European Investment Fund Agreement Bill 2018: Second and Subsequent Stages

Question proposed: "That the Bill be now read a Second Time."

The Minister is welcome. We look forward to her address.

I welcome this opportunity to present the Bill to the House. I thank Members for agreeing to take all Stages today. This short, technical Bill will enable me, as the Minister for Business, Enterprise and Innovation, and the Minister for Agriculture, Food and the Marine to enter into agreements with the European Investment Fund, EIF, to facilitate access to finance for qualifying enterprises. The new future growth loan scheme was announced in the budget as part of the Government's response to Brexit, and enactment of this Bill will allow us to launch the scheme in early 2019.

The future growth loan scheme will be an important support for businesses throughout the country that are facing challenges arising from Brexit. It will be available to SMEs, including those in the primary agriculture and the seafood sectors. To bring this loan scheme to the Irish market in early 2019, it is imperative that we, as Ministers, be granted the necessary powers to enter into the agreement with the EIF this year, which includes providing the necessary Exchequer funding.

This scheme is an important component of the Government's Brexit mitigation measures for businesses, as it will provide businesses with the opportunity to borrow for periods between eight and ten years to support long-term capital investment. The tenure of borrowing currently available on the market for SMEs is typically anywhere from three to seven years. The future growth loan scheme has been developed to address a gap in the market for longer-term loans up to ten years.

The scheme will support enterprises that wish to invest and diversify their business by ensuring they have appropriate and affordable finance available to them. This, in turn, will fuel future economic growth in our important indigenous sectors by helping them to remain competitive. Given the particular exposure of the food sector to Brexit, the scheme, which will be 40% funded by the Minister for Agriculture, Food and the Marine, will also be available to primary producers. To unlock the EIF counter-guarantee, which will be used to leverage funding of up to €300 million the future growth loan scheme, both my Department and the Department of Agriculture, Food and the Marine will collectively contribute €62 million in Exchequer funding over a five-year period. The counter-guarantee with the EIF is a bespoke agreement, wider in scope than those available through the European Commission, offering 64% risk cover rather than the standard 40%. The scheme represents the first time that we, as Ministers, have entered into such an agreement, although there is potential for further such agreements, if needed. The Attorney General has advised that primary legislation is needed to provide the necessary powers to both Ministers to enter into such an agreement. The Department of Agriculture, Food and the Marine will contribute 40% of the loan fund on the basis that it is anticipated that at least 40% of the scheme will be used by food business and primary producers. The remaining 60% will be channelled through my Department's Vote in 2018 and subsequent years.

I refer to the heads of the Bill. Section 1 defines the "relevant Minister" as the Minister for Business, Enterprise and Innovation or the Minister for Agriculture, Food and the Marine, as we are the Ministers entering into the agreement with the EIF for the future growth loan scheme.

Section 2 provides the Ministers with the power to enter into agreements with the EIF, with the consent of the Ministers for Finance and Public Expenditure and Reform. This includes providing the necessary financial contribution from the Exchequer and limiting this to an aggregate total of €75 million should the Ministers wish to implement additional schemes concurrently. It also includes the discharge of any additional fees and expenses. Definitions of "qualifying enterprise", "SME" and "small mid-cap" are also referred to here.

Section 3 provides for a review of the operation of the Act after four years following the passing of the Act.

Section 4 provides that expenses incurred in the administration of the Act be paid out of moneys provided by the Oireachtas.

Section 5 provides for the Short Title and the commencement provision.

This short Bill is important as it will allow me, as Minister for Business, Enterprise and Innovation, and the Minister for Agriculture, Food and the Marine to enter into an agreement with the EIF to implement the future growth loan scheme, which is a critical component of the Government's response to Brexit. Essentially the scheme is a longer-term Brexit loan scheme. If we want to ensure our businesses throughout the country succeed and prosper in the face of fundamental challenges such as Brexit, it is essential that we take the necessary steps to ensure appropriate financial supports such as this scheme are in place for businesses. I look forward to hearing Senators' contributions.

