Vol. 502 No. 4
9 Mr. Perry asked the Tánaiste and Minister for Enterprise, Trade and Employment when the service strategy paper on the development of the significant employment potential of the services sector will be published; if her attention has been drawn to the importance of directing this report towards integrated action for services into mainstream business development; and if she will make a statement on the matter. [8453/99]
44 Mr. Perry asked the Tánaiste and Minister for Enterprise, Trade and Employment the range of initiatives which will be implemented which will help small businesses to identify new supply and service opportunities; and if she will make a statement on the matter. [8452/99]
I propose to take Questions Nos. 9 and 44 together.
A services strategy was published in March, 1997 and included a graduated system of support for services companies ranging from a basic level of support, mainly information and advice, to access the full range of agency supports for internationally traded firms in "designated" sectors. A reappraisal of that strategy took place in the context of drawing up the legislation to establish Enterprise Ireland in 1998 and the opportunity was availed of to update the list of services within the "designated" sectors to include specifically new emerging sectors such as electronic commerce, multimedia and logistics management services. This should assist Ireland to become an "early mover" in these new electronic services.
A study of the services sector is under way to determine ways and means of stimulating greater activity throughout Ireland in all services. Work on this review should be completed within six months.
Measure 3 of the Small Business Operational Programme also supports studies into new and emerging services areas. The focus of these studies is to determine the potential of the sectors to create sustainable employment and to identify the parameters necessary to realise this potential. In addition, Enterprise Ireland provides support through its linkage programme to Irish SMEs involved in the supply and services sector.
Since the report was published in 1997, several other reports have been published on audio visual facilities, the multimedia sector, the creating of a franchise and the establishment of a digital park. Areas under investigation include direct mail, the design centre, entertainment and support services. A major survey is being carried out in the service sector. Given that there have been up to ten different studies since the report was published in 1997 I am astonished that another report is to be conducted on the service sector. Given that the service sector has been neglected I am pleased emerging businesses are coming forward. I hope they are better supported than they have been to date. Following all the surveys will there be support for the service sector to create jobs? In America the greatest job creator is the service sector. What direction has been given to the consultant who will be given the overall remit of condensing about 15 reports which have been conducted since the early 1990s?
My predecessor, Deputy Richard Bruton, published a services sector strategy. That strategy is being implemented. As I said in my reply, certain designated services were identified for support. Clearly, we cannot support through grant aid corner shops or other such activities. Rather we must support internationally traded services, an area which is changing all the time, particularly given the potential of electronic commerce. A huge percentage of jobs currently being supported by Enterprise Ireland in the context of indigenous companies and by the IDA in terms of foreign direct investment are in the services sector. In export terms the services sector is currently worth approximately £2 billion annually, accounting for about one quarter of total exports. Half of this comes from the internationally traded services in the financial sector and about 25 per cent, or £25 million, is accounted for by software services.
The new support mechanism available through Enterprise Ireland is much different from that which was available through Forbairt or the Export Board. Enterprise Ireland provides support to help companies grow to a sustainable level, develop R&D and train employees. In general, Irish companies have had very little interest in human resources, training employees and upgrading employee skills which leads to increased productivity and greater use of technology.
It is fair to say we can only support service companies involved in trade and not those which display services in other parts of the country or within particular regions. The Price-Waterhouse-Coopers study is not a preliminary to another strategy but is being carried out in the context of the Operational Programme for Support to Small Industry. It is a Community-wide initiative to examine how we can develop the potential of services, not just nationally but particularly within the regions.
In the context of job creation in small companies in the services sector, I appeal to the Minister that, rather than providing an employment grant, which can be restrictive to a certain extent in the context of the development of small companies which can get £7,000 per job created, she provide a capital grant for equipment. This would allow a company grow to a greater extent. In certain cases the biggest risk for small companies is taking on people when doing so cannot be justified. A company would develop to a greater extent if a capital grant was available to help sustain growth at a relatively modest rate.
Grant aid is given under a range of headings, some focused on capital equipment. In recent years grant aid has been geared more and more towards job creation.
It is a problem.
In the indigenous sector much grant aid is provided to upgrade existing activity and to install new technology and equipment. In the foreign sector grant aid is probably more employment than capital orientated. On average the companies which receive the largest amounts of grant aid are those which install new equipment. Such equipment is very expensive and companies, particularly indigenous ones, receive a fair proportion of the capital cost. Last week I was involved with a company in the midlands which has potential but has never traded internationally. It now has potential to develop its export market and Enterprise Ireland will help it upgrade its facilities and put in place new equipment and technology which will allow it improve productivity.
The mandate we gave Enterprise Ireland is very broad. It was asked to examine how companies can be made more sustainable in the medium and long-term. This involves examining the entire company, including the capacity to research and develop new products, to upgrade skills of employees, etc., and not just the number of people employed or the technology used. I think the new strategy is working and is beginning to take effect quite rapidly. It is better than having separate grant aid for exports operated by the trade board and for company development operated by Forbairt as happened in the past and which led to a very disjointed approach. Because of this some companies slipped through the net and did not get the kind of support they needed. Other companies which needed it least got more support. I hope we will see improvements in the sector and we must keep an eye on it as more jobs are being created in the services sector, in Ireland and elsewhere, than in other sectors. This means the strategy for the support of industry must change accordingly.
In the context of the strategy, what is the current situation regarding the labour and skills shortages in the services sector? Is it leading to wage inflation? What strategies has the Minister planned to deal with this issue?
It is fair to say that in many sectors, including the services and manufacturing sectors, companies are experiencing difficulties in getting unskilled and in particular skilled employees. This is why the Government, on taking office, established a £250 million education technology fund to increase the number of engineers, scientists, those with software qualifications and PLC courses, addressing, for example, the demands of the call centre sector where there was a shortage of people with linguistic skills. The biggest complaint I get concerns the provision of people with skills. That is the reason we have an additional 8,800 places this year in active labour market programmes, namely, training programmes as opposed to community employment which has not had the desired effect in some regions in terms of people progressing into employment. The catering industry, for example, is experiencing difficulties, not just in terms of employees but also in getting people to do relevant courses. Recently the Minister for Tourism, Sport and Recreation commented that some courses are finding it difficult to get people to avail of the training opportunities, which is a great pity.
Unemployment is down to 6.8 per cent. There are 37,000 in community employment, a further 18,000 apprentices and approximately 29,000 doing various programmes. Therefore, there is a large number of people involved in Government backed training programmes. The challenge is to ensure we have enough people for the emerging jobs. This is why Forfás, working with the skills group which was established, is currently trying to forecast what we will need over the next number of years if current growth levels continue so that we will have some idea of where money should be spent. A considerable amount of public money is being spent and yet there are shortages. The construction industry, for example, is also experiencing difficulties in recruiting people, while at least one or two of the people serving in most restaurants in Dublin are from outside the jurisdiction. I welcome this, but this is so because it is difficult to get Irish people to do some of the jobs currently available.
