Our annual position paper, The Next Financial Year, published today. Researched and written by the Advocacy & Voice team at Chartered Accountants Ireland, with input from expert chartered accountants, it is an open letter to the governments on the island of Ireland, making realistic, practical proposals (50+ for each jurisdiction) on how to make life easier for business.
To give government its due, from the perspective of SMEs, the response to the Covid-19 pandemic and its necessary restrictions, was swift and effective. Supports for businesses and their employees brought reassurance, calming the waters of the economy. A calm, measured approach is still required as we have entered another perfect storm; the challenging post-pandemic world of cost inflation, competition for talent, supply-chain disruption, and geopolitical uncertainty. We call on government to be sensitive to the challenges faced by businesses in what continue to be tough times.
The Next Financial Year is a blueprint of the Institute’s public-policy thinking, relevant to issues that affect the lives of entrepreneurs, workers, and their communities. As a compendium of ideas representing our 30,000+ members its canvas is broad and holistic, ranging from technical accounting, tax and governance issues to hybrid working, sustainability and digitalisation.
For me, three areas of focus stand out:
supporting SMEs;
making work and employment attractive; and
signposting the journey to net zero.
Supporting SMEs to survive and flourish
From our discussions with members, a recurring theme is the importance of government supporting the SME sector, which employs most of the workforce. Wherever possible, government should remove red tape and administrative burdens. In both Ireland and Northern Ireland, there are excellent grants and support schemes available for small business – these need to be better communicated and their eligibility criteria broadened to include more of the economy, the more traditional businesses that provide services and employment to their communities.
At the same time, grants should be used appropriately, and businesses made more aware of the longer-term benefits of equity investment, bringing expertise, connections, and improved governance. Improving financial literacy among small business owners and managers will pay substantial dividends for the economy.
A perennial request from members advising businesses is to incentivise the continuing investment of talented, serial entrepreneurs by increasing the lifetime cap of €1 million on entrepreneur relief to at least €12 million. This would also have positive effects for the succession of family businesses to younger generations, again helping to invigorate the economy.
Making work accessible and attractive
Another stand-out theme in interviews we conducted for The Next Financial Year was the challenges businesses are experiencing in recruiting and retaining the right people, particularly in certain sectors like professional services and hospitality. A repeated request was for government to make it easier for people from overseas that are not automatically eligible to come and work here. Again, a call to remove the administrative hurdles.
While the labour market is competitive and finding people is a challenge, employing people should be made as easy as possible. Tax policy should not increase the cost of employing people and, while necessary, legislative changes affecting employers, such as pension auto-enrollment, statutory sick pay, and the right to request remote working, should be introduced with timeframes allowing employers to adjust and prepare their systems.
Investment in training the workforce for 21st-century skills is needed, particularly for digitalisation and sustainability, and government has an important role to play, for example in how Apprenticeship Levy funding is allocated in Northern Ireland. In Ireland, the Key Employee Engagement Programme (KEEP) scheme could be expanded to include a wider category of businesses to help them attract and retain talented people.
Signposting the journey to net zero
Consumers will look to businesses to take the lead with sustainability, for example in the re-use of materials, the reduction of packaging, and commitment to positive social impact. Clear and coherent guidance from government is needed, however, to ensure that the business sector is aware of what it needs to do to help achieve the net-zero targets. As well as the wider social and moral imperative, companies will need to understand the business case for climbing the mountain to net zero, such as business model resilience, brand-building and meeting customer and stakeholder expectations.
Human beings do not like change, at least not initially, but with change comes the opportunity to develop and grow. Extensive and profound changes in behaviour are required; government can provide the necessary incentives through the tax system, by rewarding innovation, and by underwriting a system of ‘green finance’ for SMEs, from targeted grants and supports to enlightened equity investment.
Despite the obstacles, The Next Financial Year reflects a broad sense of optimism and the huge potential in businesses, North and South, to achieve the best of possible futures.
A PDF copy of The Next Financial Year is available on our website.
Michael Diviney is Executive Head of Thought Leadership at Chartered Accountants Ireland.