Government is ignoring needs of mid-sized companies - ISE CEO
- The ISE ready to help mid-size companies access capital to grow but Government policy needs to support it
- Irish economy would benefit from more home-grown companies of scale and policy should reflect this
- Tax changes to encourage market access are essential to counter the collapse in bank funding to enterprise
The Government is ignoring Ireland’s mid-size companies in favour of an enterprise policy that is primarily aimed at supporting multinationals and start-ups, ) Chief Executive Deirdre Somers said today.
“Developing more home-grown success stories, which are capable of earning money abroad and spending it on creating jobs at home, can make a major and sustainable contribution to the economic and social life of this country,” said Ms Somers.
“Having a low corporation tax rate, however laudable and necessary, will not of itself deliver successful mid-market companies. We need to set a national agenda for scale, recognise the prize of having successful companies of scale and tackle whatever obstacles stand in the way of the entrepreneurs who can create these companies”.
Ms Somers said the ISE is ready to help mid-market companies (those with annual turnover of more than €20m and profits of more than €3m) access the funding they need through the public equity and debt markets – but the Government’s current tax policy is making it unattractive for companies to do so.
“Bank funding to enterprise has collapsed. New funding sources are not a conceptual luxury, they are a necessity,” said Ms Somers.
“Internationally, public equity and debt markets will be a critical part of the funding landscape for companies in the future but Ireland needs the right environment that allows this type of funding to work.
“The success of the Government enabling the introduction of REITs into Ireland is a great example of how collaboration can channel much-needed investment into Ireland – but now we need to take a similar approach to resolving the funding challenges of private, mid-market companies,” she said.
Ms Somers also warned that founders of successful Irish companies will continue to sell to international buyers – resulting in the Irish economy missing out on a new generation of Irish-headquartered international businesses - unless we find a way of rebalancing incentives that at present are tipped too heavily in favour of trade sales.
Ms Somers also said:
- A “profound rethink” of how we tax capital, share options and exits is necessary to grow a strong, embedded indigenous enterprise sector that can make a major contribution to the economy.
- The Government should stop taxing investment in Ireland and Irish companies by charging stamp duty on investors who buy shares – which is currently 10 times the proposed EU Financial Transaction Tax which the Government opposes on the grounds that it would damage Irish business.
- The Government should make it more attractive for investors to invest in businesses
- The current taxation of share options makes it “hugely unattractive” for entrepreneurs to share in the benefits of growing their business to scale.
- The ISE can respond quickly to help companies if the Government changes the law – as shown by its recent co-operation with NASDAQ OMX to encourage companies to list on both exchanges, which came just a month after the Government changed legislation which facilitated this initiative.
Ms Somers also said the recent strong performance of the ISEQ index (which rose by 25% in the first 9 months of 2013, making it the best-performing index in Europe in that period) shows that domestic and international investors are willing to invest in Ireland and Irish companies as the economy bounces back.
“Ireland’s story of recovery and managing its challenges is making a significant impact with international investors and the anticipated exit from the Troika bailout programme in the coming weeks will further enhance Ireland’s credentials as a favourable home for investment,” she said.
The Irish public market provides a great “shop window” for Irish companies to international investors and our national priority must be to ensure that we have enough product in that window to channel that international investment and interest, she added.
The conference, organised by the ISE, was attended by more than 250 delegates from over 100 companies.
Speakers and panellists at the ISE - Funding for Growth conference
- Michael Cole-Fontayn – BNY Mellon (Executive Vice President and Chairman, EMEA)
- Ray Nolan – serial IT entrepreneur
- Siobhan Talbot - Glanbia (Group Managing Director Designate)
- Joe Hogan – Openet (Founder and CEO)
- Stephen Vernon – Green REIT plc (Non-executive director) and Green Property (Chairman)
- Terence O’Rourke – Enterprise Ireland (Chairman)
- John Moran – Department of Finance (Secretary General)
- Eugene O’Callaghan – National Pensions Reserve Fund (Director)
- Helen Ryan – Creganna-Tactx Medical (Former CEO and Non-Executive Director)