Thursday, 7 March 2019

Questions (1)

Billy Kelleher

Question:

1. Deputy Billy Kelleher asked the Minister for Business, Enterprise and Innovation if she has submitted a request or is preparing to submit a request at EU level to revise state aid rules as set out in EU Regulation No. 1407/2013 to protect exposed enterprises and exporters from Brexit; the status of progress being made at EU level to increase state aid thresholds to support enterprises in the event of a hard no-deal Brexit; and if she will make a statement on the matter. [11388/19]

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Oral answers (6 contributions) (Question to Business)

In the context of the hard Brexit that we may be facing on 29 March and the need for the State to be able to respond immediately in the event of a catastrophic impact on businesses that export to the UK market, has the Government made a formal request to the EU to revise state aid rules?

I thank the Deputy for raising this important matter. My Department, with the Department of Agriculture, Food and the Marine, has been working closely with the Commission and DG Competition since November 2017 through the Irish-EU technical working group on state aid. The objective of the group is to scope and design schemes to support enterprises impacted by Brexit in line with state aid rules. This includes exploring all opportunities under EU Regulation No. 1407/2013, the de minimis regulation. Much has been achieved by this working group, including the development of the future growth loan scheme under the general block exemption regulation and the expansion of Ireland's rescue and restructuring scheme to include temporary liquidity aid and increase its budget to €200 million. We have fully utilised the provisions of the state aid framework to enable the investment by Enterprise Ireland of €74 million in Brexit-impacted businesses in 2018.

The group is working closely with DG Agriculture and Rural Development to explore the range of opportunities under the agriculture and forestry state aid guidelines. As part of that, state aid approval was received in February for capital investment by Enterprise Ireland in an Irish cheese producing company, Carbery Food Ingredients Limited, to help it towards financing a €65 million diversification project to mitigate the impacts of Brexit. The future growth loan scheme, along with the Brexit loan scheme, which was launched in 2018 and is operated under the de minimis regulation, and the temporary restructuring support will provide a stabilisation package for enterprises impacted by Brexit with a view to allowing them to transform and grow.

On 24 January, I met the European Commissioner for Competition, Margrethe Vestager, at my Department. The meeting focused on the severe challenges that Irish businesses would face as a result of Brexit and the need for appropriate and timely State supports. It was agreed that Irish officials would continue to work closely with the Commissioner's team in addressing any state aid issues that may arise, including the de minimis regulation, to ensure a rapid and appropriate response as the ultimate shape of Brexit and its firm-level implications become known. The Commissioner emphasised that the Commission stood ready to act urgently in mitigation against the impacts of Brexit on Irish firms. My officials have since met DG Competition as part of the technical working group and we are looking at a number of areas, including opportunities under the de minimis regulation.

We appreciate all of the efforts that have been made to date in terms of business supports and encouraging people to Brexit proof themselves, but the larger issue is that all of the loans mentioned fall within current state aid rules as they stand. What is being proposed is not outside the norm of state aid obligations. We must have a system in place that will allow for an immediate increase in the ceilings permitted for business lending. During the 2008 crash, for example, we moved the ceiling from €200,000 to €500,000. That had an impact on companies that were very exposed to the financial crash. We may experience a similar situation with companies that are wholly dependent on the UK market. Two developments could happen: a rapid devaluation of sterling and the closure of the market due to tariffs. These companies cannot wait months for us to renegotiate state aid rules. The rules must be flexible enough for us to act immediately. Will the Minister ask the European Commission to allow these changes to be made in advance of a crisis?

In November 2017, the Commission approved a rescue and restructuring scheme for Ireland for undertakings in difficulty, with an undertaking considered to be in difficulty when, without intervention by the State, it will almost certainly be condemned to going out of business in the short or medium term. They are viable but vulnerable companies. The scheme was put in place and, in May 2018, extended to include temporary restructuring support for enterprises with acute liquidity needs. In February, the Commission approved an amendment to the scheme's budget size from €20 million to €200 million. To date, no enterprise has sought rescue and restructuring aid for temporary restructuring support, but we stand ready.

I was pleased when we received confirmation a week or so ago that Carbery Food Ingredients Limited could get funding of almost €6 million. Enterprise Ireland can now provide supports of almost €6 million to that company, giving it the investment it will need for its €65 million project. The Carbery example is a significant transformation for a food company in that it is moving away from the UK market.

We are all trying to support businesses. However, what is important is not the amount of money that is available in the pot but the amount that can be made available to an individual company out of it.

If there is a rapid devaluation of sterling, Irish companies that are wholly dependent on the UK market will be in an immediate crisis situation in the first week of April. We should not have to go to the EU to renegotiate the state aid rules, outside of what is there already, to be able to inject liquidity into those companies to provide cashflow in the short to medium term. The issue is not the amount of money that is available but the amount that can be given to individual companies. I ask the Minister to consider that issue because it is critical.

The rescue and restructuring fund, with a pot of €200 million, is already in place and applications will be considered on a case-by-case basis. If something untoward occurs and companies need assistance, that fund will be there to support them. We are still engaging with the Commission to secure further flexibility in any schemes that we may have to roll out. We are very happy that we have made good progress with the EU Commissioner for Competition, Ms Vestager. When I met her at the end of January she said very clearly that she stands ready to help us. My officials are working very closely with a group of officials in the Commission and have made good progress.

Deputy Kelleher is right to point out that companies may be exposed to currency fluctuations. We have been asking them to hedge their currency exposure and EI has been working very closely with some of the food companies in particular that are very exposed because of Brexit. A number of supports have been provided. The dairy industry in particular has been working very closely with the Government and has announced an investment of between €700 million and €800 million.