Matt Shanahan warns SMEs face collapse amid soaring energy costs

Minister, just with respect to the justice vote, of course I welcome it and I think everybody will welcome additional Gardaí on the beat and additional Gardaí passing through Temple Moor. Can I just make a point about my own constituency of Waterford and it may be an OPW issue but we are waiting for upgrades to the Gardaí Division there which is now the South East Gardaí Division for many years. We have additional civilian staff coming in there and nowhere for them to be accommodated within that centre. I would ask you please to make a note to the Minister that we need to see funding and development of that Gardaí station if it is to have any chance of actively trying to fill its remit. Can I just say, Minister, yesterday this budget of €11 billion was of a scope never seen in the country before and certainly the economic and social challenges facing the country because of the energy crisis and the resulting inflation are also of an extraordinary magnitude. And I would think whatever one's politics in the country we would hope that this budget will act significantly to reduce the chronic pressures facing households and businesses. There has been much talk in the House yesterday and today of the need to support households. But I would like to focus for a few moments if I can on the small to medium business enterprises that are facing catastrophic energy costs and hugely difficult trading environments. Our SME sector in this country is constituted by micro, small and medium enterprises and between them they imply almost over a million people in this sector. The SME sector has for many years been the bedrock of national revenue generation long before the money tree of foreign direct investment arrived and the associated corporation tax that it has brought which is most welcome. The SME community has here to forward and largely on its own generated the taxes that has put guards on the beat, that has put teachers into classrooms, that has put nurses at the bedsides and it has secured Department of Social Protection payments. And what is happening in this sector, let me give you one idea of where things are at. I wrote to both finance ministers recently on this issue and I highlighted a manufacturing business in the South East that is presently employing 40 plus people. Their monthly utility costs have risen from €9,000 in January to €21,000 in April to €42,400 for the month of August. This company makes a range of components for sale through trade and retail outlets. It uses electricity predominantly in heating and cooling processes as part of its production. It has no way of mitigating its electricity usage without reducing its output and thereby reducing its revenue. Under the proposed Government SME support scheme, this firm would be able to claim 40% of its increased electricity cost from its average base, where 150% of the annual cost increases have occurred. So it well qualifies. A rough calculation delivers the support of €13,300 per month. However, that is capped at €10,000, which means this company can see support extended, which would reduce the firm's present energy bill from €46,000 to €36,000. The revised annual energy cost would now be approximately €432,000 per annum versus €108,000 for the previous year. That is a net $300,000 increase year on year, and in euro terms it is an additional operating cost of €324,000 annually, a whopping €27,000 cost per month. I know this business sector very well, Ministers, and I can tell you it is challenging, competitive and a very, very tight margin business. And I can promise you there is not a spare €320,000 lying around anywhere in this business to plug this gap. This is a business that would have been severely impacted during COVID and it is only getting back on its feet. It is also extremely sensitive to consumer demand activity at the retail level. Reducing energy bills for this business means reducing activity, thereby reducing turnover. So it is not possible for this business to scale down in order to save costs. It will not improve its profitability and it will not make the business viable at present to support the levels on offer. This is a rural business. It implies 45 skilled and semi-skilled operatives. If this business stops manufacturing, the products they make will most likely be replaced by cheaper imports. The employees working in this business will struggle to find jobs to which they are suitable. And the number who are middle aged will quite likely end up in the long term unemployed. My question to you, Ministers, is this. How does it advance our national interest to support crisis cost of living for families, while not supporting adequately the businesses which keep many of these family breadwinners in employment? The SME support package that Government has signalled will not do enough to keep these businesses viable, which they were up to some months ago. If we do not make significant efforts to keep these businesses operational to some degree, we will have very little on which to build an economic recovery into the future, which we obviously want to see post this crisis. Government yesterday announced contributions to the Rainy Day Fund. The question I have is how much water will we bale before we take a significant look at how we can meaningfully support SME businesses over the next 12 months? So I would urge you, Government Ministers, please, to look at this issue. And I would also ask you that you would speak to the Department of Enterprise officials in particular, that they would stay very close to business groupings to understand the pressures that are coming down the line. because what is going to happen here is a number of business promoters are going to try to keep trading in the hope of reducing their costs. They will then start to fall over in terms of meeting supplier payments, they will fall over in terms of returning their VAT payments, and ultimately their businesses will become insolvent, at which point they will fall over, go into liquidation, and we are going to see promoters of businesses who have spent 50 years of their lives developing intergenerational businesses, where they are basically going to become insolvent, and those people ultimately will become liable for loans and possibly for debts. And that is not fair to anybody. These were all, as I say, very viable businesses before we arrived at where we arrived at. And what I am saying to you very clearly is the government support of 40% is not adequate, and it is not enough to address what is happening, and whether we need to get major actions to sit down and work out at what point a support is viable, at what point it is better to keep companies trading and to keep employees employed, and what support monies should be directed to that point. But I can tell you that we have and have had a very vibrant SME business sector in this country for years. I believe we have been slightly overtaken of late with the windfall taxes that are coming from the FDI sector. But, as has been said by both finance ministers in this House, they may well be transient and gone in 12, 18 months or 24 months. We do not know where they will finish, but we need to sustain our SME bedrock in this country, and that means we need to support them. And I am calling on you ministers and those in government to ensure that we do not have a catastrophic failure in the SME sector before we decide to step in and try to give adequate support. Thank you very much. Thank you very much.