dedicated roadmap to address labor market bottlenecks. Azets highlights that while small businesses are facing additional costs, they are still managing to navigate the inflation crisis, with only a small number experiencing significant financial difficulties. Their survey reveals that less than one in five SMEs anticipate a decline in revenues this year, despite rising prices putting pressure on already tight margins and businesses struggling to attract and retain talented individuals.
In recent years, Ireland’s economy has become heavily reliant on foreign-owned multinationals, particularly in the technology sector. As a result, small businesses have faced challenges in terms of competition, access to resources, and talent retention. The proposed SME innovation fund aims to address these issues by providing financial support for training programs, enhancing the skills of existing employees, and facilitating the recruitment of new talent. By investing in the digital and green transition, Irish SMEs can seize opportunities for growth and contribute to a more diversified economic model.
The call to peg the rise in the national minimum wage at around 5% instead of 12% is motivated by the desire to alleviate the financial burden on small businesses. While an increase in the minimum wage can benefit workers, it can also place significant strain on SMEs, which often operate on tight profit margins. By implementing a more moderate increase, the government can strike a balance between supporting workers and safeguarding the sustainability of small businesses.
This proposal from Azets aligns with the growing consensus among business services and lobby groups, who are advocating for targeted funds to address specific challenges faced by different sectors of the economy. The availability of substantial tax revenues, particularly from corporation tax, provides an opportunity for the government to invest in initiatives that promote economic diversification, support small businesses, and enhance the overall competitiveness of the Irish economy.
As the budget approaches, it remains to be seen how Finance Minister Michael McGrath will respond to these recommendations. The allocation of funds to support training initiatives for small businesses and the decision regarding the national minimum wage increase will be crucial in determining the trajectory of Ireland’s economic recovery and the level of support provided to SMEs.