Joint Committee on Enterprise, Trade and Employment díospóireacht -
Wednesday, 9 Nov 2022

Current Issues Affecting Trade in Ireland: Enterprise Ireland

Chairman

All those present in the committee room are asked to exercise personal responsibility to protect themselves and others from the risk of contracting Covid-19. Members are required to participate in the meeting remotely from within the Leinster House complex only. No apologies have been received.

The issue we will discuss today is current issues affecting trade in Ireland, the supports available to businesses and matters affecting indigenous enterprise with small and medium enterprise, SME. Trade is essential to Ireland's economic well-being and is crucial to developing prosperity and higher living standards for all the people of Ireland. The major economic disruption from the Covid-19 pandemic, the war in Ukraine, Brexit, growing protectionism, global tax developments and geopolitical trade tensions are among the many challenges facing Irish enterprises. Enterprise Ireland is the Government organisation responsible for the development and growth of Irish enterprises in the world market. Today I am pleased we have the opportunity to consider these matters further with the following representatives from Enterprise Ireland: Mr. Leo Clancy, chief executive; Ms Carol Gibbons, divisional manager regions and local enterprise; and Mr. Donal Leahy, department manager strategic policy.

Before we begin, I wish to explain some limitations to parliamentary privilege and the practices of the Houses regarding references witnesses may make to another person when giving evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. Witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name, or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if witnesses’ statements are potentially defamatory to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that witnesses comply with any such direction.

The opening statements from Enterprise Ireland have been circulated to all members. To commence our consideration of the matter, I invite Mr. Leo Clancy to make the opening statement on behalf of Enterprise Ireland.

Mr. Leo Clancy

I thank the Chair and the committee and welcome the opportunity to present to the committee on the topic of current issues affecting trade in Ireland, the supports available to businesses and matters affecting indigenous enterprise with small and medium enterprises and to outline the actions and initiatives that Enterprise Ireland is engaged in to support companies in this area. Enterprise Ireland's purpose is helping Irish companies to start, grow, innovate and win export sales. We work with internationally-focused Irish enterprises across all sectors of the economy, predominantly with SMEs, helping them to strengthen their competitiveness and productivity; to increase innovation and realise their growth potential; and to contribute to employment and economic growth across all regions. We also work with a network of 31 local enterprise offices through our centre of excellence to support the growth of micro-enterprise across the country. Enterprise Ireland's strategy for 2022-2024 is entitled Leading in a Changing World. Our mission, as set out at the start of 2022, is to accelerate the development of world class Irish companies to achieve leading positions in global markets. Since we launched our strategy in early 2022 the trading environment for the agency's ambitious exporting companies has become more challenging. I will address the specific headwinds that Irish indigenous enterprises are facing but we believe our strategy is still the right approach.

In 2021 Enterprise Ireland-backed companies employed more than 200,000 individuals in Ireland, generated €27.3 billion in exports and directly invested €9.79 billion in the Irish economy in the form of wages and salaries, €15 billion in materials produced in Ireland and €6.4 billion in Irish services. The Enterprise Ireland-client companies represented in these figures cover a vast range of sectors including, but not limited to, construction, energy, engineering, food and drink, medical devices, ICT and pharmaceuticals. Our client companies are responding well to current trading issues and are expanding with 315 new overseas presences established in the first nine months of this year across all regions. Client sentiment remains positive with 91% of companies surveyed ahead of our recent international markets week anticipating growth in 2023.

The local enterprise offices, LEOs, have just come out of their eight consecutive year of growth with 7,400 new jobs created by LEO clients in 2021. That is not to mention the thousands of other businesses they have helped with additional measures such as: the training and mentoring programmes; the trading online voucher scheme; the lean for micro programme; the green for micro programme; and the start your own business programme. The LEOs are at the very heart of business development and entrepreneurship in towns and communities right across the country.

In terms of challenges for SMEs, trading performance has recovered very well from the pandemic. Prior to recent inflationary factors, exacerbated by the illegal war in Ukraine, companies were broadly doing well. However, we are keenly aware of the competitiveness issues that are impacting our client base. From our daily interactions with client companies, we have heard that economic headwinds are causing businesses to consider the moderation of their growth ambitions. Energy costs and energy security, inflation and currency fluctuations are major concerns for many indigenous enterprises. These factors were reiterated through a recent survey ahead of our international markets week where we asked several hundred clients about key concerns. Added to these are the consequences and ongoing uncertainty around Brexit, talent and skills shortages, increased costs of funding to grow businesses, an imminent global economic slowdown, supply chain disruption and the potential reversal of globalisation.

We have delivered some specific responses to specific issues, both independently and with our colleagues in the Department of Enterprise Trade and Employment, which I will address. It is important to note that many of the direct concerns for businesses are beyond our control. What is in our control is assisting our clients in maintaining their ability to compete while keeping in mind how increased competitiveness and productivity can have enduring benefits.

I will address those specific issues. First, there is supporting companies that are currently viable but financially vulnerable as a result of the effects of the Ukraine crisis. Energy costs are the most urgent issue facing many Irish enterprises. Working closely with our colleagues in the Department of Enterprise, Trade and Employment, we recently launched the Ukraine enterprise crisis scheme. This €200 million scheme offers two streams of support to manufacturing and internationally traded services companies. Stream 1is a liquidity measure that will help viable manufacturing and internationally traded services companies that experience trading difficulties to access funding up to €500,000. Stream 2is a state-aid support for eligible energy intensive companies that experience severe increases in natural gas and electricity costs in 2022. This scheme is complementary to other supports being provided by the State, including the temporary business energy support scheme, TBESS. We believe that the Ukraine enterprise crisis scheme is an agile response to a developing situation.

The next issue is supporting energy efficiency and decarbonisation. As well as supporting companies through the current crisis, Enterprise Ireland is actively working to help companies to develop and implement sustainability plans that address energy efficiency and decarbonisation. The agency has a range of funding supports under the green transition fund. These include training and business planning supports, and funding for capital investment in decarbonisation and energy monitoring.

The next issue is supporting the digital transition. Under the digital transition fund, which is part of Ireland's national recovery and resilience plan, Enterprise Ireland will increase digitalisation across all businesses across products, processes, supply chains and business models. This will bring about productivity gains, access to new markets, increased innovation and improved competitiveness.

Finally, there are productivity enhancements. Of course all existing proven and effective Enterprise Ireland supports remain open to eligible companies, including funding towards capital investment, job expansion, training, and research and development, and innovation, which are supports that will help companies increase their productivity. We are also actively supporting companies scale by developing leadership and management capability, supporting internationalisation and access to capital.

In conclusion, strengthening resilience in the SME sector and enabling SMEs to compete internationally and in the low-carbon economy are key areas of focus for Enterprise Ireland. We are going to be unwavering in our commitment to preserve and grow employment in terms of both numbers and quality. Enterprise Ireland’s message continues to be that all businesses that need support should contact Enterprise Ireland or their local enterprise office and to not wait but to put in place plans now.

I again thank the Chairman and committee for this opportunity to speak and I would welcome any questions.

Chairman

I invite members of the committee to discuss the issues with the representatives who are here. I remind the people who are online and participating remotely to use the raise hand function in MS Teams when they wish to speak and, most importantly, to please cancel it when they have spoken.

Deputy Louise O'Reilly

I welcome the guests and thank them for their submission. I apologise in advance as I must step away from the meeting in a few minutes but I will try to return.

I wish to place on record my disappointment that representatives of IDA Ireland are not here and I understand that there was a technical issue. Notwithstanding that, given all that is happening at the moment, and the current climate, it would have been preferable were we to have a representative from IDA Ireland here. I appreciate representatives of Enterprise Ireland for being here. There is nothing worse than going to a meeting and having people say that it is awful that there are not more people present because obviously the people who turned up are here. I thank our witnesses for being here this morning.