The business representative body, IBEC, said this €300 million future growth loan scheme for loans with terms of eight to ten years is a good start. It added that it will not be enough, however, considering the major concern presented by Brexit. While additional Brexit measures have been announced by the Minister, the low uptake of support schemes and loans to date indicates there is an awareness challenge. Businesses still seem to be encountering cumbersome red tape in gaining access to the various loans and schemes. It is two and a half years since the UK voted to leave the EU. With less than four months until its departure, unless there is an extension, Irish businesses remain ill prepared for the implications. Grants under Enterprise Ireland's Be Prepared grant scheme are being awarded at a rate of six per month. This means just 2% of Enterprise Ireland's approximately 5,700 client companies have availed of the scheme. Grants under InterTradeIreland's Start to Plan voucher scheme are being awarded at a rate of approximately six per month. Only 3% of the €300 million available through the Brexit loan scheme has been sanctioned to date, despite it opening last March.

I welcome the proposed scheme. It is good news. I have two questions based on the points I have made. Does the Minister still believe the red tape is onerous? It has led to a low uptake thus far. Considering the schemes at face value and in light of my extensive business background, I would have expected many of the producers and other businesses to jump at the opportunity. Could the Minister give us a flavour of the types of businesses involved? She referred briefly to agriculture and fisheries. What other types of businesses are considering the schemes? I am sure she has had inquiries. She does not have to name entities in her response. Are niche businesses involved?

I welcome the Minister to the House and I also welcome the Bill. The Bill is an important part of preparing for Brexit and Brexit-proofing arrangements for businesses, which will face challenges. As the Minister knows better than most, SMEs are critical to our economy. They are the beating heart of the economy and of communities. They are working in an ever-changing, rapidly moving market nationally and internationally. Innovation is essential if a business is not to lose its place in the market quickly.

I wish to speak not only about what Senator Davitt mentioned, namely, the need to make businesses aware the scheme is available and the need to minimise any red tape or obstruction that makes dealing with financial institutions difficult, but also about the interest rate on the loans. The rate will be critical to their attractiveness. What collateral will businesses have to put up?

Will the Minister comment on what the requirements are likely to be if she is in a position to do so?

I would like to speak of the lack of competition with regard to financial institutions in the country. It was clear to us at the Joint Committee on Business, Enterprise and Innovation that businesses were finding it difficult to access money and that the pillar banks are of a particular nature and do not by any means suit everybody. Some of us on that committee went to Germany to visit Sparkassen banks to see what they do. They offer rates of 1.5% and lend anything between €5,000 and €50 million, always within their own area. They are community-based banks. It is critical that we have a similar type of bank available to small businesses in this country and, considering the sums they lend, not-so-small businesses. They have survived two world wars, depressions, etc. They have been in business for 200 years. They are old-style banks where people go to visit the farmer on his land or the business person in his workplace, factory or wherever he might be, understand him and his community and the nature and real risks in business. Much of that has been lost in Irish banking because of the over-emphasis on property and property development up to the crash. If there was any doubt about the fact that there is lack of competition, when Mr. Mario Draghi appeared before the committee and everyone asked why rates are so high here, he gave the same answer repeatedly, which is that there is a lack of competition. I wish the Minister well with this. It is part of an important set of arrangements but we need to do more. The Government needs to look at how we could encourage a facility such as Sparkassen in this country. They do not ever set up banks in other countries. They merely give advice on how to set them up and the ethos behind them. It is badly needed. In the past, when we had ACCBank and the other small bank for industry, many businesses were started that could not get access to finance elsewhere. I welcome this. I give it my full support and look forward to its rapid passage through the House.

This short, straightforward Bill proposes to give powers to the Ministers for Business, Enterprise and Innovation and Agriculture, Food and the Marine to enter into certain agreements with the EIF. The purpose of this proposal is to facilitate the introduction of the future growth loan scheme, which will provide medium and long-term funding for small-to-medium sized enterprises in areas including the primary agriculture and seafood sectors.

