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Covid-19 and the Irish SME Sector: Supporting Recovery and Growth A report commissioned by Vodafone Ireland in collaboration with Economist Stephen Kinsella Research by RED C
Foreword
The COVID-19 crisis has put significant that will underpin and support SME recovery Ireland’s SME sector will play a crucial role
pressure on the vital small-to-medium post COVID-19. We were delighted to work with in driving strong economic recovery and
enterprise (SME) sector in Ireland. Many Stephen Kinsella who has provided further providing jobs all over the country. I hope
companies have been forced to make insight into the sector by benchmarking that you will reflect on the findings of this
considerable changes to their business Irish SME performance against our European report and consider the current challenges
operating models overnight and others counterparts. and opportunities of this vital sector. We
have had to close their doors for months must learn and adapt to support SMEs and
to help protect public health. No matter The good news is that despite many partial or protect them in an uncertain local and global
the size or nature of the organisation, full closures during lockdown, SMEs remain environment.
COVID-19 has changed everything about positive about their future. Technology
how we do business. and training are key, with many planning to
Anne O’Leary invest across these areas. Digitalisation was
CEO, Vodafone Ireland Vodafone has commissioned this report, identified as a key driver for this recovery, with
working with economist, Stephen Kinsella, to noteworthy growth potential for Irish SMEs
investigate the impact of COVID-19 on Irish who engage in digital transformation.
SMEs. Vodafone has 2.3 million customers in
Ireland and among those are thousands of At Vodafone, we know that now, more than
small and medium businesses. It is therefore ever, connectivity and technology are at the
vital for us to understand this sector so we can core of enabling Irish businesses to operate
serve it better, offer support where needed in a digital society. After some big changes
and contribute to its future sustainability and to the way we work, many organisations are
growth. now doing business safely and successfully
and thinking about what comes next. The
This study highlights SME investment plans, tenacity, determination and innovation of Irish
the opportunities and challenges they are SMEs to carry on and to turn uncertainty into
currently facing, digitalisation, the role of opportunity came through strongly in this
technology for future growth and the policies study.
2 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and Growth
Executive Summary
The purpose of this report is to examine We also found that policy supports to increase we see larger firms have invested far more
Ireland’s SME sector in three ways. First, we SME digitalisation here can help overcome in digital tools and processes and are more
want to gauge the extent of SME reaction the structural challenges in relation to low resilient to crises as a result. One measure
to COVID-19 and Brexit, and understand productivity and domestic value added in stands out: 65% of firms with 10 to 49
how technology usage has changed in comparison to their EU counterparts. These employees have invested in cloud computing,
reaction to this crisis. Second, we want to policy supports include; designing flexible while the number for smaller firms of 1 to 9
place Irish SMEs in their European context. digital investment schemes to help firms employees stands at 47%.
When it comes to technology adoption, transition to the digital economy effectively
innovation, and adapting to the future, and ensuring equal access to high-speed Prior to COVID-19, the OECD’s recent report on
how do they compare? Third, we want to connectivity for all firms regardless of location Ireland’s SME sector, focusing on the last five
understand what policy supports can best and size. As we will see, firm size is a key factor years up to 2019, showed a buoyant, resilient
Stephen Kinsella help SMEs prosper in a post-COVID world. of technology adoption and resilience. sector operating within a favourable business
Economist environment3.
SMEs are a vital part of the Irish economy. We are particularly interested in digitalisation
The latest survey of SMEs by the CSO in in this report as it results in new business SME firms accounted for as much as 56%
2018 shows they accounted for 99.8% processes, creates new products and helps of manufacturing employment and 74%
of the total number of enterprises and firms access new markets around the world. of services employment4. Ireland has been
67.5% of all persons employed1. Of these, We find Ireland’s SMEs have a long way to go very successful in generating high-growth
micro-enterprises accounted for 91% of all to fully embrace digitalisation, but that the firms, which are a key driver of employment,
enterprises2. opportunity for them to do so is all the greater. innovation, and productivity growth in the
economy.