In terms of the imminent job losses in the tech sector, and I am not going to use any of the silly phrases that people have used to describe these job losses, but we have the serious situation where people are losing their jobs. I found the presentation by Enterprise Ireland to be upbeat in many ways. Therefore, I ask our guests to explain if there are reasons for us to be somewhat hopeful that what is an international issue may not be as serious an issue for us here in this State than is the case elsewhere. My understanding is that we have cause to hope that we may be insulated against some of the worst impacts of this downturn. Perhaps Mr. Clancy will outline why this issue may not be as big an issue for us here as it will be internationally.

Mr. Leo Clancy

I do not want to comment on the current job losses. I will say, as other commentators will say, that our thoughts are with those who may lose their jobs and that is the case in any job loss situation.

From an economic point of view we are starting in Ireland from a very positive place. We have had many years of good growth. We have a very diversified economy between multinational companies and Irish-owned enterprises, which we represent. That is a very positive place. Within the multinational base we have had a lot of strength and return from the investments that have been made over many years. I believe that we have a resilient base there but that is more of a matter for IDA Ireland to comment on.

We also have a diversified base in the Irish enterprise sector. We also have a diversified base within the technology sector, which is where we have 4,000 companies of varying skills and necessarily much smaller than the large multinationals mentioned by the Deputy but it is still a very vibrant ecosystem. We do see a lot of confidence among that group. As I mentioned in my opening remarks, 91% of the companies that we spoke to, which is a cohort of 600 and includes a lot of our tech firms, at the start of October flagged very strong optimism around their prospects for growth in 2023. That survey was conducted at a time when people were conscious of some of the effects of the current issues around inflation, energy and other matters. That finding gives us a lot of confidence that the base is optimistic at least but that is not say that this area would be without issues. As the Deputy will have gathered from my opening presentation, I mentioned that we are heading into very uncharted waters and it is impossible to make definitive statements but I do think that we have a lot of strength both in terms of the companies and the diversity within that base. Consumer sentiment is one of the things that affects a lot of the current issues. We have a tech base, in particular sticking with that sector, that is diversified between consumer technology and enterprise business-to-business technology. In the case of Irish enterprises, they are more weighted towards the latter. It is a sector that will continue to be in demand as companies transform themselves with digital across all sectors in the coming years so I am optimistic.

Another thing that is different, in terms of a characteristic of the SME base, is that SMEs, on recognising a changed investment environment in March, April and May of this year, took a lot of steps to extend their capital and took measures to be ready for a period of more uncertainty around raising further capital. A lot of account has been taken of how a downtown might impact on the SME base, and over the last six months in particular.

Deputy Louise O'Reilly

The balance has tilted towards business-to-business, which would be a considerable factor in terms of being able to insulate, albeit not everybody.

Mr. Leo Clancy

The Irish enterprise base is more founded on that. Now we have a growing consumer sector, and a consumer tech sector. We continue to be optimistic for that but obviously that is much more susceptible to short-term downturns and consumer sentiment.

Deputy Louise O'Reilly

Mr. Clancy said in his submission, and used a nice turn of phrase, that some companies face a "moderation of their growth ambitions."

In layman's terms, namely, in pounds, shillings and pence, what will that mean? There is a lot of talk in the public domain about job losses. I would join with what Mr. Clancy said. People losing their jobs this morning or any morning is a rotten thing. They are facing a very uncertain future. When Mr. Clancy speaks of the moderation of their growth ambitions, does he mean job losses, layoffs or short time, or is it just not hiring extra people where that might have been planned? Can we get an idea of what this means exactly? There is quite a lot of flux at present. People are nervous for their own jobs and for jobs in their communities.

Mr. Leo Clancy

Exposure to the current crisis is different depending on the sector. There are many crises at the moment. One is the crisis of capital availability. I mentioned the tech sector earlier. Many companies in the tech sector that had hoped to raise more capital at this stage of the year or into next year are recognising that it is more difficult for investors to commit capital to businesses. That is true across all sectors, but it is probably most acutely felt in the high-growth, high-potential startups and early-stage companies. That is one angle. The companies affected by the cost-of-living crisis, and energy and inflation costs in particular, are having to think about whether their businesses can continue to be sustainable. I would not rule out that there may be job losses as a result of some of the competitiveness factors. Short time is certainly an option, as are other measures. People are struggling to stay ahead of markets and reprice their goods. If consumer companies and people in the consumer food sector, for instance, cannot reprice their products in overseas markets or even the Irish market fast enough, they may find themselves unprofitable very quickly. That leads to a difficult situation. It is a spectrum going from capital availability all the way down. I will ask Dr. Gibbons to give any additional answers in the context of the micro and SME base. It depends on the sector. Also, markets have contracted. Even though 91% of companies are optimistic that they will see increases in export and general sales, they recognise that it might be a lower figure than they would have hoped to make prior to this.

Dr. Carol Gibbons

The companies on the micro side are clients of the LEOs. There are 31 LEOs, and the budget for them comes through the Department of Enterprise, Trade and Employment to ourselves. The domestic economy is quite strong still for those companies. The challenge ahead of us it to ensure that those companies remain competitive just as much as the base of Irish enterprise across the regions. From that perspective, one focus we have is to look at competitiveness and productivity measures in the context of the lean for micro programme. We try to ensure that digital is very much an aspect of those companies and that they are competitive in nature as they move forward. That is an area where we are doubling down for the client base in the regions and for the LEOs.

Deputy Louise O'Reilly

Yesterday evening, the Dáil discussed the Ukraine credit guarantee scheme. There was some annoyance following the Covid schemes, which have all closed now, although there is still some overhang, that some of the companies that had been in receipt of quite an amount of State support to keep going through the pandemic, which was entirely appropriate and which saved jobs, etc., paid dividends to shareholders and came through with huge profits. We are talking about new schemes that have been introduced and, recognising that Enterprise Ireland does not design these, I fear that the lessons that could have been learned from the previous schemes have not been learned. The Minister for Finance is on the record as saying that there is no way of preventing data centres from getting support in the context of energy, for instance. It is understandable how that does not sit well with people. Colleagues in other parties spoke about perhaps linking State aid to workers rights. That is not an approach I would favour, but nor do I favour the notion that the State would support companies where workers rights are not respected. When designing a scheme of support like we are looking at now, is there scope for some sort of checks and balances to be put in place to ensure that does not happen? It upset people to see companies that could have sustained a lot more than the smaller companies come through and pay dividends or report profits when a lot of smaller companies did not make it through Covid, notwithstanding the supports that were there.

Mr. Leo Clancy

I might ask my colleague, Mr. Leahy, to delve a little deeper into what I am going to say about technical limitations to people making payments over the period when a grant or loan is in place. With the sustaining enterprise fund that we operated during Covid-19 and the substantial grant aid paid out, we looked closely and carefully that measures such as the subordination of dividend payments. Directors payments and so on were considered in all the cases. It is a very delicate balance. We are in the middle of our discussion about how we handle that in the context of the Ukraine energy enterprise crisis scheme. It is a very careful balance between being able to ensure, as the Deputy rightly says, that companies do not do the wrong thing and making sure that they continue to be incentivised to invest in their businesses. The balance we always strike in respect of these things is that a company may not avail of the support, curtail its operations, lose jobs and take that as a consideration just because directors feel that they are not going to receive payments they think are due to them. We are always careful of that. We administer State funds; we are not in the business of subsidising companies just so they can make payments to directors. We can never be in that situation.

