Budget 2020 has barely been delivered and digested, yet already, the world is starting to move on. The impending threat of Brexit framed this budget, and, amid the political convulsions in Britain, that threat has quickly overshadowed it. As the prospect of a hard Brexit becomes more real and more tangible, so too does its potentially devastating impact on the large swathes of Irish business.  

Sitting in her office in the Department of Business, Enterprise and Innovation, Heather Humphreys is acutely conscious of all of this. In the portfolio for almost two years, much of her time has been preparing for a scenario that she ultimately hopes will not happen. Indeed, with a pot of €110 million at her disposal in the event of a hard Brexit, Humphreys must rank among the first cabinet ministers in recent history hoping to not to spend her budgetary allocation.  

The minister’s background has helped frame her strategy. Ireland’s agricultural heartland and the border region will be worst affected by a UK crash out. Born and raised in rural Monaghan, Humphreys understands the potential economic shock better than most.

Through a series of different contingency funds, Humphreys wants to help viable companies adversely impacted by Brexit. There will be loans, supports, schemes, even equity participation. The full suite was announced after the Budget and will see enhanced roles for the various state enterprise agencies, particularly Enterprise Ireland.

Different schemes apply to different companies in different situations, but the message coming from Humphreys is clear: the government will support the indigenous economy in the event of a hard Brexit.

“We have really good indigenous companies and I have always been clear that I want to support those companies. They employ more than 90 per cent of workers,” she says.

As part of this process, her department is currently finalising a new plan for SMEs, due to be published later this year. Humphreys says she acknowledges that indigenous Irish business, particularly smaller firms, have felt overlooked by government in the past in favour of multinationals.

However, she says she wants to change that narrative. When I ask what she would like her tenure in office to be characterised by, the minister is quite clear: “For me personally, I would like to think that my achievement will have been in terms of SMEs and giving them the red-carpet treatment. They deserve it,” Humphreys says.

The Budget has been largely well received by the business community. There have been smatterings of discontent about the lack of movement on capital gains tax, and some suggestions that modifications to the Employment and Investment Incentive Scheme (EIIS) did not go far enough.

Indeed, Brian Caulfield, the venture capitalist who has frequently criticised government enterprise policy, said that Budget 2020 was “possibly the most positive budget from a start-up/scale-up perspective in a generation”.

Overall, however, there is an acknowledgement that this a budget both constructed and confined by the shadow of Brexit.

And it is the response to Brexit that will define the likely success or failure Budget 2020. It is on this topic that we begin our interview.

Ian Kehoe (IK): Do you think the Budget did enough to deal with deal with the threat of Brexit?

Heather Humphreys (HH): We have prepared this Budget with a hard Brexit in mind. We have an allocation of €110 million that we can use immediately if there is a hard Brexit. But behind that, there is €650 million of a pot in the cloud – €110 million is the first wave and I am going to download it as we need it.

IK: How soon do you see the money filtering down in the event of a hard Brexit?

HH: In the event of a hard Brexit, Enterprise Ireland is ready. They are ready to go. But there are a lot of companies there that are getting support already. Last year, Enterprise Ireland paid out €74 million support to companies and we have been asking companies to prepare for Brexit since 2016. At this point, people may be getting sick of us. But we need them to be ready. We need them to manage those risks. And we need them to mitigate for them. But, if there is a hard Brexit and a real shock to our economy which we expect in the event of a hard Brexit, which of course we hope does not happen, Enterprise Ireland is ready to go into companies that need help.

We have these different schemes that we have designed, completely in conjunction with Enterprise Ireland. We have all the state aid approval. There is the Rescue and Restructuring Fund.

IK: That is the €42 million scheme?

HH: That is if there is a really good company that is viable but is just vulnerable because of a once-off shock that has happened to it that will wipe it out. That is a doomsday scenario, but we can provide a support, either by way of support or equity of up to €10 million. Again, it depends on the circumstance.

To give you an example: this could be an Irish company that is supplying components into a car manufacturer in the UK. The UK company has suddenly realised that because of a hard Brexit that they can’t export into Germany. That has an immediate effect on the Irish company. This is a very good company that has suddenly lost its market share in the UK for that reason. That is the company we want to rescue. We want to help them restructure and find a new market or to produce a new product. Enterprise Ireland will go in. They have all the expertise and they have all the skills. This will be done on a case-by-case basis.