I thank the Minister for introducing this legislation. It seeks to give powers to the Ministers for Business, Enterprise and Innovation and Agriculture, Food and the Marine to enter into certain agreements with the EIF with the intention of setting up a new loan scheme to help businesses with the effects of Brexit. My party recognises the importance of supporting SMEs across Ireland and the particular need to assist them with the challenges Brexit will bring next year and in the following years. We are happy to support this Bill. I have some questions and would appreciate if the Minister could answer.

Will she outline how much is intended to be leveraged by the Government to secure the €300 million scheme and has she set any targets or estimates for the number of businesses that will avail of this scheme? I ask about this because the €300 million Brexit loan scheme announced last year has not been a success. It was announced in budget 2018 and has performed poorly. The latest figures, from October, show the uptake of the scheme has been poor. Just 224 firms have been approved by the SBCI and just 38 loans to the value of €8.5 million have been sanctioned. That means not even 3% of the total pot has been drawn down on this existing fund. Is this new €300 million future growth loan scheme which this Bill is aimed at establishing just a new renamed, rebranded one aimed at taking the bad look off the previous loan scheme? My colleague, Deputy Maurice Quinlivan, has raised this with the Minister, and asked if she has looked into why the uptake has been so poor. Is it as a result of too much red tape or the imposition of criteria that are too strict? Will she enlighten us? It is vital that we know before we jump into another scheme and make the same mistakes again. That would be an unacceptable error and mismanagement of public money and, therefore, the Minister needs to clarify that.

Small businesses are the engine of the economy, as they comprise 245,000 firms or 98% of all business across the State. They employ 927,759 people and contribute €66.1 billion to the economy annually. Sinn Féin was disappointed and underwhelmed by the proposals for the Department of Business, Enterprise and Innovation announced in budget 2019. An allocation of just €8 million was made for funding to the Department, its enterprise agencies, and regulatory bodies, to assist enterprises to diversify in global markets and to meet the challenge of Brexit. This is a tiny amount when divided among all the different enterprise agencies and offices, and is dwarfed by what Sinn Féin proposed in our detailed alternative budget. We proposed an increase of €27 million for Enterprise Ireland alone to provide it with a record €300 million budget for the year of Brexit, while also providing €10 million extra to IDA Ireland, €2 million for InterTradeIreland, and €5 million for Science Foundation Ireland. We proposed a 50% increase in the digital voucher scheme and €2.25 million to develop our worker co-operative SME sector. As the engine of the economy, this sector deserves the required attention from Government and Sinn Féin recognised that fully in our alternative budget. We are committed to delivering that attention.

With regard to this Bill, we are happy to see a new investment avenue being opened for this sector. It is vital that with all of the threats that Brexit may bring to business that we think ahead and secure investments for those ordinary businesses which may be at risk. I thank the Minister for bringing the Bill forward and we are happy to support it.

I welcome the Minister. I met departmental officials this morning to discuss digital archiving on the web. It was a productive meeting. I encourage the Minister to give urgency to that issue. A number of Senators have talked about the sectors that may benefit from this Bill. The EIF introduced a loan guarantee fund for the creative and cultural sector. The Minister will be aware that the sector has been constrained in its ambitions and growth potential by the unavailability of debt finance. In Ireland, the sector is almost entirely reliant on State funding for projects of limited scale. To address this across Europe, the European Commission, through Creative Europe, provided €121 million for a cultural and creative sector guarantee fund, managed by the EIF on behalf of the Commission. The fund targets microbusinesses and SMEs by acting as insurance to financial intermediaries such as banks or credit unions. To date, financial intermediaries have been approved in Belgium, the Czech Republic, France, Spain, Italy and Romania. In December of last year, the fund had enabled loans of €130 million across those countries. In her new role, will the Minister call on Irish banks, community lenders, or credit unions to make expressions of interest to the EIF as financial intermediaries with the intention of generating access to loans for creative and cultural SMEs in Ireland? I would appreciate it if the Minister could shed any light on whether financial intermediaries are in discussion with the EIF about.

I thank all the Senators who contributed to the debate and who have shown great flexibility by taking all Stages today, because this Bill is urgent.