Deputy Louise O'Reilly

I understand that Enterprise Ireland is careful It is right that the organisation is cautious. Looking at how checks and balances can be put in place, are there differences between this scheme and previous ones?

Mr. Leo Clancy

We are applying some of the same factors. I will ask Mr. Leahy to expand on some of the technical options available to us. We will look at these on a case-by-case basis. It differs a little between stream 1 and stream 2.

Mr. Donal Leahy

As Mr. Clancy noted, there are two streams. In stream 1, the checks and balances are that the company must have a 15% reduction in earnings before interest, taxes, depreciation and amortisation, EBITDA, in 2021. Any companies that continue to be very profitable should not be able to avail of the new scheme. The new thing in stream 1, which we did not have with the Covid supports, is that companies are required to show a willingness to deal with sustainability issues and must have a plan in place in respect of sustainability or be preparing one. Stream 2, which is the larger scheme-----

Deputy Louise O'Reilly

Sorry, if I can just stop Mr. Leahy there. The firms must have a plan in place or they must be preparing one.

Mr. Donal Leahy

The must have a plan in place or be preparing one. If they are not preparing one there are templates and help that they can get from the Sustainable Energy Authority of Ireland, SEAI, to develop a robust plan.

Deputy Louise O'Reilly

Is that an absolute requirement?

Mr. Donal Leahy

It is an absolute requirement either to have a plan in place or to be preparing one. Stream 2 involves additional checks and balances. The 15% EBITDA reduction is also there. On top of that, all companies must be high energy-intensive users. That means that at least 3% of their turnover in 2021 must be for energy. It will exclude companies for which energy is not a real part of their cost base. The amount that companies get under stream 2 is limited. The first thing is that they are only getting 30% of anything over a doubling of their energy costs. If a company had €1 million energy cost in 2021 and it rises to €3 million, it would not receive anything for the second million and would receive 30% of the third million. This means that it would receive €300,000. That is another safeguard to make sure that there is not abuse. The schemes that are in place under EU rules will be there until the end of this year.

We will be closely monitoring what happens. If we see abuse or money going to companies that would not be the best benefactors of it, we will put in changes.

Deputy Louise O'Reilly

I thank the witnesses. I will have to go.

Deputy Richard Bruton

I welcome the witnesses and thank them for their presentation. It is worth recalling the role that Irish enterprise winning new markets played in our recovery from the last crash and indeed the role that start-ups played. Start-ups in Ireland created 100,000 jobs in that very difficult period, without which we would have had a much deeper crash. The work that Enterprise Ireland does is extremely important. We have proven the adaptability of the Irish-owned enterprise base.

Brexit has almost vanished as a topic, however, the UK market is running into serious decline. They are talking about some British regions declining already by 1.2%. Next year, that is likely to go nationwide. What is our dependence now on the UK market and to what extent are we vulnerable? The consumer foods area was mentioned, which presumably is very crucial.

Do the witnesses have lead indicators that would give Government and indeed the Oireachtas a heads up on how some of these headwinds, as they were described, are evolving so that we get a quicker understanding of where the pressures are coming from - for example, are they about losing market share or productivity problems? Can we respond to those?

I would be interested to hear what is happening in the start-up sector. Has it taken a bit of a hammering? In that context, Enterprise Ireland has pulled back on some of the competitive start options that used to be available. What is its approach to start-ups? At the other end, has it found that the small companies administrative rescue process, SCARP, has proven to be effective in some of its companies?

Finally, my last question goes back to what Deputy O’Reilly talked about. How seriously are companies taking sustainability changes? There is no doubt people are moving away from and are being conscious of energy. However, in terms of changing the types of materials, the sustainability of their supply chain, the packaging, the recoverability and reuse of materials, has that penny dropped? How far is Enterprise Ireland going in leading this? We are in the week of COP27 and the reality is that the western world generally has not made the sort of changes that we need to make. There is a need to embed what I would call circular economy thinking – our witnesses can call it what they would like. It is removing the environmental damage from our supply chains and that is still not embedded in the thinking of western economies. Where does Enterprise Ireland stand in embedding that?

Mr. Leo Clancy

We will take the questions as they were raised. I might ask Dr. Gibbons to comment in a second on the UK market because she will have a very good lens on small, new exporters, which tend to be a bellwether for the UK, and the sentiment among them about the UK.

Overall, 31% of exports were to the United Kingdom in 2021. That was a growth from 30% in 2020. It shows that the UK market is growing. As the Deputy rightly said, that could signal that we are further exposed than we had been the prior year to a downturn in the UK. That said, the UK is our closest neighbour and, as the Deputy knows, we have a unique trading relationship with it at what is a very difficult time for it. Also, in areas such as consumer foods, people need to eat. Many of our exports are absolutely required by the UK market. We are still not pessimistic on the UK market as a market overall.

On some of the lead indicators, we have seen and continue to see good engagement with the UK market. We had a business leaders event two weeks ago in London where there was huge engagement, including people in the audience who were planning to launch presences of various products into the UK market. It is on a very strong trajectory. Our indicators are the export levels and the market activity we are seeing. We measure the export levels once a year through our annual business review, which showed a growth in 2021, which was also a difficult year for the UK. The other sense we have of it is from engagement with our exporters. We saw very high engagement at our international markets week just at the start of October in respect of the UK. I might ask Dr. Gibbons perhaps to add something in the context of new exporters and small and medium enterprise, in particular.

Dr. Carol Gibbons

The North of Ireland and mainland UK would be the primary focus market for the micro and small industry. We are seeing that is holding up quite strongly. There is much North-South collaboration as well with state agencies in the North and that gives us a pulse of business in the North as well. Trade is growing. We are seeing no difficulty at the moment with respect to that. That would be, as Mr. Clancy mentioned, the first port of call for many businesses as they look to export markets. We work hand in hand with the local enterprise offices in that regard for the micro industry as they step out and increase their trade to the UK. At the moment, I am not seeing any decline in that trade across the sectors as I speak today.

Mr. Leo Clancy

The sentiment remains positive in respect of the UK. However, we are closely watching it. In particular, the current headwind relates to energy prices. We have a price cap in effect and a business in Ireland, for instance, that is heavily exposed to energy prices competing with companies that are price capped in the UK. That is certainly a very specific issue at the moment. On cost competitiveness, we are seeing those issues. However, on the demand side, we are hearing positive sentiment from our exporters.

The Deputy’s second question was around the start-up sector. As I mentioned in earlier remarks to Deputy O’Reilly, there has been a pull back in global capital and that is affecting the start-up sector. There are different schools of thought on this area. Scale-up capital will be harder to get. However, I think businesses have adjusted their expectations to not need as much capital as soon as they might have otherwise sought it. That is certainly balancing some of that. Certain start-up businesses are seeing that there are positives for them in some of the pull back that is happening in that they can make the capital that they raise go further. There are always swings and roundabouts in this.

On what we are seeing, we set an ambitious target every year, as the Deputy will know, for high-potential start-ups, as we call them, and for pre-seed funding by ourselves into businesses through what the Deputy recognised was the competitive start fund. We are seeing a strong pipeline for high-potential start-ups this year, though not as strong as we saw last year. The pipeline is as strong. I think our ability to close it out this year will be challenged by that availability of capital issue. However, notwithstanding that, we will see a good outturn in terms of high-potential start-ups.

We also just launched a new pre-seed fund, which replaces the competitive start fund. Rather than backing off the competitive start fund, we have actually doubled down on it by making the instrument more start-up-company friendly. We had a lot of feedback from the sector that it was not operating in that way and by increasing potentially the amount of funding that companies can access, we are doubling down on the pre-seed funding we are offering to companies. I might ask my colleague, Mr. Leahy, in a second to comment on SCARP specifically, in terms of how it is rolling out for us.