“It is a case-by-case basis. We have produced a suite of financial instruments that will help companies weather this storm.”

IK: I would like to step in there, minister. There are going to be companies that simply can’t be rescued. So, there will be hard choices about which companies you can bankroll and which you cannot.

HH: Enterprise Ireland come with a huge amount of experience. They [the companies] have to be viable. There is no point in throwing good money after bad, putting money into a business where it is not viable, and the company is not going to survive.

But we do have a Transformation Fund, and that is for food and non-food business. There is €5 million there from us and €5 million the Department of Agriculture – a €10 million pot for the food companies only. Then we have another €3 million for the manufacturing companies. That is when there is a need to change completely and transform what they are doing and look at new markets or change products. That fund is there for them.

There is the Transition Fund. That is there for businesses in food, engineering, life sciences or internationally traded services. All of these companies will have ten or more employees. This fund will help them deal with short-term shocks such as disruption to supply chains or loss of market.

IK: This would appear to be the fund that will help companies in the short-term without writing the big cheque?

HH: It is targeted at small- or medium-sized companies with ten or more employees. There are three funds in particular – there is the Rescue and Restructuring, there is the Transformation Fund and there is the Transition Fund. It will be a mixture of equity, loans or grants. It will depend on what suits each company. It is a case-by-case basis. We have produced a suite of financial instruments that will help companies weather this storm.

IK: I want to talk about timelines. If you generally apply to Enterprise Ireland, it can take more than six months to get money. This needs to be much sharper surely in the event of a hard Brexit.

HH: This will be much sharper. There are a lot of companies that are in the food sector that Enterprise Ireland are working with and they know who they are. They have been getting support. This is for a hard Brexit and unexpected shocks.

IK: You say the government is ready. But do you think the companies are ready for what is about to happen – particularly in the areas most at risk like your own area along the border?

HH: A lot of companies have put a lot of investment into preparing for Brexit. Carbery, for example, have gone from dairy cheese to mozzarella. There are a lot of the food companies looking at the European market and asking what product they need and even if they need to change their products slightly to cater for a different type of market. There has been a lot of work gone onto that.

I am more concerned about the small company. There are lots of supports for the micro companies, which are those under ten employees. There are supports from Micro Finance Ireland. There is €5 million there and they can give loans of up to €50,000. There is also the Local Enterprise Office – they have an extra €5 million. It is from the hairdresser to the haulier. You don’t have to be exporting to ask for that assistance.

IK:  That is an issue. A lot of companies feel they are outside of the Enterprise Ireland arena because they don’t export. So, there is something for non-exporting companies?

HH: There is. But I just want to be clear: if there are companies that are not exporting and are going to be hit by Brexit, go to Enterprise Ireland. They have a Brexit support service, so go to them if they have more than ten employees. Regardless of if you are exporting or not, if you are in trouble and there are going to be job losses, they will help you.

They have funding to pay a consultant – even at this stage, before Brexit. If you need help and you are not sure, go to them and they will help. They will get a consultant to look at the issues and help you prepare a plan.

IK:  We are working on the assumption of a no-deal Brexit because that is the assumption of the Budget. If this €110 million does its job, are you confident that you can go to Paschal Donohoe and get more money?

HH: This is the first wave. He has been absolutely clear. There is a pot there of €650 million so we can go and look for more money. But this is what we initially anticipate we might need. It won’t be spent the first day. It is available from day one, but it is going to take a bit of time. You have to look at the company and see what the needs are. But it is ready for them when they need it.

“You have to look after the business but you also gave to look after the workers as well.”

IK: When people were talking about Brexit two years ago, the conversation was about long-term impact to the economy. Now it is very immediate, and we know the shock will be much more immediate.

HH: There is going to be an immediate shock in the event of a hard Brexit. The Copenhagen report said that it would dampen growth over ten years. But this is going to be a big shock. But from working with Enterprise Ireland and with officials here in the department, we have assessed what they feel is needed and we have come up with these supports. This is in addition to all the other supports that Enterprise Ireland provide to business. We are satisfied that this should put us in a good position to support these companies.

