Why do Irish SME not export more?

September 7, 2010

Let us start by framing the issue of indigenous Irish exporters by drawing a pretty picture, or in this case a less than rosy one.  In 2009, according to Enterprise Ireland’s Annual Report, the value of exports traded by Enterprise Ireland-supported companies was €12,903 million, a fall of €2,103 million since 2008 (a reduction just shy of 14% in one year).  Our biggest export market was the United Kingdom with exports valued at €5,458 million with the rest of Western Europe accounting for €2,153 million.  Thus, Western Europe and the United Kingdom (what we might generally describe as the European Union, accounted for 59% of the value of EI-supported Irish exporting companies.  North America accounted for €1,341 million or 10.4% of the value of exports from EI-supported companies.  By far the largest export sector was the food sector which accounted for €7,020 million in trade or 54.4% of all EI-supported companies.  To be fair 2009 was when the full effects of the recession hit.

According to the CEO’s Report from Frank Ryan, ‘during 2009, Enterprise Ireland approved funding for a total of 1,460 companies.  Notwithstanding the challenges, we maintained our focus on the innovation agenda as evidenced by the number of new high potential start-ups and investments in R&D which exceeded expectations, indicating improved confidence as companies position themselves to take advantage of recovering markets. In 2009 Enterprise Ireland supported 73 innovative start-up enterprises and 122 client companies were approved financial support in excess of €100,000 for significant R&D projects’ (see http://www.enterprise-ireland.com/annualreport2009/ceo_report_2.html).  Incidentally, before anyone criticises EI for only supporting 73 innovative start-ups (one assumes significantly through the third-level institutions) let us remember that EI can only fund the projects put in front of it.  I repeat my comments in previous posts regarding my concern regarding the pipeline of HPSU projects.

According to Finfacts, ‘In 2005, Bank of Ireland research showed that only 3 per cent of Irish SME firms are medium size with more than 50 employees. Overseas expansion and exporting are dependant on businesses growing to a medium sized enterprise, yet the research indicated that only 7 per cent of firms intended to expand abroad in the following twelve months. This contrasted sharply with the UK where medium enterprises, which employ about 30 per cent of the workforce, are the powerhouse of the economy…’ (see www.finfacts.ie, May 4 2009).  Finfacts also reported the Irish Exporters Association’s annual report on exports noting that ‘the Irish Exporters Association (IEA) today released its year end review, with news of robust growth in services exports, but continued difficulties for merchandise exporters  Foreign-owned companies are estimated to account for over 90% of exports from Ireland but data is not officially collected.  The review will be available at the IEA website’ (see www.finfacts.ie, Jan 3 2008).

So, if we looked at Ireland in 2007, before the housing bubble burst and the international recession hit, Ireland looked like a great success story.  Large trade surpluses, budget surpluses in most of the previous ten years, high-tech industrial estates abounded.  However, most of our trade surplus was generated by foreign-owned companies.  This, actually, was a success for government industrial policy.  Going back to the Lemass/Whitaker economic plans of the 1950’s and 1960’s through the Telesis Report and beyond, Irish industrial policy was to bring in foreign-owned companies in to the country and up-skill our employees.  This went hand-in-hand with expenditure on education and infrastructure (especially since Ireland joined the European Economic Community in 1973).  We succeeded in forming one of the most impressive FDI track records in the world.  If there is a disappointment is was that the policy expected more of these high-skilled employees to become entrepreneurs and create a higher amount of ‘spin-off’ ventures.  It is not that this has not happened but we now see that the amount of these spin-off ventures is far lower than we might have hoped after the boom. 

But before we fixate on the high-tech sector let us remember that exporting is not a solely high-tech sector issue.  Any Irish business can develop exports, trade alliances, licences and agencies, especially within the single-European market (our rationale for joining) and especially within the Eurozone (our rationale for joining that also).  Why do so few of our businesspeople see the need to develop market share in countries other than Ireland.  In fact, if we take out the UK, the apparent data available indicates that Irish businesspeople seem unwilling to export or do not know how to go about exporting.  It seems to me to be a case of bringing the horse to water…given all the information and campaigns run to date many of the businesspeople I have met over the last 13 years as a business adviser seem to think that building business in other countries is beyond them or that their product cannot be exported.  Is this another example of a culture issue, a lack of ambition or do we need to address some invisible barriers faced, or perceived, by Irish businesspeople?

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