In relation to COVID-19, the research found Comparing Irish and European SMEs by a range
that Irish SMEs adapted where they could, of indicators, from the integration of internal That said, the sector had been not without its
using digital tools wherever possible. In and external IT processes like e-invoicing, challenges. Prior to the start of the COVID-19
particular, larger, rural-based businesses to big data analysis and the use of artificial pandemic, growth among Ireland’s SMEs was
displayed a greater use of digital channels to intelligence and robotics, Ireland’s SMEs stagnant. Productivity was far from declining,
access new markets than smaller, urban-based tend to fare poorly, except in areas like cloud but it was also not increasing, with Ireland’s
businesses. computing. When we look at firms by size, direct SME export levels very low when
3 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and Growth
compared to EU countries such as, Lithuania, technology will play an even bigger role in how
Estonia and Luxembourg with only about 6% SMEs plan for recovery and growth. In fact,
of Irish SMEs directly trading across borders. our study shows that those SMEs who were
As a small economy, there is a need to make agile and adaptable and embraced technology
exporting a part of the business ambitions of managed to maintain some, if not all, of their
more SMEs. One route to increased domestic business operations.
value added is digitalisation.
In order to obtain an informed view of the
Without a doubt, the challenges facing SMEs impact of COVID-19 on the SME community
in Ireland have since been exacerbated by in Ireland, the opportunities for growth and
the arrival of COVID-19. In just four months the role of technology in recovery, Vodafone
between March and June 2020, around two- commissioned this report to investigate:
in-five micro-sized firms and one-in-two small
and medium-sized firms faced a revenue • The impact of COVID-19 on revenue,
shortfall. The total shortfall across the Irish employment and workplace operations
SME sector over this period is estimated to be among SMEs
between €6bn and €10bn, according to the • The economic outlook and investment
ESRI. plans of Irish SMEs
While the scale of interruption and uncertainty
• Digitalisation and the role of technology
of COVID-19 has been unprecedented in in supporting SME survival and growth
recent history, Irish SMEs remain bullish, with a • The policy changes required to support
high level of confidence (67%) in the future of SMEs post COVID-19, particularly
their own business. Half also anticipate growth digitalisation
in their business in the next two years.
It has also become quickly evident that
1
usiness in Ireland 2018 - CSO - Central Statistics Office, 2021
B
2
Business in Ireland 2018 - CSO - Central Statistics Office, 2021
3
SME and Entrepreneurship Policy in Ireland | OECD iLibrary, 2021
4
Business Demography 2018 - CSO - Central Statistics Office, 2021
4 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthThe Report Profile of SME Sample
The report is based on a nationwide survey of Less than 5 years 3%
500 SMEs operating in rural and urban areas 5 - 10 years 9%
in Ireland and across a wide range of sectors.
In addition, a European economic benchmark 11 - 20 years 27% Less than €250,000 42%
analysis was carried out by leading economist,
Stephen Kinsella, to assess the opportunities
and challenges for SMEs in Ireland vis-à-vis
other European markets. 21 - 30 years 33%
€250,000 - €500,000 14%
€501,000 - €1 million 7%
31 - 50 years 19%
€1 - 5 million 12%
Over 50 years 7% €6 - 10 million 2%
1% €11 - 20 million
Over €20 million 1%
Length of Time in Ireland Annual Turnover
10-49 21%
Rural 34%
1-9 75%
50-249 4%
Urban 66%
Location of Company Company Size
5 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and Growth (Base: All Irish SMEs, n=500, Urban=348, Rural=152, 1-9 n=217, 10-49 n=218, 50-250 n=65)Business Impact The Role of Remote Working Investment
& Future Outlook Technology
Key Findings
from Irish SMEs:
The findings in this report point clearly to a
need for greater structural supports to help
70% 43% 75% 25%
suffered full or partial claim they could not have of SMEs have been unable to aren’t confident their staff
Irish SMEs recover from a period of significant closures during lockdowns functioned productively facilitate remote working have the necessary digital
uncertainty and instability, increase productivity without investment in skills
levels, access new markets and encourage new technology
entrepreneurs and start-up enterprises. At the 75% 50%
heart of the findings, digitalisation is identified as experienced some reduction said scaling IT and phone 50%
a key driver for recovery, with significant growth in financial performance – 50% systems was the biggest plan to invest specifically in
potential for Irish SMEs who engage in digital (an average of 34%) of SMEs invested in technology issue when trying to facilitate digital skills training
transformation. such as communications or remote working
digital channels
67% Advantages include increased
60%
are confident in the future of plan to invest in people
their own business Only 19% of smaller Irish productivity, fewer sick days
and improved employee
training in the next two years
firms are ‘highly digitalised’
wellbeing
50%
anticipate growth in their
business in the next 2 years
6 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthThe SME Sector in Ireland: COVID-19 Impact Interestingly, larger, rural-based
businesses displayed a greater use of new
digital channels to access new markets
than the smaller, urban-based businesses.
