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Ireland: SMEs call for a focus on competitiveness in Budget 2015

Wednesday, 30 July 2014   (0 Comments)
Posted by: Author: Fiona Reddan
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Author: Fiona Reddan (The Irish Times)

Budget must get the balance right between generating savings and productivity gains

The Irish Small and Medium Enterprises association has called on the government to put the focus on competitiveness in this year’s budget.

In a pre-budget submission, Isme said the 2015 Budget must get the balance right between generating savings, primarily through cost savings and productivity gains rather than imposing additional taxes, which will hinder economic performance.

"This budget must focus on the transition from austerity to growth for businesses who have survived the recession and are now ready to capitalise on the recovery,” Isme chief executive Mark Fielding said.

Meanwhile, the latest DKM/IBF SME Market Monitor said today that an increase in activity from small and medium companies in the construction sector could not only help the wider economic recovery, but could also stimulate other SMEs . However, activity is likely to be constrained in the short-term by a variety of factors including planning constraints, the difficulty in getting funding, and the high cost of construction.

According to Annette Hughes, director of DKM Consultants, SMEs account for 95 per cent of total construction employment and they generate 88 per cent of total turnover and 96 per cent of total value added in the sector. As such, she said that there is "real opportunity” to grow turnover and deliver much needed jobs, housing and other infrastructure.

However, obstacles to construction growth include costs, with Ms Hughes noting that it may cost more to build a house than it can be sold for, due to the impact of the cost of materials and planning contributions. Funding is another issue.

According to Maurice Crowley, director, retail, with the Irish Banking Federation, the problem with funding is that while banks now have the capacity to lend, they are only willing to lend 50-60 per cent of the amount needed, which leaves an equity gap that needs to be filled.

From a broader SME perspective, Ms Hughes said that the economic environment continued to improve in the first half of the year, and developments in the manufacturing, tourism and retail sectors give "cause for optimism”.

However, stronger consumer spending and domestic demand are needed to spur SME appetite for investment credit, Ms Hughes said, noting that while consumer sentiment has improved, it has yet to translate into increased consumer spending.

This may be because there is "still no sign of a meaningful increase in disposable incomes”, and levels are still below that seen in late 2011 and early 2012, although Ms Hughes noted that indicators appear to suggest that the decline appears to have halted.

"The good news is that we’d expect to see domestic demand make a positive contribution to the economy in 2014,” she said.

Recovery in the wholesale and retail trades also remains constrained. While employment grew in the sector during 2013, it has now fallen back to its lowest level of 2012.

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