I will try to answer the questions roughly in the order they were asked. Deputy Ó Cuív asked a question on share capital and Deputy Cannon asked a question on the availability of credit in general. All forms of finance are an issue for small businesses, which have a different approach to finance from businesses with which Enterprise Ireland usually deals. I explain it to people very simply. Small companies do not have a treasury function and most of them do not have an accountant. This means they simply run out of money, which gives rise to a "hair on fire" discussion, so to speak, because the company needs money immediately.
On Monday, I spoke to a highly distressed woman from the west who runs a garden services business. Her company traded through €300,000 of bad debt in the bank crash and lost stock worth €500,000 in the big freeze of 2010-11. The company continues to trade and employs eight staff. The owner told me that three of her staff have mortgages and are waiting for their wages to be paid. She cannot obtain €30,000 for a truck. The conversation arose because she was sending me a rather aggressive letter that she intended to send to a finance house. We talked through the issue and I understood the emotion expressed in her letter.
The consistent message that comes through is that as a result of the banks having to repair their balance sheets, one of the good things lost has been the bank manager who could read a cashflow, profit and loss statement and balance sheet and understand whether a company was good. He or she used to be able to approve or reject a credit application, as appropriate, but they are no longer in place in the towns. Companies must then deal with a system or an IT connection and there is no longer an ability to provide the working capital, which is a serious problem. Whether this comes from an initial squirt of State capital, the Strategic Banking Corporation of Ireland or another source, it must be provided. There are, however, specialists entering this space. Wearing my previous hat, which was in the transport business, I note that some UK providers are very comfortable assessing the risk of distribution operations. These providers are making headway, although they are charging a premium of 2% or 3% on the cost of capital over what was previously available.
People are paying more money for access to credit now and it is across the board.
I was asked about basic services such as electricity and water. Again, there is a difference among our relative clients. A big business coming to Enterprise Ireland will have a check sheet, and if an area does not pass muster on the availability of services and the services are not there in the first place then a discussion will not take place. Some of our members are indigenous to an area and just muddle through with what they have so they are different, but the consistent message from them is the cost of the provision of these services relative to what their peers pay elsewhere is too high. The cost of electricity and water is too high. The cost to a small café or restaurant of a boil water notice is too high. This has to be fixed. Very politely, the message to all the Deputies and Senators in the Houses is they must sort out the water issue yesterday, because one crowd that will not pick up the tab for a failure to sort out water charges is small businesses. Back in the day they paid rates. Now, many local authorities are renegotiating rates with these small businesses. They must also pay for their utilities. Loud and clear I hear from them that the State should not come back asking more for water just because it cannot be got from someone who refuses to pay for water. We all have to pay for water. The only thing the politicians must decide is how we will pay for water and how much we will pay. It is simple.
Deputy Cannon asked about the turnover requirements for tenders. The simple answer is the turnover requirements are inappropriately high in some cases. I know of a business that tendered for a significant State tender. The value of the tender was €25 million and the turnover requirement was €40 million. There is no justification for doing this. I understand the State, particularly after the crash, decided to address this by having entities with a big turnover, but small businesses take the view that if the tender is for something in a rural area such as a road sweeping, hedge cutting or a road repair service, just because a Spanish or British company has a huge turnover it does not mean it will be able to replicate the service at a value for money price in the west of Ireland, and because it does not have network there it will probably end up buying the service from an SME locally. If we had a more holistic approach as to how the business is tendered in the first place it would cut out the middle man, cut out a piece of margin to a multinational and small businesses would be dealt with directly. We understand the State wants the comfort of dealing with a larger business. What the small businesses state is they can put consortia together but they need time to do so. I have already had conversations with the Office of Government Procurement on this and it is amenable to this discussion but it needs leadership from the State in doing so.
We would hate to see Brexit becoming a catchall cliché, with politicians having a go at each other and it is all great fun for them, but for businesses it will be a real issue. Last night we all saw aired the real right now issue for mushroom farmers who just happen to be very sectorally exposed. Going back to finance, they have a right-now, hair-on-fire working capital issue, which must be bridged. This is in the short term. In the medium term, perhaps sterling will settle at the level it is at and perhaps the mushroom farmers will be able to trade through it and trim their cost base, but they have a very tight cost base as it is. Otherwise they will have to reorganise their business or we will no longer grow mushrooms here.
Our concern is that in many businesses people do not realise they are doing business with the UK and do not realise they are doing sterling business. An example is hospitality, and we are not just talking about the west coast hospitality but Temple Bar. Many of the people on stag weekends come from the UK. Perhaps some people will be just as happy if they do not come over, but their pricing decision has changed in recent weeks. We just became 15% more expensive for them.
I was at a meeting this morning with a Coillte director who manufactures prefabricated construction equipment. Most timber in Ireland is now privately sourced. Many farmers who grow timber think their customer is Coillte, and their first customer in Coillte, but the end customer is a builder in the UK. There are businesses whose level of exposure we do not know, and how badly they will be affected will only come out in the coming months.
I believe I have answered the question on credit unions. Small businesses do not really care where the money comes from. There are regulatory issues involved but they need money.
Deputy Connolly asked about Alpine resorts where tourists in the ski season are moved around by a bus that looks just like a school bus with big wide doors. One gets on and there is no conversation or exchange of money with the driver. The locals also use this service. Of course there is a cost to doing this. Either the local commune in Italy will pay for it or the lift company in France will do so. There is a local agreement that just providing this on a regular round-robin basis provides a local service and they are willing to absorb it as the local overhead. To an extent, this already happens with the rural transport initiative, if we think about the school bus service. There is an element of State subsidy in this. We are not necessarily saying that something would go around the place on the hour, but if we think about extended rural areas in the west where people want to go to pubs there is also a road safety argument for it. There are clever ways of thinking about this where we could provide a level of service that would be a return to the local community.
The county manager issue has not clarified itself as yet but I will give some examples where there might be a sensitivity. In the old system, the reporting line was effectively through the county enterprise board to the Department of Jobs, Enterprise and Innovation or its predecessors. Now the concern is, and we will only see this over time but we are alerting the committee to the sensitivity of it, that we have a county manager who deals with local authority members, and what was previously a purely commercial viability discussion is now potentially involved with something that might have a planning permission attached to it or a change of use for land. There is a concern that where local authority members are involved there may be things that get in the way of the discussions, sensitivities or something that someone does not wish to disclose, simply because the reporting line has changed and there is a local political element to it.
To answer Deputy Ó Cuív's question on what a good connection looks like, there is no simple answer to this. For instance, a local engineering, architecture or design firm that shares drawings or computer aided design will be very data hungry. On the other hand, for someone simply in a small town or village or rural area whose accountant is in one place and whose solicitor is somewhere else and who wants to use a cloud-based service, it will not work on a phone line. While it does not necessarily need to be a 30 GB or a 1 TB service it needs to be there, it must be reliable and it cannot be affected by weather. This is the issue. There have been local press reports. According to a recent study in the Irish Independent Cavan has 5,250 businesses without broadband, Donegal has 8,410, Leitrim has 2,500, Louth has 2,800, Monaghan has 5,200, Sligo has 3,800 and Meath has 6,300. Proximity to Dublin does not necessarily address the issue. It is the dispersal of the population in the area.
We survey our members in our quarterly trends survey, which we publish and which is available to committee members to search.
Of our respondents, 31% highlight quality and availability of broadband as a business issue.