THE GOVERNMENT has made an undisclosed cut to a fund set up last year to support struggling companies.
The €100 million “enterprise stabilisation fund” was announced in the emergency budget in April last year to help firms sustain and develop their businesses over a two-year period. This fund has been cut by €22 million.
Internal Department of Enterprise documents show a significant number of viable company proposals for support will have to be rejected due to the cut. It is estimated the cut will affect 40-50 companies which would have been eligible for financial support.
Speaking at the launch of the fund in April of 2009, Mary Coughlan, minister for enterprise at the time, said the fund was a sign of the Government’s commitment to helping companies survive the downturn: “This will enable our internationally trading companies survive the current global downturn by supporting their drive to reduce costs and gain sales in recession-hit overseas markets.
“This is targeted expenditure. These are the very companies that Ireland is depending on for the export-led growth that will take us out of this downturn.”
In 2009, €58 million was paid to about 140 companies. This works out at an average cost of €415,000 in support to each firm. Instead of allocating a further €42 million under the fund, this sum has been cut to €20 million.
Briefing documents prepared for the new Minister for Enterprise Batt O’Keeffe show that officials are concerned over the potential fallout from the cut.
There is no record to show the reduction in the fund was ever formally announced. In a statement to mark her department’s budget allocation for 2010, Ms Coughlan said Government support for the fund “will continue” in 2010. She did not indicate the fund was being cut.
The move to establish the fund was part of a series of measures which the Government said last year would help save in the region of 27,000 jobs. Other steps included an employment subsidy scheme, which gave financial assistance to companies in the manufacturing or internationally traded services sectors.
EU law bans state aid to business that can potentially distort normal competition. As a result, the State had to seek Brussels approval for the stabilisation fund.
The European Commission gave the fund the green light on the basis that funding was temporary and would only be given in the form of repayable grants, interest-rate subsidies or public loans.
At the time of the announcement, Minister for Finance Brian Lenihan said the fund would be important in helping firms experiencing severe difficulties.
In many cases, he said, these firms had viable products and sound business models. This underlined the need to support these companies as they were capable of returning to growth when the global upturn came.
So far, the Department of Enterprise documents show support for companies has been primarily in the form of preference shares, and targeted at those developing and implementing plans to help them to survive and reposition.