On the start-up side, we would be positive. There is much ambition out there. Capital constraint is the biggest issue. The ambition is there and the number of people who are starting business and want to start businesses is very strong. In the context of any downturn in technology or other sectors, we are gearing up to make sure our supports for people starting businesses or training people to be able to do so are made available to anyone who loses their jobs who might be so minded. We see that as an area that we will be ready to intervene on at the appropriate time. Mr. Leahy might comment on SCARP potential.

Mr. Donal Leahy

SCARP, as the Deputy knows, is quite new, so at this point the data is not in. We certainly have not seen take-up of any sort with Enterprise Ireland companies. Therefore, we are relying on the anecdotes and what we are hearing from companies at this point. What we are getting is that SCARP is being felt as a tool and is almost a negotiation tool to not get the SCARP. When dealing with creditors, companies that might need a bit of forbearance in order to get through a tough trading position are telling us that the fact that SCARP is there at all allows them a stronger negotiation position with their creditors, and it is useful from that point of view.

Time will tell how much of an uptake there is in respect of SCARP and the effect this will have on the market.

Deputy David Stanton

I welcome the witnesses and thank them for the work they are doing. I ask them to feed the following point back. The reports I have been getting about the LEOs have been fantastic. These reports have detailed the work the LEOs have been doing during the pandemic and since. Lots of small businesses were sustained and got supports to help them keep people in jobs because of the work of the LEOs. The question I would ask is whether Enterprise Ireland has reviewed the geographical spread of the LEOs. In other words, could there be more of them? They are doing such a good job. The witnesses might come back to me on that.

I congratulate Enterprise Ireland on joining the Open Doors Initiative, which, as the witnesses know, I am involved with. I am also interested in diversity and inclusion. Having Enterprise Ireland involved is huge because its philosophy will hopefully be passed on through its client members. From what I can see, it is doing good work.

I have a few questions on the lean for micro and green for micro schemes and the Starting Strong business programme. What is the take-up in respect of those? What level of interest has there been? The witnesses might also indicate the level of take-up in respect of the Ukraine enterprise crisis scheme. The schemes are relatively new. What level of interest is there and what has the take-up been so far? How much has been spent on those schemes?

The documentation supplied indicates that eligible companies are defined as companies that are involved in international trading. Does that exclude companies that are not involved in international trading, including those that produce for Ireland only? What support is there for companies that are not involved in international trade?

The witnesses spoke to Deputy Bruton about companies starting up, growing and so on. When companies like that reach a certain level, the are often sold off. Is there a barrier to them growing or do we need to do more to help them to scale up further and remain in Irish ownership or in the ownership of their shareholders or founders? This is an issue that has been brought to my attention once or twice. I am curious about Enterprise Ireland's experience in this regard. Those are my initial questions.

Mr. Leo Clancy

In a moment, I will hand over to my colleague, Dr. Gibbons, who will address the issue of the geographical spread of LEOs and the lean for micro and green for micro schemes. Dr. Gibbons is our regions and local enterprise divisional manager.

I thank the Deputy for his comments on the Open Doors Initiative. We are delighted to join the Open Doors Initiative. Diversity in all its forms will be increasingly important for us as an organisation, especially, as the Deputy mentioned, in the signalling effect we can have to clients. It is important that we support these significant initiatives.

On the take-up relating to the Ukraine enterprise crisis scheme, it is still early. We developed the shape of this scheme in August, subject to the appropriate approval, so we have been having conversations with clients through September and October. We were not starting from scratch with last week's announcement; we are well under way in our conversations with clients. That said, there are a small number of applications in because it is support that is retrospective to companies' performance in 2022. We anticipate that companies are to some extent waiting to have a final handle on where that performance will land. As Mr. Leahy mentioned earlier, there are qualifying criteria in the doubling of energy and of 15% EBITDA. As a result, there will be a factor of waiting to see what the eligibility is. On Deputy O'Reilly's comments earlier, what we are doing is trying to make sure the scheme is as easily administrated as it can be and that once we have applications at hand we can process them as quickly as possible. Internationally traded manufacturing companies are the ones that are eligible. Manufacturing that is non-exporting will also qualify so that is an important distinction. Those are the eligibility criteria we have set for the scheme.

I will address the question on startups before I hand over to Dr. Gibbons. It is a major issue for us that we want to see more Irish companies become growing global leaders. If I have one ambition that is core to the things I come back to in my role as chief executive of Enterprise Ireland, it is that in the next ten years we will see more Irish companies become leading global companies. We hope that they will stay Irish, that the headquarters of those operations will increasingly be here and that they will join the ranks of public companies globally, or that they will stay private and grow globally. That is significant and important in the context of the current discourse on FDI and indigenous enterprise. This should not be a contention between FDI and indigenous enterprise. It has served and continues to serve the nation very well. It would do a great disservice to the FDI sector to trade one off against the other. We have room for both to continue to grow together, but I am ambitious for where we can take companies and in that regard we have various programmes that are specifically targeted at keeping companies Irish, including leadership and management programmes. We are expanding our options in the networks of funders that can come in and provide that scaling capital, and we are taking various other measures.

I am conscious that we may not have time to-----

Chairman

I ask Dr. Gibbons to briefly answer the query on LEOs.

Dr. Carol Gibbons

On lean for micro and green for micro, there are just over 400 companies on each scheme. In terms of the 2022 targets on the micro side - and we will verify these figures for the Deputy - it is tracking well in the ambition to get to 2022 and to have over 2,200 green and 2,000 lean interventions made in the micro industry.

If I may address the wider supports, the Deputy mentioned industry. LEOs falls into two categories. Over 5,000 companies have gone on the LEO start your own business programme, with over 390 programmes put in place in 2021. That is a fantastic achievement on the LEO side that is encouraging entrepreneurs that are coming through their doors.

On the 31 LEOs, at this point we have not looked at any other locations. One thing I would like to say is there is great collaboration between the LEOs and their locations and Enterprise Ireland's regional offices. That joint work is incredibly important for us and for enterprise in the regions.

Deputy David Stanton

I want to be clear. I was not making a criticism at all. They are built to do a job-----

Chairman

Deputy Stanton wants much more.

Deputy David Stanton

-----and we want more of them. The feedback I am getting from small businesses is tremendous. This has saved them and kept people in employment. How does Enterprise Ireland let people know about the various support schemes, including stream 1, stream 2 and the Ukraine enterprise crisis scheme? How is Enterprise Ireland letting people know about that and sending that information out to companies that may not be fully engaged with it?

Mr. Leo Clancy

That is a fair point. Many companies came to us long before the Ukraine enterprise crisis scheme flagging the need for one, so we have a lot of bottom-up demand in this regard. We have published the scheme and done some advertising around it but we have largely relied on our network of contacts with companies. That said, companies are broadly aware of it. We have seen lots of public discourse on it and we are confident that those that may need it will be aware of it.

Senator Ollie Crowe

I thank Mr. Clancy, Dr. Gibbons and Mr. Leahy for their time. On energy costs, Mr. Clancy outlined the significant support from Government but businesses are still facing a substantial hike compared with prices a year ago even. What is the general view among SMEs? Do they believe that the current situation is sustainable?

Mr. Leo Clancy

I thank the Senator for the question. On SMEs, it depends on the sector. You could be in a sector that involves high energy use. On the news this morning, we heard about a retailer experiencing difficulty. There is a lot of difficulty out there and we are conscious of that. It depends on what your business is. If you are in an energy-intensive business it is extremely challenging. SMEs are responding in a number of ways.