The economic and social fabric of to remain fully operational, with smaller and
Irish society has undergone a period rural-based businesses more likely to have
of sustained interruption, shock and partial or full closures. Unsurprisingly, those
uncertainty due to the COVID-19 pandemic who were completely shut were far worse off
- the tremors of which will be felt for than those experiencing partial or no closures,
some time to come. Despite the positive with an average 62% decrease in financial
economic outlook of Irish SMEs captured performance. On average, small businesses
for this report, there has been a significant experienced a one-third reduction in their
impact on small to medium sized business income.
across Ireland, many of whom require time,
investment and above all, stability to make
a full recovery.
Despite the challenges, many SMEs in rising to two thirds for larger enterprises.
The OECD’s July 2020 survey of policy Ireland displayed tenacity, innovation, and Communication tools and mobile or
responses to COVID-19 for SMEs found that t resourcefulness in adapting their operations broadband connectivity were the most widely
undan
they were likely to fail within three months Red and business models to survive. What is invested in; but close to 20% also invested in
without government supports5. Unlike evident throughout this study is that SMEs cloud-based services and new digital customer
larger firms, with access to internal financial looked largely to digital tools and technology software.
resources and external debt markets, SMEs to support a transition to new ways of working.
typically access local banks to obtain credit, Perhaps the greatest indicator They also increased their use of digital Importantly, company size was a key factor in
are more limited in their customer base and of the impact of the pandemic channels to access new markets or to create tracing a firm’s ability to adapt to the COVID-19
supplier network, have less of an ability to on SMEs is that one in eight new methods of reaching and engaging with challenge. As the graph shows, smaller firms
offset or lower costs, and are less likely to buy businesses had to make customers when the bricks and mortar option of less than nine employees were less likely to
and sell online. redundancies of up to 20% of was no longer viable. make changes to their business in response to
their workforce. This rose to the crisis.
Between March and November 2020, only 11% for larger SMEs with up to Half of all SMEs invested in new technology
three in 10 Irish SME businesses were able 250 employees. during the first nine months of COVID-19,
5
Coronavirus (COVID-19): SME policy responses, 2021
7 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthWhich of these changes were implemented
in your business due to Covid-19?
Adapted or changed 27%
your supply chains 19%
21%
New technology to 31%
support remote working 35%
34%
Increased use of digital
50%
channels to new routes
33%
to market (for example,
trading online) 38%
New technology to 48%
communicate with 38%
customers 41% In order to cope with Covid-19, Irish SMEs
engaged in several strategies, including
investing in new communication and digital
50 - 250 Employees 10 - 49 Employees 1 - 9 Employees channels to access new markets and engage
with customers or to support remote working.
