I am delighted to have a brief opportunity to speak in support of the European Investment Fund Agreement Bill 2018. The Minister of State wants to pass this Bill urgently and to have provisions in place to implement the scheme early in 2019. There is a sense of urgency every day as we see events taking place at Westminster.
The Bill gives the Ministers for Agriculture, Food and the Marine and Business, Enterprise and Innovation the power to enter into agreements with the European Investment Fund to facilitate the future growth loan scheme, which was announced in budget 2019. Initially I wondered why it was necessary. Why did the Attorney General state the Government could not establish the fund? When Mr. Andrew McDowell appeared before one of the finance committees – it may have been the Committee on Budgetary Oversight – he urged us to try to draw down more money from the European Investment Bank, of which he is our director, for infrastructural projects, small businesses and all types of business. Will the Minister of State comment on that?
A particularly important element of the Bill is that it will make longer term loans available to SMEs, in particular those in the seafood and primary agriculture sectors. As a large proportion of the agriculture sector is expected to avail of the loans, the Department of Agriculture, Food and the Marine will front 40% of the fund and the Department of Business, Enterprise and Innovation will resource the remaining 60%. Both Departments will contribute €62 million over five years. I welcome the Minister of State’s assertion that the counter-guarantee with the European Investment Fund offers 64% of the risk cover, which is an improvement on the usual 40%. I mentioned Mr. McDowell and what he is doing on the European Investment Bank. The Bill fits in with the wider Juncker plan from 2015 whereby €315 billion was to be raised for investment in Europe by the end of this year. How is that plan progressing? The European Investment Fund previously committed €20 million of venture capital to Ireland alone.
I agree with Deputies Kelleher and Quinlivan. The banking sector has not been performed well enough in supporting households or small businesses. One has to wonder, even while the Minister of State is putting his best foot forward with the €12 million per annum and the possible leveraging of €300 million, whether it will be enough.
Major concern was expressed yesterday by the Irish Fiscal Advisory Council, IFAC, when Mr. Seamus Coffey and his team made a presentation to the Committee on Budgetary Oversight regarding the serious risks from Brexit, which seem to be increasing daily. IFAC’s fiscal assessment report on budget 2019 stated there was a reasonable probability that the transition agreement and final relationship assumed will not materialise. IFAC referred to critical estimates of the medium-term impacts on Irish output from Brexit – we are talking about small SMEs that are exporting – at levels of 1.1% to 2.8% for a soft Brexit and 3.1% to 7% for a hard Brexit. IFAC cautioned the figures may be an underestimate due to the intense economic connections between Britain and Ireland. An example cited by Mr. Coffey and his colleagues is the labour intensity of Irish exports to the UK. Our exports to Britain look smaller in monetary terms when people are making comparisons with our other export markets but they tend to have a higher number of workers’ hours involved. This is particularly true of agriculture and the food sector. Brexit still has the potential to administer a very severe shock to the Irish economy, which may last for up to a decade. Hence the importance and urgency of the Bill.
Recently, the Governor of the Bank of England, Mr. Mark Carney, delivered possible statistics arising from a cliff-edge Brexit, which would be pretty terrifying for our country. It would seriously damage our exports as a result of the changes to the value of sterling and so on. People have said Mr. Carney has been wrong in the past. We have to hope our fellow parliamentarians in Westminster will somehow turn the bus away from the cliff it is heading for and not bring us with them.
Other Deputies have queried why there has been such poor drawdown so far from the Brexit loan scheme. Is awareness of the availability of loans lacking or is the application process too onerous for busy SMEs trying to get through day after day? In previous speeches, the Minister, Deputy Humphreys, spoke of the responsibility of businesses to know about what loans and finance schemes are available to them. As Deputies, our experience with community bodies and small SMEs is they do not have the resources to spend time researching Brexit loan packages. The Be Prepared Enterprise Ireland scheme, which provides a €5,000 grant, has a very low take-up, at just around six per month. InterTradeIreland is also offering a Start to Plan voucher which is also apparently being taken up at a rate of about six per month. These are disappointing returns, which suggest the Minister of State and his senior Minister need to get the roadshow going and get out there and try to convince people to come forward and look for supports.
The Brexit loan scheme of €300 million, which opened in March, has only had 3% sanctioning, with a value of around €8.5 million for 38 loans. These are disappointing statistics. I particularly welcome that the loans will be provided over the long term, for seven, eight or even ten years. That is a major step forward, one which is badly needed in this era of increasingly sustained unpredictability. Typically, SMEs can access borrowing for periods of between three and seven years so a term of ten years is welcome.
Are we remotely Brexit ready or just hoping for the best? Are we hoping it will turn out okay on the night? Are we doing enough? While this is another step forward, are there other areas in which we could improve? The British Government is in absolute turmoil. There have been a number of Getting Ireland Brexit Ready seminars which around 4,000 participants are reported to have attended. Enterprise Ireland is running Brexit advisory clinics. They are all very welcome but perhaps we need to do more. How accurate and reliable is the information given out at these clinics when we are not sure what we are heading into? I hope the position will change because the level of unpredictability is very bad for small business.
I have always been a strong supporter of small Irish businesses. Throughout my career, I have always supported startups in particular to encourage dynamic people to leave unemployment. In areas of the city with very high unemployment it has been very important to be able to set up small business centres to encourage people with innovative ideas and entrepreneurial skills to get out there and start on the road to market their skills and eventually employ other people.
As my colleague stated, we cannot underestimate the importance of SMEs and indigenous companies. There are almost 250,000 small businesses in the State, comprising 98% of all businesses and contributing more than €66 billion to the economy. They cover the whole budgetary expenditure of our country. Eligible business for this scheme include micro, small or medium-sized enterprises which employ 250 persons or fewer with a maximum annual turnover of €50 million or an annual balance sheet not exceeding €43 million. Small mid-cap businesses that employ 500 persons or fewer are also eligible.
The Bill is brief and to the point. I note the review of the Bill will be four years from commencement. It is not set out in the Bill, but the explanatory memorandum states there are no costs arising from the legislation. The cost to the Exchequer, of course, will be €62 million.
I welcome the news recently of the doubling of the European Angels Fund Ireland for Business Angels from €20 million to €40 million. The first €20 million of the fund for SMEs is now invested in 20 companies and up to 100 companies hope to be supported over the coming decade. That is another brilliant innovation. Last year, there were 43 investments worth over €12 million for Irish start-ups through the Halo Business Angel Network. Enterprise Ireland has stated that there has been good take-up of the €20 million available and welcomed this additional package also. These are positive steps but the challenge we face, as we celebrate after Christmas 100 years of Dáil Éireann, probably is the biggest challenge we have had to face, maybe, besides the Second World War, throughout our independence history.
The European Investment Bank may directly finance Irish companies also. I referenced earlier the visit of the director of the bank to the Oireachtas committees. Last week, we had the announcement that Nuritas, a biotechnology company based here, has received €30 million backing under the European Investment Fund’s European growth finance facility. I note the vice-president of the European Investment Bank stated the bank was impressed by the innovative use of technology by that company – it has already achieved a number of global deals.
I warmly welcome and support the European Investment Fund Agreement Bill as another small step to help Irish business address the ferocious challenge of Brexit. Hopefully, if the worst Brexit scenarios, as feared by the Fiscal Advisory Council and other commentators, remotely came to pass, we will not be faced in this House, before or after 2020, with the dilemma we had ten years ago of introducing emergency legislation.