Finance Minister Brian Cowen TD has produced findings that support the argument that the Business Expansion Scheme (BES) is vital for the creation and development of Ireland’s indigenous industries.
The indigenous technology sector in particular has been vociferous about the retention of the BES scheme as it is fundamental to young companies’ research and development (R&D) and sales efforts.
In last month’s Budget, Minister Cowen said the scheme, which has benefited hundreds of small businesses and was due to expire on the 31 December, had been reviewed at his request.
The ceiling of the BES scheme was doubled from €1m to €2m. In addition, the annual limit for investors has been raised from its old limit of €31,750 to €150,000. The annual investor limit for the BES sister scheme, the Seed Capital Scheme, has been put at €100,000.
Cowen said these changes would require approval from the European Commission and that the total cost to the exchequer next year would be €25m.
A survey of 1,400 companies by the Department of Finance that had used the BES in the past found that 70pc of the companies were new, being set up in the last 10 years.
One third of all firms were start-ups or in the development phase. The bulk of the firms employed less than 15 people and in two thirds of cases their annual sales were less than €1m.
Export sales represented 56pc of output for all the firms surveyed. Some 58pc of the firms classed themselves as being in manufacturing, 22pc in international services, 12pc in tourism and 8pc miscellaneous.
Many of the firms used BES funds to launch new or improved services, expand their workforce and grow the business.
They also used the funds to increase capital expenditure and invest more R&D.
The majority of respondents, some 62pc, also indicated a wish to raise more BES funding in the period ahead, most of this being for less than €1m.
“The survey indicates that the current BES scheme has been good for manufacturing, good for jobs and good for investment in small firms throughout the country,” Cowen said. “I am confident that the expansion of the scheme I announced in the Budget will further support our enterprise culture.
“This is not risk-free investment: a return on the investment is contingent on the company making a go of it. We vitally need such schemes if we are to create more jobs in small manufacturing firms throughout the country,” Cowen argued.
He said that he would make these points strongly to the European Commission in order to get approval under State aid rules to continue the scheme that he proposed in the Budget.
By John Kennedy