8 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthThe European SME Sector
The European SME sector typically has very small firms (91% of all firms have less
high levels of productivity, digitalisation, than 9 employees, as mentioned above)
and innovation. We need to place Ireland’s and many sectors feature an over-reliance
SME sector in its European context to on exporting to a small number of larger
understand its scope for development. companies, as opposed to having a diverse
One measure of the development of a supply chain or customer relationships with a
country’s SME sector6 is the percentage of range of businesses across the EU. This is a key
value added created by domestic firms for structural feature of the Irish SME landscape,
export7. The EU average is 88.4%, meaning, and an aspect Ireland’s new SME Taskforce
across the EU, 88% of all value created report references directly.
and sold abroad is made by firms from
the EU. By this measure, Ireland features Therefore, due to their over-reliance on a small Economic activity is heavily concentrated in helping adjustments of households and firms.
one of the lowest scores in the EU at 58%. customer base and difficulty in obtaining the greater Dublin area, where about 30% of Ireland was characterised by a high degree
Countries like Denmark (71.9%), Latvia extended credit lines, Irish SMEs are more the country’s employees reside and income of disparity between larger regions that are
(79.3%), and Estonia (65%) fare far better. likely to experience significant disruption per head is substantially higher than the rest of ‘catching up’ to the EU average and those
compared to their EU counterparts in a the country. These income and concentration ‘pulling away’ from the EU average than other
This may be because, relative to our EU lockdown or restrictive economic situation disparities are among the highest in OECD countries like Greece or Finland or Austria,
neighbours, Ireland has one of the lowest such as COVID-19. countries. underscoring the need for a considered rural
ratios of exporters to total enterprise numbers COVID-19 policy mix in Ireland.
in the European Union. This poor performance In addition to the size/value disparity between The European Stability Mechanism considered
is partially reflected in Ireland’s deep firms, the Irish economy, including the the role of regional disparities when trying to
connections to global value chains8, but it is growth potential of SMEs, is hampered by the understand how regions might recover from
also a function of the size of most Irish SMEs. sustained economic disparity between its COVID-19. They found models of specific
urban centres and the rest of the country. regional support were most effective in Johnson, R., 2014. Five Facts about Value-Added Exports and
6
Implications for Macroeconomics and Trade Research. Journal of
Relative to other EU countries, Ireland’s SME Economic Perspectives, 28(2), pp.119-142.
structure features a combination of many SME and Entrepreneurship Policy in Ireland | OECD iLibrary, 2021
7
Dollar, D., Khan, B. and Pei, J., 2019. Should high domestic value
8
added in exports be an objective of policy?. Global Value Chain
Development Report 2019, p.141.
9 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthRegions Catching Up, Falling Behind
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
BE DE IE EL ES FR IT NL AT PT FI
Lagging Catching Up Catching Down Pulling Away
SOURCE: ESM based on Eurostat and OECD. Luxembourg is omitted due to the limited number of regions
10 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthIrish Economic Outlook & Business Confidence
Understandably, the economic outlook for
all Irish businesses, across all sectors is
exceptionally uncertain. This is particularly
true for SMEs who are also contending
with other economic shockwaves, such as
Brexit. Participants in this survey exhibited How confident do you feel about the future of
local optimism, global pessimism, and your own business and the wider economy?
general uncertainty in their views about
the future.
Irish SMEs remain bullish, with a high level of 41%
Don’t Know
confidence (67%) in the future of their own 18%
business. In fact, 50% of businesses believe
that they will return to normal (i.e. pre-COVID
37%
levels of activity) within the next 12 months, Confident
though one in three believe it will be 2022 or 67%
later. Importantly however, 50% of SMEs see
significant growth potential in the next two
22%
years, relative to the start of the pandemic, Not Confident
though smaller SMEs are less confident of 15%
growth than larger ones, as highlighted in this
graph.
Economy Own Business
11 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthSupporting Future Growth Financial support is the
most important common
SMEs have identified a number of key
supports to help drive growth, with 85%
of SME’s can access
support businesses can
access to aid future growth,
though just under half also
financial aid the most common. Digital
transformation and technology adoption is at least one of these plan to gain from digital
opportunities transformation and the
recognised by 47% as a key driver of future
adoption of the new tech.
growth and 40% highlight access to new
markets as a growth opportunity.
Which of these opportunities are available
It is clear that in order to weather the
pandemic and drive future economic
to you to support future business growth?
recovery, SMEs need access to a broad range
of supports that reduce risk in the short
term, in particular financial aid and grants. To Access to financial support, for example
62%
remain competitive, businesses are looking to government grants and payment schemes
digitalisation and technology supports that
drive innovation and business growth, and
Digital transformation and technology adoption 47%
those that support access to new markets.
