BusinessOpinion

Ireland is on the cusp of a historic pivot. The right choices can propel us toward rapid economic growth

Contrary to the misconception, the State can support enterprise and prioritise social justice. The two are symbiotic

The IFSC district in Dublin's docklands where many international companies have located their Irish operations. We need to attract more talent from abroad.

Daryl Hanberry
Mon Feb 19 2024 - 05:30

Frequently, as we navigate the complexities of managing our businesses, expanding market influence, and overseeing costs, we often lose sight of the broader context in which we operate, live, and mutually support each other.

It’s common to only recognise a significant shift in retrospect, long after it has transpired. In research published last year, The World Economic Forum characterised our present context as the “turbulent 2020s”, and events since then have intensified this turbulence.

There is a risk that, in contemplating the future, we, as a nation, become overly fixated on the tumultuous environment, potentially missing the opportunities right in front of us.

Through my day-to-day role at Deloitte, it has become evident that Ireland is at the cusp of a historic pivot, perhaps for only the third time in our history.

READ MORE

While efforts to develop our foreign multinational sector need intensification, there is now an urgent need and a growing acceptance that equal attention should be given to prioritising the domestic multinational sector

The first pivotal moment occurred a little over a century ago when the State was founded and we began to assert our independent national direction for the first time. The second was in the 1950s when TK Whitaker advised that the country needed to establish itself as an international trading partner and a committed European nation to prosper.

Despite difficult societal challenges, we have achieved significant success in building our economy and providing opportunities for our young people and those eager to work and trade from Ireland.

As an open trading economy, Ireland has greatly benefited from foreign direct investment. While efforts to develop our foreign multinational sector need intensification, there is now an urgent need and a growing acceptance that equal attention should be given to prioritising the domestic multinational sector.

Fostering and supporting innovation and enterprise should transcend volatile electoral cycles. Enterprise, entrepreneurship, and intellectual capital should be considered precious natural resources, providing the means to deliver a third pivot that can diversify our economic model and help to ensure a better society.

The debate on supporting enterprises and entrepreneurship is often framed as a contrast between old Europe with its rules and obligations and free America, especially the west coast, where individuals are free to thrive and scale. This oversimplified narrative ignores the reality of national competition for enterprise and entrepreneurs.

During a visit to Dublin in late 2023, then French prime minister Élisabeth Borne highlighted France’s success in supporting its start-up community. She outlined how French start-ups raised just €1 billion in investment in 2013, but how that figure was €13 billion in 2023.

The French government created a public investment bank, Bpifrance, in 2012, with an investment plan for technologies in the future. Added to this, Station F, located outside Paris, opened in 2017 and is now the world’s largest start-up campus accommodating 1,000 companies. It also provides access to affordable and flexible housing through its flatmates programme.

Portugal is also making considerable progress with advanced supports for those building businesses. The country has a total of more than 150 registered incubators and seven tech unicorns valued at $1 billion-plus each.

Ireland faces crucial choices. Contrary to the misconception, this can involve both supporting enterprise and prioritising social justice. The two are symbiotic.

The recent political kite-flying about penalising those who earn over a certain amount is being used by our competitor countries as a reason not to invest in Ireland

In practical terms, three key priorities could propel the country towards similar levels of the growth achieved in the past 50 years.

Firstly, we need to evolve and simplify our taxation system with the principle of supporting enterprises and those individuals who work to build them. Ireland has a progressive system at present and its redistributive nature – those who earn more, pay more – has been recognised by the IMF, the OECD and the ESRI.

The recent political kite-flying about penalising those who earn over a certain amount is being used by our competitor countries as a reason not to invest in Ireland. It comes at a time when there should be a universal commitment to making the country a hotbed for entrepreneurship and investment.

On a similar theme, the Special Assignee Relief Scheme (SARP), which provides income tax relief for certain people who are assigned to work in Ireland from abroad, is too complex and is less competitive than similar schemes in other countries. Ireland’s broader economy benefits from the influx of highly skilled, senior people and SARP is one of the measures that makes Ireland a more desirable place to work.

Secondly, we should establish an investment infrastructure fund enabling Ireland to lead in new technologies and sustainable industry. Existing and planned State funds are useful and have made a difference. Alongside Enterprise Ireland, entities such as the Ireland Strategic Investment Fund and the Strategic Banking Corporation of Ireland have effectively assisted lending and investment since they were established a decade ago.

[ Investment in digital and EV infrastructure crucial for growth ]

Following recent bank exits from the Irish market, greater competition and choice needs to be made available to small and medium-sized scaling businesses. In addition, we need a more streamlined, borrower-focused funding mechanism to accelerate delivery, one which operates in a similar way to specialist commercial lenders. A dedicated start-up and SME scale-up fund that could accept the risk associated with such ventures would be a significant reinforcement of Ireland’s enterprise supports.

Offshore wave and wind farms and onshore sustainable projects should be fast-tracked through the planning system to ensure the time from design to producing sustainable energy is radically reduced

Thirdly, we should be quicker to address systemic blockers to growth, with current examples being housing supply and delivery pathways for sustainable energy. The planned reform of our planning laws is long overdue and to be welcomed. However, if we are to realise the nascent potential of wind and wave energy, we should treat the construction of the necessary infrastructure as a matter of national emergency.

[ Explainer: Planning Bill seeks to reform the process and reduce number of court challenges ]

Offshore wave and wind farms and onshore sustainable projects should be fast-tracked through the planning system to ensure the time from design to producing sustainable energy is radically reduced. This is a point of international competition – the UK has reformed its planning laws and last year Portugal powered its entire national grid for six days on sustainable electricity.

[ ‘The scale of our offshore wind potential offers once-in-a-century development opportunity’ ]

Investments hinge on the twin pillars of confidence and perception, but are driven by individuals in senior positions. Hiring such people is among the key investments many corporations make and their leadership fosters job creation across the economy.

Achieving social and political consensus on investment and taxation priorities would build confidence, enhance our reputation as a true innovator, and allows us to make the next leap forward.

Daryl Hanberry is head of tax and legal at Deloitte Ireland

LATEST STORIES