As the Deputy will be aware, under the Fiscal Responsibility Act 2012, the Irish Fiscal Advisory Council (IFAC) has been assigned the monitoring and assessment functions required of an independent national fiscal institution under the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union. The Act requires IFAC to “provide an assessment of whether the fiscal stance for the year or years concerned is, conducive to prudent economic and budgetary management”.
In addition, as part of the Council’s so-called ‘endorsement function IFAC provides an independent assessment of the official macroeconomic forecasts of the Department of Finance, upon which the Stability Programme Update (SPU) and Budgets are based. Accordingly, the Council’s role is to assess the overall fiscal stance as well as the forecasts underpinning the SPU and Budget publications. Therefore, the impact of all government expenditure, is assessed by the Council in this context.
In respect of the actions that my Department will take to stimulate the small and medium sized enterprise sector, I would note that the Irish Fiscal Council Report that the Deputy refers to, which was published this month, does not explicitly address SMEs beyond the level of credit advanced to them. I note the trend of an increase in new credit advance to Irish SMEs over the past four years, as well as a general decrease in the level of indebtedness of Irish SMEs. This appears to be consistent with the findings of the Central Bank’s SME Market Report for 2019.
It is worth noting that demand for credit by SMEs has been consistently subdued in recent years according to a number of studies including the SME Credit Demand survey carried out by my Department. This survey is conducted twice a year; over 1500 SMEs are surveyed to identify credit issues experienced by SMEs, the largest of its kind in the State. The latest Survey results, covering the period April – September 2018, has shown that demand for credit decreased to 20%, and of those SMEs that did not access credit 89% cited lack of credit requirements as their reasoning.
There are a number of policy supports and initiatives in place to support access to finance by Irish SMEs including the Credit Review Office, Enterprise Ireland, the Local Enterprise Offices, the SME Online Tool, Microfinance Ireland and the Strategic Banking Corporation of Ireland (SBCI).
The SBCI is Ireland’s national promotional institution. The purpose of the SBCI is to deliver effective financial supports to Irish SMEs to address gaps and potential failures in the Irish SME finance market as well as encouraging competition and innovation, and facilitating the efficient and effective use of EU resources and financial instruments. The SBCI achieves this through the provision of low cost liquidity and risk-sharing guarantee activities that support the provision of appropriately priced, flexible funding to Irish SMEs.
Since it began its activities in March 2015, to the end of December 2018, the total amount of SBCI supported lending activity (through the provision of liquidity) was €900 million to 21,783 Irish SMEs supporting 141,658 jobs. Under the SBCI’s risk sharing schemes, €152 million has been drawn down by 4,278 SMEs supporting 6,572 jobs.
Additionally, the Government launched the Brexit Loan Scheme in March of last year. This is a €300 million loan scheme to provide short term working capital support to SMEs to enable them to adapt and innovate in response to the challenges and opportunities posed by Brexit. From the launch of the scheme on 28 March 2018 to 12 June 2019, the SBCI has received 645 applications. Of these, 582 have been deemed eligible and can proceed to one of the participating finance providers for a loan under the scheme. 139 SMEs have progressed to sanction at finance provider level to a total value of €30, 566,300.
Following on from launch of the Brexit Loan Scheme, a Future Growth Loan Scheme has been developed to provide long-term investment financing for Irish businesses to help them strategically invest in a post-Brexit environment. There is an absence of financing available for businesses in excess of seven years and the Future Growth Loan Scheme is addressing that gap providing loans of eight to ten years. SBCI's open call to financial institutions for designation as a lending partner closed on 11 February 2019 and the scheme was launched on 27 March. The SBCI began accepting eligibility applications from SMEs on 17 April 2019.
The Deputy may rest assured that my Department is committed to supporting Irish small and medium sized businesses and the Government recognises that such businesses are vital for sustainable economic growth and employment.