Ensuring SMEs are incentivised to undertake Access to new markets 40%
these transformations this will be crucial.
Opportunities to diversify products,
35%
services or routes to market
Reduction in business costs, such as commercial rent 27%
None of these 15%
12 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthThe European Perspective
In comparison to the EU, sentiment in Economic data for Europe allows us to assume Economic policy uncertainty index
Ireland appears much more certain in that, at the macro-economic level, there is no
relation to economic policy than other trade-off between the health of the population
markets, according to an analysis by Bloom and economic recovery9. Countries that have 600
and Co-Authors at Stanford. While Ireland strong policy supports for closed businesses
exhibits large amounts of volatility caused have fared better than countries that have not.
by COVID-19, both Germany and the wider The SME sector across Europe has absorbed 500
EU experienced a degree more since the shock caused by COVID-19 aided by a
February 2020. The latest Economic Policy suite10 of domestic and pan-European supports
Uncertainty Index at November 2020, show for working capital, warehousing of arrears, 400
Ireland at 285, Europe at 327, and Germany worker supports, and improving access to
at 387, highlighting a remarkable lack of finance.
variation in the levels of uncertainty for 300
Ireland, relative to Germany. At the EU and Irish levels, there are many
opportunities to recover from the shock of
This suggests Ireland was able to COVID-19. With sustained access to financing
200
communicate policy certainty more and new market access opportunities, the key
adequately than its EU counterparts, due challenge is to decide upon the digitalisation
to very strong policy supports by the strategy for the firm, the technology tools to
100
Government. According to our survey, more invest in, and the strategy to access these new
than 80% of SMEs accessed a Government markets.
service during the period and interestingly,
27% felt that the Government was providing 0
enough support.
9
0
9
0
Ma 9
Ma 9
No 9
No 0
Ma 0
Ma 0
9
0
9
0
Ap 9
0
Ap 0
De 9
0
Se 9
Se 0
Ju 9
Ju 0
l1
l2
n1
n2
1
r1
t1
t2
b2
r2
n1
n2
p1
p2
r1
c2
r2
v1
v2
g1
g2
y1
y2
b
Ju
Ju
Oc
Oc
Fe
Fe
Ja
Ja
Au
Au
(Which countries have protected both health and the economy in
9
the pandemic?, 2021) Ireland Europe Germany
Coronavirus (COVID-19): SME policy responses, 2021
10
13 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthDigitalisation of SMEs in Ireland:
The Challenges and Opportunities
Digitalisation is defined by the world’s It is clear from the findings in this report Additionally, 51% of all firms said they
leading research and advisory company, that technology was and is a key enabler of will invest in digital technology and
Gartner, as the use of digital technologies business adaptation throughout the pandemic, transformation, with 80% of those planning to
to change a business model and provide with many SMEs recognising the need to invest in the next two years.
new revenue and value-producing make significant changes to their digital
opportunities; it is the process of moving infrastructure. It is certainly evident that those
to a digital business11. It is integral to the SMEs who embraced digital transformation
growth and resilience of enterprises, both were more responsive and flexible during the
large and small. pandemic. The trends around innovation,
investment, and new market entry, enabled by
Our study shows that there are two important digitalisation were apparent before COVID-19,
drivers of economic recovery for the SME but have been accelerated by the pandemic.
sector post COVID-19. The first is the scale
and scope of the range of supports around In fact, over 43% of SMEs claim they could
working capital—this is keeping firms alive not have functioned productively during the
long enough to rebuild once the recovery pandemic without investment in technology
takes over. The second is investment in – this is higher among those in rural areas
technologies to access new markets and and outside Dublin. Therefore, making policy
create new products. In addition, developing interventions like the National Broadband
training and talent initiatives to take advantage Plan, the rollout of 5G and other digital
of new tools and processes on the horizon. transformation and innovation supports, along
The world post COVID-19 will be more with financial aid.
integrated and more online so Irish firms will
have tremendous opportunities to serve world
markets. Hensellek, S., 2020. Digital Leadership. Journal of Media
11
Management and Entrepreneurship, 2(1), pp.55-69.