TBESS, which Revenue is working on, will be a significant support for many SMEs at the level of €10,000 per month. We think that it will broadly help a lot of SMEs. It is where companies activities are more energy-intensive and where they have larger energy bills that the difficulties arise. We are hearing responses from SMEs in that regard and in terms of trying to seek price increases, where possible, looking for other inefficiencies within their businesses and seeing if they can operate more cleverly. However, price is the main lever SMEs have at the moment. Many companies have been able so far to get price increases that have helped them, but with current energy prices that will become more challenging. We think there will be significant interest in using either TBESS or the Ukraine enterprise crisis scheme in order to respond.

We also see many SMEs reacting by making energy efficiency investments in their businesses. I have spoken to a lot of companies that are planning solar panel deployments, even in the next six or nine months. That is a trend. It has surprised me that so many companies have plans already in place, but a corollary of high energy prices is that the returns on efficiency investments become much easier to realise when one faces those prices.

Long-term sustainability was the core of Senator Crowe's question. In that context, we do not know. That is the honest answer because we do not know what the future trajectory of energy prices will be. The hardest thing for SMEs at the moment is estimating what their 2023 bills will be in the context of the uncertainty out there.

Senator Ollie Crowe

I thank Mr. Clancy for that. I concur with a fair bit of it because this is certainly very challenging. In certain areas I do not know if 40% is enough. There are businesses going through significant pressure.

I will raise just a few further points. The 2021 data showed that Enterprise Ireland-backed companies employed more than 200,000 individuals across Ireland, exceeded €27 billion in exports and directly invested €9.79 billion in the Irish economy in the form of salaries. Could the witnesses add to that? What level of growth does that involve from, say, the position five years ago? Do the witnesses expect those figures to grow further in 2023?

Mr. Leo Clancy

We have the data on job growth over the period. I might ask one of my colleagues, Mr. Leahy or Dr. Gibbons, to speak about growth over the five years. What it meant, though, was that the 207,894 jobs we announced at the start of this year represented an increase of 11,911 on the figure for the previous year. That was very strong growth. We are in the middle of collecting employment growth data for 2022. I do not want to comment on those data at this point because our survey is not closed or validated, but we are and have to be optimistic about continued job growth in the Irish enterprise sector. We believe that it will be an increasing contributor to the Irish economy. That is certainly the trajectory, and a lot of things underlying our data give us confidence in that. However, putting a number on it is increasingly difficult in today's economic climate. I do not know if one of my colleagues has our trend data, but we have seen significant trend growth. We will follow up with Senator Crowe offline on the five-year trend but, certainly, we have seen very significant job growth over the past ten years and we expect that growth to continue, although, in the context of the current economic climate, it may be moderated somewhat.

Senator Ollie Crowe

I thank Mr. Clancy for that.

Deputy Stanton referred to the LEOs and the fantastic work they are doing. I echo his comments in that regard. That was really shown over the past two or three years. Certainly, in Galway city and county, going back to previous boards, before the LEOs, terrific work has been done. I acknowledge Breda Fox and her team in Galway city and county. Mr. Clancy referred to the trading online voucher scheme, which has been very successful. I know personally a number of SMEs in Galway that have used them and given me good feedback on them. Are further data available on the scheme in respect of the number of online sales made by companies that received a voucher and received the investment? What percentage of companies have persisted with digital? Will the witnesses comment on the impact of the scheme overall?

Mr. Leo Clancy

I will ask Dr. Gibbons to take that question on our behalf.

Dr. Carol Gibbons

I do not have the figures to hand. We will furnish the Senator with them. Online retail and the trading online voucher, particularly during Covid times, have been incredibly important for a lot of microbusinesses. In talking quite recently to the chair of the network of local enterprises, Padraic McElwee, it would seem that a number of companies have gained in terms of sales but, again, I do not have that level of detail to hand. I will furnish that to the Senator. Enterprise Ireland and the LEOs are looking at more digital and more online ability in respect of sales and born-digital, in particular for companies that are stating up, in order to do anything we can to assist in respect of our partnership with other companies, bringing to bear digital content, online sales and new business models. That collaboration between ourselves and the LEOs is incredibly important in that regard to ensure we are getting a continued online presence and an increase in online sales. I will furnish the Senator with those details. I apologise for not having them to hand.

Senator Ollie Crowe

That is fine.

Deputy Paul Murphy

I thank Mr. Clancy for the presentation. Regarding stream 2 of the Ukraine enterprise crisis scheme, could the witnesses clarify whether Irish-owned data centres will qualify for support?

Mr. Leo Clancy

Yes, I can. Data centres fall into the category of internationally traded services, so would potentially qualify. They would be subject, though, to all the checks and balances my colleague, Mr. Leahy, outlined earlier.

Deputy Paul Murphy

Can Mr. Clancy say how much a given Irish-owned data centre could get from the scheme?

Mr. Leo Clancy

There is a very small number of Irish-owned data centres, and they are small regional enterprises. It would depend on the application. It is impossible to say what the amount might be until we see what the company's energy costs are and how much they have increased. We have found, as we look across all sectors, that the situation people are in regarding energy varies very widely. Some of the more energy-intensive businesses have hedged. Some people have hedged out as far as 2024, as far as I can see, so it would depend on the individual situation of the company, and that would be true of any company.

Deputy Paul Murphy

If a company has seen a big increase in its energy costs, it can get up to a 30% contribution towards its energy costs. Is that right?

Mr. Leo Clancy

It is 30% over a doubling. The way I remember this is as follows. If a company's energy cost was €1 million in 2021, and if it is now €3 million, it can get 30% of the last €1 million, so €300,000 over a €3 million energy bill is the quantum. Also, it is worth remembering that our support is capped at €2 million for stream 2 of the Ukraine enterprise crisis scheme.

Deputy Paul Murphy

Per company.

Mr. Leo Clancy

Per group of companies.

Deputy Paul Murphy

That is entirely separate from and on top of any support such a company would get from TBESS, for example, under which data centres can get €30,000 a month.

Mr. Leo Clancy

It is. TBESS will be netted off from our supports, so if someone gets the full €60,000 under TBESS and accesses €120,000 under our scheme, he or she will get €60,000 from Enterprise Ireland.

Deputy Paul Murphy

Various sectors are excluded from stream 2. There is a reference somewhere here, which I cannot find now, to adult entertainment and the gambling sector, both of which are excluded. Enterprise Ireland has not chosen to exclude data centres, while speaking about the need for decarbonisation and while the Taoiseach yesterday uttered great words: "Our citizens will become increasingly cynical, weary and hopeless if words are not urgently matched by deeds; if commitments do not generate new realities." Why has Enterprise Ireland not excluded data centres, given that their contributions to our total energy use is 17% at this stage? Is it not entirely contradictory to the idea of decarbonisation to have more public money funnelled to data centres?

Mr. Leo Clancy

It is not clear at all that public money will be funnelled to data centres because we are not certain whether those centres will be eligible under the specific criteria of the fund. The sectors we have excluded are those we exclude from our typical grant offers.

I might ask Mr. Leahy to comment further on this in a moment. What we have done, as we always do, is make this support available to companies that are eligible for current and standard supports and exclude those that are not.

Mr. Donal Leahy

To expand on the sectors that are excluded, there is almost nothing new in the sense that there are about four sectors, including gambling, tobacco and adult entertainment. These are traditionally excluded, sometimes for legal reasons. There are international agreements among states not to support tobacco companies, for example, and also, from experience in dealing with certain industries and following advice, it was thought it would be unhelpful for the State to be involved. In general with schemes, however, we do not look at sectors anew and decide what is or is not appropriate, apart from in the case of those four categories.

Deputy Paul Murphy

That is purely a policy choice, however, on the part of Enterprise Ireland. Nothing is legally preventing the agency from saying it will not include data centres.

