Budget Commentary: Mark O’Rourke, Bibby Financial Services Ireland

Brexit inevitably loomed large in the Minister’s budget statement, even as the Irish economy remains in good health. Minister Donohoe made clear that Budget 2020 was created with a no-deal Brexit in mind, and to that end it appears a prudent one, which will hopefully help protect businesses and trade as Brexit approaches.

SMEs across Ireland have been clear for some time that more Government support is needed to weather the Brexit storm. SMEs account for 90% of Irish businesses, employing over 400,000 people, and are typically seen as the backbone of the economy. Brexit will have a disproportionate impact on the SME sector in Ireland, and while it’s clear that the budget has been compiled with Brexit front of mind, some of the measures that SMEs have long been looking for – such as more tax breaks and lower VAT rates – have not materialised. While the 5% increase in the R&D tax credit – now raised to 30% - will be of benefit to SMEs in reducing the overall amount of corporation tax paid, capital gains tax, for instance, remains unchanged at 33%.

Start-up businesses and budding entrepreneurs often face acute cashflow pressures in their early days, and changes to the Employee and Investment Scheme will hopefully make it less restrictive and encourage investment in Irish SMEs.

One of the biggest challenges facing Irish business is rising costs, affecting not only day-to-day trading operations, but also a business’s long-term prospects for growth. Unfortunately, this budget does little to address these challenges.

However, the Brexit contingency fund of €1.2 billion is a welcome commitment that supports will be there for businesses.  Of that, €110m will be earmarked for those ‘vulnerable but viable’ businesses. There will also be a particular focus on those sectors deemed most exposed to the ill-effects of Brexit. This will be of some comfort to businesses, for example, within Cork’s agri-food sector, in particular, who are so dependent on imports from or exports to the UK.

The UK has long provided Irish SMEs with an obvious path to growth, but this will be made more difficult by Brexit, whatever form it ultimately takes. The Minister’s pledge to allocate a range of funding measures to businesses reorientating towards new markets is therefore to be welcomed, but the devil will be in the detail in terms of how this is allocated across sectors and around the country.

9 October 2019


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