14 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthDespite this willingness to invest, SMEs in
Adoption of new technologies
Ireland face a number of barriers in relation
to the adoption of technology. 58% of firms
face at least one issue, such as the cost of Internal digital capabilities to 37%
investment, choosing the right supplier to manage IT infrastructure, 34%
suit their needs, integrating new systems including administrator training 26%
with older ones, sourcing the right product or
service or having the in-house capability to The availability of the right 35%
manage IT infrastructure. Though cost is the digital product or service 33%
highest obstacle to adopting new technology, for your business 29%
trust in suppliers and integration with older
systems are also common issues for SMEs The integration of 43%
wanting to invest. newer technologies 40%
with older systems 29%
As this graph indicates, larger firms – those
with between 50 – 250 employees, are more 34%
Selecting the right
intent on investing in this area than smaller 34%
supplier for your needs
firms. Investment in technology is vital to 37%
increase SME productivity and Ireland lags
behind its European neighbours in this area. 48%
The cost of investment in
There is much to improve for small to medium 43%
digital infrastructure
sized SMEs with significant potential if they 35%
embrace digital change.
50 - 250 Employees 10 - 49 Employees 1 - 9 Employees
15 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthSkills, Training & Remote Working
In addition to the adoption of new
technologies, SMEs see a significant need Issues around remote working
to upskill employees in the coming years, Note. 24% of SMEs facilitate home working
especially in digital skills. One quarter
of SMEs lack confidence in the digital
Scaling Systems
skills of their employees and almost half 50%
(IT, Phone Systems, etc.)
plan to invest in digital skills training and
development. This rises to 65% for larger Increased employee productivity 41%
Highest
SMEs. among rural
More precarious work or working conditions 36%
enterprises
Interestingly, just under one quarter of SMEs (70%)
surveyed were facilitating remote working at Decreased sick days taken 31%
the time of this study, and the majority were
Decreased employee productivity 29%
urban-based enterprises. This suggests an
inability to do so due to the nature of their Decreased employee physical or
29%
business or the lack of understanding of how mental health and wellness
their business could operate remotely. Of Increased employee physical or 28%
those who have operated remotely, challenges mental health and wellness
were identified with scaling systems and Increased sick days taken 13%
precarious working conditions, but for many it
has also brought increased productivity, fewer
sick days and improved employee wellbeing.
Remote working has brought challenges
with scaling systems and precarious working
conditions, but for many it has also brought
increased productivity, fewer sick days and
improved employee wellbeing.
16 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthThe European Perspective
An analysis across 21 OECD countries Does this establishment buy or sell goods on the internet?
found that a 10% increase in mobile
broadband penetration causes 0.6%-2.8% 60% 53
increase in GDP per capita12. Despite the
wide-ranging benefits of digitalisation, 50% 45 45
42
data indicates that SMEs lag in adoption of 39
36 37
nearly all technologies in comparison to 40% 35 38 34
31 32 31 31 32 32
larger businesses13.
30 30
28 27 28 28 28 29 30 29 28 30 30 29 30
28 29 30
30% 25 25 26 26 26
23 23
20 20 19 2020 20 21 21 22 20
In their 2019 survey of 26,000 firms across 20% 16
Europe, Eurofound placed Ireland solidly mid-
table for the level of digitalisation of its firms. 10%
There is an interesting outlier in the data,
however, with just 30% of small firms in Ireland 0%
(10-49 employees) saying that they sell BG BE HR LV LU SI EE PL AT DE ES IT NL FR LT IE PT SK RO SE CZ EL DK MT FI HU
online. For larger firms (50-249 employees)
that number jumps to 38%14. The graph below 10 to 49 50 to 249
highlights how different the picture is for
Ireland, relative to other European nations, Ireland has much to learn from small, highly of technology, versus only 31% of Irish firms. SME and Entrepreneurship Policy in Ireland | OECD iLibrary, 2021
12
SME Performance Review - Internal Market, Industry,
13
when you consider the difference in firm size. digitalised EU countries like Denmark, Croatia, Eurofound data shows that only 19% of the Entrepreneurship and SMEs - European Commission, 2021
COVID-19 has forced many of the other firms Malta, Latvia, Lithuania, and Estonia. These smaller Irish firms are ‘highly digitalised’, while Eurofound. 2021. European Company Survey 2019 - Workplace
14
who were not buying or selling online to start, countries feature highly digitalised SMEs which just 24% of larger firms are, as the chart shows. practices unlocking employee potential. [online] Available at:
[Accessed 27 January
2021].