Mr. Donal Leahy

Yes, there is nothing legally preventing us from doing that. What I would say-----

Deputy Paul Murphy

If Enterprise Ireland were serious about the commitment to decarbonisation, it would have excluded data centres.

Mr. Donal Leahy

This scheme, like most of our schemes, operates within EU rules, which we are following. We went for notification to Europe on doing it, and we had to think about what is generally easier to get through Europe. We had to do this fairly quickly. The more sectors we exclude, the more competition distortion there would be and, therefore, the longer the process will take.

Deputy Paul Murphy

The reason data centres are not excluded relates to EU rules. Is that what our guests are saying?

Mr. Leo Clancy

No, we are not saying that. It is important to draw a distinction between energy costs and decarbonisation at that level. Going back to the foundation of the Deputy's question, there are very few Irish-owned data centres-----

Deputy Paul Murphy

But they exist and they can apply to the scheme.

Mr. Leo Clancy

They do, and they serve local needs for digital customers - hyperlocal needs, in certain cases. I can think of two off the top of my head, but probably only two at this point, that are local data centres, and I know the communities they serve. One is located in the centre of a rural region, while the other is in a regional urban location, and they serve local clients. Without further information to hand, I do not want to comment on those businesses, but-----

Deputy Paul Murphy

Mr. Clancy is suggesting these cloud data centres serve only local people. I must have misunderstood the nature of the cloud.

Mr. Leo Clancy

The Deputy asked about Irish-owned ones, so clients-----

Deputy Paul Murphy

There is one example in Blanchardstown, or at least its office for getting in touch is located in Blanchardstown. It advertises internationally and offers a data centre. The idea these data centres serve just local people is contradictory to the nature of cloud technology.

Mr. Leo Clancy

I am aware of the data centre the Deputy is referring to. There are companies that offer international services, but they are important export businesses in themselves. We do not want to exclude businesses. However, this support is not targeted at data centres. The fact these companies are not excluded does not mean we deliberately left them in. The key point I made earlier is that the exclusions on this scheme are ones we have in respect of our standard supports, and that is the approach we took. As Mr. Leahy said, that simplifies the process of creating a scheme that was created in response to an emergency requirement.

Deputy Paul Murphy

Does it not demonstrate a gross policy incoherence that, on the one hand, there are the kinds of speeches we heard yesterday from the Taoiseach and Enterprise Ireland's statement about the commitment to decarbonisation while, on the other hand, the public, through Enterprise Ireland, or at least through TBESS, separate from Enterprise Ireland in a big way and quite possibly through the agency itself, may be funding the energy use of these large data centres? Is that not in some way contradictory?

Mr. Leo Clancy

There is a longer conversation to be had in terms of the difference between decarbonisation and digital infrastructure or data centres. Energy use and decarbonisation are probably different discussions, albeit subtly different-----

Deputy Paul Murphy

Greater energy use will make it more difficult to decarbonise. Does Mr. Clancy accept that? It is a basic mathematical fact.

Mr. Leo Clancy

That depends on what that energy use offsets at other locations and on the benefits that accrue to the businesses that decarbonise their operations. It also depends on the carbon content of the energy used by the consumer of that energy. There are many factors. It is not as simple as the Deputy is suggesting, but I would be more than happy to follow up on this matter with him and to have an offline discussion, if that is helpful.

Deputy Richard Bruton

Going back to the issue of sustainability, despite what Deputy Paul Murphy says, data centres have enabled the digital transformation. They have allowed us to have remote delivery and remote working, they facilitate enterprise operating in a less energy-intensive way where they are properly used and they are excluded from Ireland's obligations under the EU because they are in the emissions trading system. The reason data centres are often located in Ireland relates to the fact Ireland is an efficient place in which to locate them, and we have developed a strong enterprise base in the ICT sector. That is recognised in Europe as an area of competitive advantage where there is an advantage for Europe, in climate terms, in having such activities done in areas where they are more efficient in climate terms. A very simplistic view is often taken in Ireland regarding the role of data centres, and Deputy Murphy is adding to that.

To what extent is Enterprise Ireland looking to see whether sectors are generally transforming themselves in terms of their design of product, their material choices, how they get to the market in terms of packaging, how they design for minimising waste in the production, use and distribution of their products and how they contribute to using reused rather than virgin material, as well as energy efficiency? It seems the response to date has been narrow in terms of energy and saying we have to think about our carbon footprint, but if we want a sustainable approach, which COP27 is calling for, we need a deeper transformation. To what extent has Enterprise Ireland looked at that broader agenda? It will hit us in spades in food, where, increasingly, consumers will want to know a lot about origin and so on, and moves are starting in that direction. We ought to have a circular strategy for construction, food, ICT and all the sectors Enterprise Ireland develops, and I am interested to hear the extent to which the agency is going to adopt a leadership role in this, beyond the grants for solar and so on, which are valuable but which are not the whole story.

Mr. Leo Clancy

I might ask Dr. Gibbons to build on this in a moment. First, I acknowledge the Deputy's comments on data centres. It is a complex topic, as both he and Deputy Paul Murphy have addressed, and it deserves further discussion.

The design of product and the circular economy is already something we support through a circular economy technology gateway and circular economy functions within technology centres we have supported. Dr. Gibbons might comment a little further on that.

Dr. Carol Gibbons

Particularly within the third level sector and the circular economy through the likes of manufacturing components and so on, we have funded the Irish manufacture and research centre, for example, which works with companies, looks at their products and lines and considers the sustainability of approach in that regard. The regional enterprise funds are also available. Nine were launched earlier this year. Through that, we expect the development of programmes to assist companies regionally to look at their supply chains and components and to gain valuable insight into how they can change their methodologies, processes and manufacturing, and through ensuring they look at their carbon footprint as well. Through regional initiatives and with the LEOs, we support companies that need consultancy support, particularly in green, to conduct that one-to-one analysis of a business and its supply chain. Those supports are in place today for companies that wish to avail of them, and we would encourage every company to look at its energy cost and at how it can recycle and reuse its components for that circular economy.

Deputy Richard Bruton

My concern is that, at this time of focus on costs, sustainability will be regarded as an extra. In my view, sustainability is the enterprise strategy. If we do not put sustainability first, we are on a round track. It is great to have sustainability at the research level and to begin to start the conversation but there is a sense of urgency implying we need to put it front and centre in enterprise strategy. I ask Enterprise Ireland to consider this because we do not yet have the tools to allow us to say this is the case.

Mr. Leo Clancy

It is front and centre of our Enterprise Ireland strategy, at least. We have included sustainability as the fourth of five pillars in our strategy. Every time we survey our clients, we survey them on sustainability. The Deputy asked earlier about the level of sentiment towards sustainability but we did not have time to answer his question. We surveyed clients on the way into our recent International Markets Week event and learned that 74% of companies feel sustainability is a high priority for them. As the Deputy said, that is still not enough, and as I said to the audience gathered on the day, it is still not enough and we need 100% of companies to understand that if they do not show up sustainably in their global markets, they will be locked out of them in years to come. I agree with the Deputy on that.

All our direct productivity supports have been very helpful in allowing companies to consider new ways to make their process more sustainable. We are seeing an increasing flow of research and development, and innovation projects, from companies. In this regard, I refer to supporting them in innovating the next wave of products more amenable to the circular economy. I recently met a company in regional Ireland that is experiencing the challenge of having to prove its products will be 100% sustainable, recyclable and amenable to circular-economy principles within a very small number of years. Our response to it was to ask it how we could help it to innovate the product through research and the process innovation that is needed.

