Peter Barry
Question:46 Mr. Barry asked the Minister for Industry and Commerce if he proposes to take any action to help small and medium sized companies cope with the effects of the UK Government's decision to leave the Exchange Rate Mechanism.
Ceisteanna-Questions. Oral Answers. - Assistance for Exporters.
Peter Barry
Question:47 Mr. Barry asked the Minister for Industry and Commerce the investigations which have been conducted by his Department to assess the effects on (1) employment (2) investment and (3) exports, of the decision by the UK Government to leave the Exchange Rate Mechanism.
Ruairí Quinn
Question:48 Mr. Quinn asked the Minister for Industry and Commerce if he will make a statement on the measures taken within, and by, his Department to assist exporters to the sterling area, in view of the changes in the value of sterling and the difficulties they face as a result.
Brendan Howlin
Question:55 Mr. Howlin asked the Minister for Industry and Commerce if any special or particular initiatives to assist Irish industries engaged in exporting to the UK have been taken, consequent on the relative revaluation of the Irish pound; and if he will make a statement on the matter.
Eamon Gilmore
Question:57 Mr. Gilmore asked the Minister for Industry and Commerce the implications for Irish industry, and particularly for job creation, of the recent decline in the value of sterling against the Irish pound and the 3 per cent increase in interest rates; if he has any plans to assist industry in coping with the difficulties created by the increase; and if he will make a statement on the matter.
Ruairí Quinn
Question:81 Mr. Quinn asked the Minister for Industry and Commerce if he will outline the measures he intends to introduce to alleviate the impact of recent currency changes upon indigenous Irish companies trading in the sterling area; and if he will make a statement on the matter.
Peter Barry
Question:103 Mr. Barry asked the Minister for Industry and Commerce the assistance it is proposed to give to industries affected by the exchange rate re-alignment between the pound and sterling.
I propose to take Priority Questions Nos. 46, 47, and 48, Oral Questions Nos. 55, 57 and 81 and Written Question No. 103 together.
The recent dramatic fall in the value of sterling, coupled with the ongoing turbulence in the currency markets, has created serious difficulties for a number of Irish firms. On Thursday, 24 September 1992, I asked my Department to undertake, as a matter of urgency, a detailed analysis of the problem. Subsequently, on 29 September 1992, the Government decided to establish a working group, under the chairmanship of my Department, and representative also of the Departments of Finance, Agriculture and Food and the Marine, and semi-State bodies as appropriate, to look at the nature and content of the problems arising for firms as a result of the decline in the value of sterling and to make recommendations as soon as possible. The working group's report was considered by the Government yesterday.
The working group concluded that many manufacturing firms face serious difficulties in maintaining positive margins on sales in the UK market and in those parts of the domestic market and certain major overseas markets which are subject to strong price competition from UK firms.
These problems are not confined to specific sectors; firms in all sectors of industry have suffered immediate erosion of margins arising from the devaluation of sterling. However, the sectors which are most badly affected are clothing, food products, small engineering firms, furniture and joinery, building products, saw-mills and firms which sell intermediate products.
In general the working group concluded that the firms under greatest pressure have some or all of the following main characteristics: a high level of exports to UK, a high level of exposure to competition from UK competitors, low levels of input purchases, e.g. raw materials, from the UK, low margins, high gearing, high level of debtor exposure and little or no forward currency cover.
The Government have carefully considered the report of the working group. They have decided to immediately establish a market development fund of £50 million for the period up to the end of March 1993 to assist firms which have been seriously affected by the recent turmoil in exchange rates. By helping firms to help themselves, the fund will also contribute to the achievement of the stability necessary to maintain Ireland's membership of the Exchange Rate Mechanism at a time of considerable uncertainty.
The fund will be administered by a special management team drawn from the relevant State bodies. The establishment and management of the fund will be supervised and directed by a management board which will comprise the managing directors/chief executives of ABT, FAS and IDA together with representatives from the Departments of Agriculture and Food, Finance, Industry and Commerce, Labour and the Marine, and a representative from the industry/employer bodies and ICTU.
In establishing the fund, the Government emphasised that assistance would be directed very specifically at firms which would have temporary difficulty in maintaining employment and in adjusting to the recent fundamental changes in the market place arising from the devaluation of sterling. Firms will need to demonstrate the ability, commitment and actions being taken to manage their way out of current difficulties. Operational criteria for support under the fund will be worked out in the next few days. These will concentrate on providing help for firms whose profitability and employment is threatened because of the devaluation of sterling. It is not intended as a permanent subsidy; it will be available only to enable firms to make the changes necessary following the sudden currency changes of recent weeks. There will be a formal review of the operation of the fund at the end of this year.
