Vol. 462 No. 3
101 Mr. B. O'Keeffe asked the Minister for Enterprise and Employment his views on the fact that the average return on sales by companies which have been grant-aided by Forbairt is only 4 per cent as against 6 per cent for small businesses in the United States. [18404/95]
An annual survey of Irish economy expenditures by manufacturers in Ireland is carried out by Forfás. The most recently published results of the survey are for the year 1993. The survey showed that, in the case of Forbairt-assisted Irish owned manufacturing companies employing 20 or more persons, the average rate of profitability as a percentage of sales was 4 per cent. In the case of slightly larger companies employing more than 29 persons, the figure was 4.5 per cent. Preliminary data from the 1994 survey indicates that profitability in companies employing 20 or more persons is stable at 4 per cent.
Forbairt also assists the indigenous internationally traded services sector. The survey found that companies in this sector employing 20 or more people had profits as a percentage of sales of 10.1 per cent in 1993.
The survey also showed that there are substantial variations in profitability as a percentage of sales as between different sectors of Irish-owned industry, and these different levels of profitability must be viewed against the background of the different levels of capital employed in each sector in order to make any meaningful comparison. It could be hazardous, therefore, to compare an average figure for all Forbairt-assisted Irish companies with an average figure for all small businesses in the United States without any analysis of the respective industrial structures of both countries. Account would also have to be taken of any differences in the methodologies employed in arriving at both figures, including both the categories and sizes of business included in each case. In this regard it is important to bear in mind that "small businesses" in an American context may include quite large companies by Irish standards, in terms of sales, numbers of employees and capital employed.
There are of course many reasons why businesses in one country may be more profitable than in another. For example, American firms have ready access to much larger domestic markets than Irish firms, and this may facilitate economies of scale which Irish firms may only achieve through exports. American firms also appear to invest a greater proportion of their income in research and development, which is initially costly but yields long-term benefits in terms of sales and profitability.