We launched a significant suite of decarbonisation assistance measures for companies in June. There is significant interest in these, and it is building. To date this year, we have supported 118 companies with decarbonisation or climate-action initiatives of one kind or another. The two are linked. I hear the Deputy's point clearly on the sustainable circular economy as distinct from sustainability in the carbon-reduction sense but we feel companies are becoming more alert to this. There is a long way to go but sustainability is at the heart of our strategy.

Deputy Louise O'Reilly

I apologise if I ask a question that has been asked already. The delegates should feel free to refer me to the transcript.

I have two questions. The first relates to the inclusion or exclusion of data centres. I was here for some of the discussion earlier in this regard. Mr. Leahy said he had advice that the industries and areas excluded are ones in respect of which it would be unhelpful for the State to be involved. I am referring to those associated with gambling, tobacco and adult entertainment. I believe there is also another. Is it possible to design a scheme that excludes data centres? I understand the instructions on how this would be done come from the Government. The inclusion or exclusion of data centres involves a policy decision. The policy could be changed, making it possible to design a scheme from which they would be excluded, given that it is likely that they could carry on their work without the subsidy.

Mr. Leo Clancy

As it stands, we do not know whether we could design a scheme that excluded data centres. The sectors we have excluded are excluded for good reasons, including legislative reasons. We are absolutely not permitted by legislation to support the sectors in question. We have a long-standing policy that rests on the reputation of the agency and State. The State has a very clear policy position on data centres, which Deputy Bruton summarised. The State regards data centres as important to national infrastructure, so we did not take the view that we should add them to an exclusion list, nor did we examine in detail whether we would do so from a policy perspective. I do not know the answer to the Deputy's question because it depends on Government policy; however, we are happy to examine the issue with our colleagues in government. Right now, I cannot give the Deputy an answer as to whether we could or would exclude data centres.

Deputy Louise O'Reilly

I have more faith in Enterprise Ireland because I believe it absolutely could exclude data centres were it the policy. However, as we see, the red carpet is the policy for them instead.

Most employers in the State are decent in that they pay their workers and meet the minimum requirements under the law, but some are not. Consider the circumstances where there is a failure to adhere to Labour Court recommendations etc. The delegates can understand that it seems counterintuitive to many that supports are provided by the State, which runs the Labour Court on the one hand, while on the other, recommendations of the Labour Court and so on are ignored. Is it possible to link the two or is there no value to that? I have an open mind on it because, as I said, my issue is that you start to buy workers' rights from these lads and eventually the price gets too high. I do not believe that is how it should be done. Workers should be facilitated with the right to collectively bargain and organise. Notwithstanding that, were an instruction to be issued that schemes had to be devised to ensure not only full compliance with requirements on paying the minimum wage and what must be done at a minimum in terms of health and safety but also with recommendations from the third-party industrial relations machinery, could it be acted upon? Is that possible or would it render the scheme so top-heavy with bureaucracy as to be unworkable?

Mr. Leo Clancy

As the Deputy said earlier, we would never say anything is impossible but it might be a question of whether things are advisable. The Deputy knows better than most that Labour Court recommendations can be contended on both sides. It would certainly be cumbersome to do as proposed even if it could be done. I do not want to give the Deputy an answer on whether we could do so but I can say that our priority when grant-aiding companies is always to incentivise quality job creation therein. Every time we have a proposal before us on expanding jobs and capital investment and determining where we can provide support, our question first and always concerns how we can protect the jobs and ensure their quality is as high as possible. We certainly ask all the qualitative questions, including on what is meant for employees in the long term. Many of our supports are designed this way, by their nature. For instance, our employment grant aid has five-year contingent liability from the last payment. Therefore, someone who accesses our employment grant must maintain the jobs incentivised for at least five years after the payment for the cohort in question. That is very positive, but, as the Deputy said, it is a functional requirement in terms of job expansion. We are continuously considering ways to enhance the jobs.

Much of our current work, particularly in a tight labour market, is on how we can support companies to automate and become more efficient, while also increasing the quality of what they are doing in terms of their employees' learning journey. Many of our supports, such as those for business innovation, involve major training components for the workforce, as well as the implementation of the projects. That adds to the competence and wage rates. With our intervention, wage rates are going up over time.

The Deputy can take it from me that when we have an interaction, particularly in difficult times but also in normal times, and where there is expansion, we always look towards the end that is the worker. Every time I stand up in front of my team in Enterprise Ireland, I state the purpose of the organisation is to create increasingly high-quality jobs. That is what we will continue to be laser-focused on.

Deputy Louise O'Reilly

Could Mr. Clancy give me a brief rundown on what is in place to assist companies with decarbonisation? How many companies are availing of the support?

Mr. Leo Clancy

We launched a climate-action enterprise voucher in 2021. It is a voucher to help companies start their journey of decarbonisation. It involves bringing people in, effectively for two days, to have a good look at their businesses and ask them where they are at and what they might need to do next. We have built on it since its launch.

For years, we have had GreenStart and GreenPlus. These are productivity improvement programmes that are green oriented. So it is how one decarbonises one's business. We have been doing this for many years. In June, we launched new funds under the national resilience and recovery fund. Collectively, these are known as the enterprise emissions reduction investment fund.

Deputy Louise O'Reilly

That just trips off the tongue.

Mr. Leo Clancy

It includes capital investment for decarbonisation. We are building on what were advisory and process supports around green and climate action to support capital investment on a broad basis. The capital investment could be in monitoring equipment for carbon, so that could involve installing something at a site that monitors carbon and gives a readout of where things stand, or for capital investment in decarbonisation up to €1 million of our support per project. There are significant supports that are available. We have seen 56 schemes approved since we launched in June. Overall, including the climate action and green vouchers and the other 56, we have seen 118 this year to date. We have a growing pipeline, but, in response to Deputy Bruton, it could be better. We could be doing more but it is a long journey. At a time when they have been focused on Covid-19, Brexit and Ukraine, it is hard to get people's attention. If there is one small bright side to the recent energy price increases that are stressing businesses, it is that the capital investment window for decarbonisation of enterprises has narrowed significantly, but for all the wrong reasons.

Deputy David Stanton

Mr. Clancy mentioned Covid, Brexit and war in Ukraine. Prior to that those there was the economic crash. We have had a number of haymakers one after the other, yet the State and the economy have come through stronger than ever. That shows the resilience we have. Each one would be a massive economic disaster on its own for any generation, yet in a very short period, we have experienced all of them and come through.

Mr. Clancy mentioned capital investment. Does that include funding for solar, wind, biomass and so on?

Mr. Leo Clancy

I will ask Mr. Leahy to expand a little on this, but it specifically does not include solar panels. It is deeper decarbonisation investment. There is both a market argument for things like solar and there are supports from our colleagues in the SEAI. We are very conscious when we launch anything to do it in a complementary way and to make sure that we are launching things that are additive to what is already available to business. That is where we are coming from.

Deputy David Stanton

What are some examples of what these capital investments would be for these businesses?

Mr. Leo Clancy

Would Mr. Leahy like to comment?

Mr. Donal Leahy

That is an excellent question. The latest scheme is specifically trying to focus on where big wins can be got for carbon usage, and where there is use of carbon as part of the manufacturing process, to take remove it and mitigate its effects. Heat pumps would be a very good example. If the manufacturing process produces heat, then we also want it to be captured and removed. It is very specific because that was identified as an area in respect of which help was needed.

Mr. Leo Clancy

Mr. Leahy mentioned heat pumps. There is also air water and ground storage, electric steam boilers, heat recovery technologies, mechanical vapour recompression, evaporators and biomass boilers. I would scrutinise matters too much by drilling down into those technologies, but those are the kinds of things involved.

On the energy monitoring side, it is logging the use of electricity, gas, diesel, oil and water. It is about all of the things relating to energy use whereby if we knew more, we might do better. The first scheme has a smaller limit of €50,000 because it involves energy monitoring. The other involves up to €1 million for the decarbonisation of an individual enterprise.