We also have support to the worker as well, and we are working with Minister Doherty’s department and Minister McHugh’s department for a Short-Term Work Scheme. You have to look after the business but you also gave to look after the workers as well.

Prioritising indigenous Ireland Inc

IK: One of the interesting things about this Budget was the juxtaposition between the moves on institutional and international funds and the supports provided for the indigenous Irish economy. Was that a deliberate move by the government?

HH: Since I have come into this department, I have put a very big focus on the indigenous Irish companies. I absolutely value the foreign direct investment that we have here, and how Irish companies can leverage off that. There is a great advantage to having the type of FDI companies that we have. It is great for this economy. For every ten jobs that are created in an FDI company, there are eight ancillary jobs in other companies here.

But we have really good indigenous companies and I have always been clear that I want to support those companies. They employ more than 90 per cent of the workers.

IK: But they do feel that they are forgotten about.

HH: They do, and I am conscious of that. I felt that there was more we could do for them through the Local Enterprise Offices. They are not exporting enough, and they are not scaling into the international market. There is a figure that is interesting. Only 6.3 per cent of our businesses export their goods and services versus 27 per cent in Denmark. That is a country of a similar size. So, it is how we give them the confidence, and how we give them the supports to enable them to scale up and find new markets.

Initially when I came into the department, I was keen that we would increase the supports to the Local Enterprise Offices, and we have done that. We gave them an extra €5 million last year and there is an extra €5 million in a hard Brexit scenario. I am proud of the work that they do.

In Future Jobs, which is the government plan to position Ireland for the jobs of the future, I specifically wanted make special mention for indigenous companies – how SMEs can embrace new technology, look at Lean Programmes, can invest in R&D. That is why in this budget we have increased the R&D credit for them. It is all about helping our SMEs to reach their potential. I am keen on that. I am now developing a new SME strategy. We want to make sure our SMEs feel valued because they are so important to our economy.

IK: When do you hope that strategy will be done?

HH:  We hope to have that strategy by the end of the year. I came from a business background, and I could always see that there were so many SMEs and they just need that encouragement and support to help them scale up and push out the boundaries. Because if you do the same thing forever you are going backwards. You can’t stand still.

“It was something that was brought up with me, especially with Keep. We feel these changes will bring improvements.”

IK: The Minister for Finance referenced a number of schemes in his speech. There were enhancements to the EIIS scheme and the Keep scheme for share incentives. A lot was tinkering around the edges. Would you have liked to see more changes?

HH: What the minister has done with Keep is to make it easier for SMEs to access it and ensure that more companies can take it up. We have widened the criteria to make sure they can use it. It is also about adjusting the scheme to allow for part time and family friendly working arrangements.

IK: There has been a lot of frustration about the scheme. So too EIIS.

HH: Well, we have changed the EIIS scheme as well. Limits have been increased and those changes will make it more attractive for people. It was something that was brought up with me, especially with Keep. We feel these changes will bring improvements.

IK: I am sure another one that was brought up with you was the Entrepreneur Relief on capital gains tax. There was a big lobbing campaign by industry to get it increased. Were you disappointed that it has been kicked to touch?

HH: I don’t feel it has been kicked to touch. It was changed in 2017. It was reduced down to 10 per cent for the first million and then you back 33 per cent for capital gains. The cost of the scheme has increased since its introduction. It cost €20 million originally in year one. Now it has gone up to €80 million. The minister did do a review and Indecon did not see any value in increasing it. But he said he has asked his officials to consider the review. We could possibly look at increasing it if it is for reinvestment. Then it will be going back into another venture.

IK: Richard Bruton’s time in this department was defined by the Action Plan for Jobs. What is your signature?

HH: I think the Future Jobs is going to be the most important thing in this department during my term. It is about looking at tomorrow’s world, about embracing new technology and about embedding a culture of lifelong learning. It is about transition to the low carbon economy and about labour force participation – how we can get more people back into the workforce and make it a more attractive people to were, especially carers and people who look after kids.

For me personally, I would like to think that my achievement will have been in terms of SMEs and giving them the red-carpet treatment. They deserve it.