The management team is meeting today to finalise all the practical details for support from the fund. I would advise firms to contact An Bord Tráchtála or the IDA through their central and regional offices. An Bord Tráchtála has installed a special help line — number: 1-800-424242.
I think I will have to ring the helpline to get some details of what is actually involved — the Minister did not give them. The Minister will appreciate that all I have to go on are the reports in this morning's newspapers, from which, of course, I am not allowed to quote at Question Time. Therefore, he will have to correct me if I make wrong assumptions. I understand from reports that only firms which are more than 50 per cent dependent on the United Kingdom market will get benefit and that the benefit will be a certain amount of money per employee. Is that correct?
It is correct that the benefit will be a sum of £50 per week per employee for firms which qualify. They will have to show a relatively heavy net dependence on the UK market or on the domestic market in sectors where they are in direct competition with UK companies or in a third market where they are similarly in competition.
I think all of that is correct. I hope the fund will prove adequate. The Minister said that the firms will have to show a heavy dependence on the United Kingdom market. I thought it would have been more just that no matter what their dependence, that that could be isolated and they could be helped; even if it was only 10 per cent, that they could be helped in relation to that 10 per cent. This morning's papers have reported that firms must have a 50 per cent dependence before they get anything. Is that correct?
If it is the UK market alone without any of the other factors I mentioned, that is so. A firm who are only dependent as to 10 per cent of their sales on the UK market would not be put in jeopardy by recent events. Obviously they would not be helped — they would prefer that this had not happened — but they would not be very seriously affected as, unfortunately, are many firms in this country.
Deputy Quinn whose Question No. 48 refers.
I would like to get in again.
I will try to call the Deputy, time permitting.
I appreciate that, I hope to be very succinct and brief. The Labour Party welcome the prompt response of the Government in this regard but are concerned that even at this early stage they are being unnecessarily bureaucratic. I support Deputy Barry's comments. Would the Minister not agree that until stability is reintroduced into the currency markets the object of the exercise is to preserve in the short term existing jobs whether they relate to a 10 per cent share of the UK market or a 70 per cent share of the UK market? Accordingly, may I ask the Minister if in the review at the end of the year to which he referred due regard will be had to that and the necessary changes made?
I am glad to be able to assure the Deputy that I have already given instructions to the management board that they are to seek to be as flexible and non-bureaucratic as possible in regard to this matter. It is an unfortunate fact of life that certain criteria have to be laid down; otherwise every firm in the country would apply. Of course, a great many firms have been helped by recent developments; they are better off as a result of some of the recent currency changes. It would be absolutely foolish to help firms which are actually better off for firms which are not materially affected.
Nobody is suggesting that.
We have to have some criteria. If there are criteria, sometimes the establishment of criteria is described as bureaucracy.
If firms are 48 per cent dependent——
Every effort will be made to avoid that and to try to be flexible. I want to assure the Deputy that not alone will there be a full review at the end of the year but that constant monitoring will be carried out by the people I have named in my reply; they will be watching this every week. I envisage the management board meeting weekly to monitor it and if it is necessary to make a change in the criteria they will so recommend to me and I am quite sure, if I think it is reasonable, I will agree to it.
Does the Minister appreciate that the margins are extremely tight in the areas he listed and if one of those firms is 35 per cent dependent on the United Kingdom market it could put that firm into a loss-making situation?
Exactly.
The flexibility to which the Minister referred should extend from nought to 100 per cent and should not waver around 50 per cent. That is the kind of flexibility I hope to see. May I ask the Minister if he could arrange to have the rules governing the allocation of these funds sent to Deputy Quinn. Deputy Rabbitte and me as we are depending on hearsay and newspaper reports?
I will in some days. The final rules will not be established for some days.
As soon as possible.
We have brought out guidelines but the final rules will not be established for some days.
I raised the point that firms which are only 20 per cent or 30 per cent dependent on the UK market should not be ruled out during these early days as that dependence and the effects of the realignment of currencies could tip them into loss-making situations. It is important that those firms should be considered.
Each application will be examined on its merits by people who are well fit to carry out the examination. They have instructions to act in a flexible and reasonable fashion given the particular circumstances of each sector and each firm.
Therefore, the report in this morning's newspapers was not correct.
May I ask the Minister — he may wish to come back to this another day when he can reply to it in more detail — if the Government, his Department or he anticipate providing any additional response to that already announced if the situation is more prolonged than we anticipate or if the divergence between the two currencies becomes wider and more permanent?
What has been announced is intended to remain in force until the end of March next, if that is necessary. It is quite possible there may be dramatic changes in the whole currency situation and if there are we will bring it to an end straightaway if companies are not at a disadvantage as a result of it. It is also possible that it could go the other way. If it goes the other way I will certainly be asking the management board of this fund to look at the situation which arises then and give me advice based on the facts as they appear.