The Senators raised issues around the supports we have for businesses. The Government and its agencies are in constant contact with businesses about Brexit preparations. We have instituted a wide range of initiatives that can be tailored to meet the needs of individual businesses, such as the Brexit score card and the market discovery fund. We are also offering financial support to help businesses prepare for Brexit. There is a €5,000 be prepared grant from Enterprise Ireland and the Start to Plan vouchers from InterTradeIreland which are worth over €2,000.

Some 85% of Enterprise Ireland-supported companies have Brexit plans in place so businesses are getting ready and these schemes are being drawn down. The supports are easily accessible. I have not received any complaints regarding barriers around access to any of the supports that are being offered through InterTradeIreland, Enterprise Ireland or local enterprise offices. Companies across different sectors are taking up the supports.

Last March, the €300 million Brexit loan scheme was launched which provides for short-term working capital to businesses to address Brexit-related challenges. To date 304 applications have been received and €12.4 million in loans have been approved. We should remember that businesses do not just rush out to borrow money, they must look at what their business needs are. Borrowing money must be part of an overall plan for business and it would be wrong to say they are not being taken up because businesses are putting their plans together. The first thing they must do is apply to Strategic Banking Corporation of Ireland, SBCI, to ascertain whether they are eligible. If they are, they then go to the pillar banks, namely, AIB, Bank of Ireland or Ulster Bank. AIB did not enter the scheme until mid-June, I think, so it is only a few months that the scheme has been up and running with all the banks. The money is available and businesses are interested in it. I would be more worried if the €300 million loan scheme was all gone by this stage because that would indicate that there was a real problem out there. It is good that businesses are considering it.

We are now identifying a gap in the market for long-term loans. The banks are not lending for terms beyond seven years and this €300 million fund, for which I am introducing the legislation, will mean that businesses can apply for long-term loans of between eight and ten years, which is something they have asked for. That is a need in the market to which we are responding.

We are also doing our upmost to ensure that businesses are aware of the various supports available to them. There has been a nationwide campaign to help businesses get Brexit ready. Almost 4,000 participants have attended local enterprise office Brexit seminars. Some 2,350 small and medium sized enterprises have engaged directly with InterTradeIreland, whose budget I increased for 2019 to allow it to support businesses on both sides of the Border, even though there is no matched funding from Northern Ireland, due to the absence of operational institutions. However, I said that they needed the help and we were prepared to give it extra funding and it was very much welcomed. Enterprise Ireland runs ten Brexit advisory clinics across the country. There is a cross-Government awareness campaign, Getting Ireland Brexit Ready, and events have taken place in Cork, Galway, Monaghan, Dublin, and Limerick and a further event is planned for Donegal. These have been very well attended. IDA Ireland and Enterprise Ireland have taken on 90 additional Brexit-related staff to date. We want businesses to diversify into new markets. Enterprise Ireland is out there, boots on the ground, identifying new markets for Irish businesses. Just over a week ago, I returned from a trade mission to China, where there are huge opportunities. We signed deals worth €60 million to several Irish companies which can now export into China.

The Senator referred to the extra €5 million to Enterprise Ireland and IDA Ireland. That is helping them to expand their global footprint and help businesses to diversify into new markets.

The Government is providing an array of different supports to businesses, however, ultimately businesses must decide themselves if they want to avail of those supports. I am sure that Senators will have heard the very intensive radio campaign telling businesses about the supports and the Brexit advisory clinics. Ultimately, they must engage themselves. I want to use this opportunity to once again tell businesses that if they only do one thing, they should appoint one person who is responsible for Brexit and allow them to research and identify all the different supports available. They are all on the Department’s website and those of Enterprise Ireland and InterTradeIreland and they can be found at the local enterprise office. The supports are there and businesses ought to draw them down. They should know that the Government wants to help them.

The Senators asked about the terms and conditions of the loan. I understand the long-term loan scheme offers up to €500,000 unsecured, which is very attractive, but they must make the business case to the pillar bank for the loan. That will offer considerable help to businesses. The maximum loan is €3 million. I thank Senators for their contributions and I look forward to working with them in progressing the Bill through the House.

Question put and agreed to.
Bill reported without amendment, received for final consideration and passed.
Sitting suspended at 1.19 p.m. and resumed at 2 p.m.