Deputy David Stanton

I want to support what Mr. Clancy said about Irish companies scaling up. That is important. In future, we might hear more about that and how it is going. I am delighted that Mr. Clancy agrees with me. It is something I have come across time and again where Irish companies start up, grow to a certain level and then cannot go any further. I would be interested to know what specific supports they can get in order to grow beyond the point to which I refer and become global enterprises, rather than having to sell or be taken over or taken out by a competitor because they cannot go any further.

I asked about eligibility for the Ukraine enterprise crisis scheme. He might correct me if I am wrong, but Mr. Clancy said that companies that are involved in manufacturing in Ireland only and not involved in international trading can qualify. I was looking at the Enterprise Ireland website and it says that applicants must demonstrate that their companies are "engaged in Manufacturing and/or Internationally Traded Services". Does that mean that if a company is producing something in Ireland that is only being sold here cannot qualify?

Mr. Donal Leahy

There is a bit of a distinction between services and manufacturing. With manufacturing, it is wider. If a company is manufacturing and only selling domestically, it can qualify under the Ukraine enterprise crisis scheme.

Deputy David Stanton

I am interested in the collaboration with the SEAI. Much of the material on the Enterprise Ireland website mentions the SEAI and that it collaborates and co-operates with it to support businesses and companies. How is that going?

Mr. Leo Clancy

It is going well. We have a strong collaborative relationship. The SEAI is a sister State agency, albeit under a different Department, and we have ongoing interaction with it. Enterprise Ireland set up a dedicated sustainability unit in January in line with the launch of our new strategy. The people who are managing the schemes we talked some minutes ago are also responsible for making sure that we are fully aligned with the SEAI. That is going well. We see that as involving closer collaboration over time.

Deputy David Stanton

I sometimes wonder what the impact on our economy would be if we closed all the data centres here. They power all our information systems, laptops, computers, mobile phones and so on. What would the impact be if Ireland became a cold place for data centres? I do not expect an answer.

Mr. Leo Clancy

I note the rhetorical nature of the question.

Deputy Paul Murphy

Can I ask how many jobs are in data centres either in Ireland or in the Enterprise Ireland-supported companies in Ireland?

Mr. Leo Clancy

In the Enterprise Ireland-funded companies, it would be predominantly work on the construction and supply to data centres rather than their operation. There are some Irish-owned companies that operate data centres. They are very small in number, as we mentioned earlier. The bigger story is the number of Irish companies that depend on data centres as a source of work for themselves. It is predominantly construction. Over the past 20 years, because the first multinational data centres were established in Ireland, Irish construction and supply companies had the unique opportunity to build their businesses on the work in that sector. We estimate that nearly 10% of our total base of exports at this point is from companies that export to data centre clients in other parts of Europe and the rest of the world.

Deputy Paul Murphy

Mr. Clancy was quoted in The Sunday Times as saying "Somewhere close to 10 per cent of exports of Enterprise Ireland-supported companies are in the data centre sector". He is not saying that they are actually in data centres.

Mr. Leo Clancy

No, they are not data centres.

Deputy Paul Murphy

They are tech companies?

Mr. Leo Clancy

They are construction services, energy equipment within data centres and things like that. There are a lot of companies active in that space. In construction industry terms and in that industry and in a tight-margin business this is good business for Irish firms. Even though Ireland was at the start of the data centre growth story for Europe, we have seen that diversify all over Europe. There is growth in the Nordic countries and in southern and in central Europe. Huge dividends are accruing to Irish companies and their workers as a result of having cut their teeth on the data centre revolution in Ireland early on.

Deputy Paul Murphy

So can Mr. Clancy explain how he gets to the 10% figure? He is not saying that that is every construction export.

Mr. Leo Clancy

No.

Deputy Paul Murphy

How did he reach that 10% figure of exports?

Mr. Leo Clancy

We survey our clients. I used the term "close to". It is an approximation, but we think that it is not far off. We survey our clients every year on their export volumes and we know the main activities of those clients too so they either declare which sector they are selling into or we know that the main activity of the company is in the data centre space. It is a combination of those two. We think it is not a bad estimate.

Deputy Paul Murphy

Mr. Clancy went on to refer to well-paid jobs. What evidence does he have for that assertion?

Mr. Leo Clancy

I do not have information on wages levels for those jobs to hand. However, we have information to hand on wage levels for the engineering sector, which Mr. Leahy is accessing. That is the sector from which most of these jobs come. They are well-paid jobs. Construction is a high-cost industry in terms of salaries at present. We are conscious of the scarcity of labour in the housing area and other areas of construction. They are well-paid jobs because of the market conditions that underpin the workers' ability to go elsewhere and also because they are in a high-value industry. Irish construction is not just in data centres. It is also in things like semiconductor fabrication plants and, increasingly, in advanced medical technology and pharmaceutical companies. Those are very high-quality exports. We have seen a big bounce in construction exports, which is really good for the long term for our construction industry and gives a lot of onward confidence.

Mr. Leahy might like to comment on the construction sector average salary versus State norms.

Mr. Donal Leahy

According to the Central Statistics Office, CSO, the average salary in 2021 was €45,000. That is the baseline. When we look at the construction sector, for Enterprise Ireland clients, the average salary in 2021 was €65,000. It is well in excess of the average.

Deputy Paul Murphy

Does Mr. Leahy have the figures for the data centres sector, which is the section to which the quotation refers?

Mr. Donal Leahy

No, I do not.

Deputy Paul Murphy

Can the witnesses say how many jobs are in the data centre sector, as referenced? Is it the case that some 10% of Enterprise Ireland-supported company jobs are in the data centre sector in Ireland?

Mr. Leo Clancy

We have not put a specific number on the data centre sector but it is substantial. There are 35,000 employees overall in construction sector companies we count as clients.

Deputy Paul Murphy

How much of the work of those companies is in the data centre sector?

Mr. Leo Clancy

I do not have information to hand on how much of the overall construction sector exports relates to data centres but, as I said, it is very substantial.

Deputy Paul Murphy

I am interested to know this. The figures seem to be high, with the suggestion that 10% of exports are in the data centre sector. I acknowledge Mr. Clancy is saying that does not relate to Irish-owned data centres.

Mr. Leo Clancy

No, it relates to all of the supply chain. We have become a really important supply chain hub for construction activity and equipment supply that feed into data centres. Even though I had some acquaintance with data centres from my prior role, it has really struck me since I started this job how widespread are the businesses that depend on the sector. That number is increasing.

Deputy Paul Murphy

If an Irish-owned construction company that is a client of Enterprise Ireland builds a data centre for a major US multinational in Ireland, does that count as an export and is it include in the figure?

Mr. Leo Clancy

It does not count as an export; it counts as a sale. We look at sales and exports for our companies and we exclude sales in Ireland. We are talking about sales overseas in respect of data centres that are being built elsewhere.

Deputy Paul Murphy

I am interested to get more detail on that.

Mr. Leo Clancy

As I offered earlier, I would be happy to meet with the Deputy bilaterally to discuss this topic. It is a wider story and a very positive one for us.

Deputy Paul Murphy

I thank Mr. Clancy.

Chairman

I had a few questions for the witnesses but they have all been answered. When one goes last, that sometimes happens. I thank the representatives of Enterprise Ireland for assisting the committee in the consideration of this matter. We will consider it further as soon as possible. I propose that we go into private session to consider other matters. Is that agreed? Agreed.

The joint committee went into private session at 11.04 a.m. and adjourned at 11.26 a.m. until 9.30 a.m. on Wednesday, 16 November 2022.