example, are described as having a high use Danish firms15.
European Company Survey 2019 - Workplace practices
15
unlocking employee potential, 2021
17 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthRecent research has also shown that Measures of Digitalisation by Country
digitalisation drives innovation, which
increases productivity over the medium term.
One measure of innovation is the ‘innovation 100%
potential’ score. Using 2019 data, Eurostat16
calculated a measure of R&D potential across
many countries. A score of five would indicate 80%
all industries in a country were investing in
R&D, a score of one indicates no industries
invest in R&D. The EU-28 average is 2.58,
Ireland’s score is 2.47, ranked 19th from 2717. 60%
Firms will see both improved financial returns
and business performance as they invest in
40%
technology and employee training. However,
investing for tomorrow imposes a cost on
today. It is this upfront cost that results in
reticence by many SMEs to invest in these 20%
areas.
0%
AT BE BG CY CZ DE DK EE EL ES EU FL FR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK UK
Highly digitalised
High computer use, limited use of other digital technology
16
SME Performance Review - Internal Market, Industry,
Entrepreneurship and SMEs - European Commission, 2021 High use of robots and other digital technology, limited computer use
17
SME Performance Review - Internal Market, Industry,
Entrepreneurship and SMEs - European Commission, 2021 Limited digitalisation
18 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthPolicy Recommendations: Supporting the SME Sector in Ireland
In the initial phases of the COVID-19 Policy Considerations
crisis, European and Irish governments
prioritised support for SMEs by introducing
•There is a need for ongoing government
short-term financial relief measures policy support, prioritising the
to mitigate the challenges they faced. opportunities presented by the use of
In addition to short-term relief, the digital.
OECD18 recognised that governments are
•There is clearly no ‘one size fits all’
increasingly focused on strengthening the approach to ongoing SME support.
resilience of SMEs in a structural way and Instead, a tailored approach is required,
supporting growth through the adoption of particularly to enable SMEs to cross the
new technologies and practices that may digital divide.
enable them to strengthen their post-crisis
Despite the strong evidence that digital
•
competitiveness.
is a key enabler of SME resilience,
there is a divide between large and
In Ireland, the Programme for Government:
small SMEs. government policy should
Our Shared Future sets out that “central to
address this digital divide by addressing
our recovery will be our SME community” and
the financial constraints that impede
certainly the establishment of the SME Growth
the ability of SMEs to digitalise.
Taskforce will focus on building an ambitious
long-term strategic blueprint beyond
COVID-19. As Ireland begins to look towards
recovery, it is vitally important that policy
fosters conditions that holistically support the
sector into the future.
18
SME and Entrepreneurship Policy in Ireland | OECD iLibrary, 2021
19 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthEnsuring access to high- or unable to gauge the benefits of digital A flexible and guided digital
tools for their business, they are less likely to
speed connectivity adopt such technologies, particularly given investment scheme
A prerequisite for all digitalisation policies is their lower financial capacity. To address this, Government should provide further direct
sufficient access to high-speed connectivity. governments may want to consider voucher support to enable digital investment, but
A lack of access prevents SMEs adopting schemes to support high-speed connectivity allow for flexibility so SMEs can choose the
and optimally using digital solutions, even targeted to SMEs in specific sectors that are most appropriate technologies or tools for
if there is a clear business case for digital most impacted financially and least digitalised, themselves. SMEs across sectors, and even
investment. To address this, Vodafone’s or to SMEs more widely. Funds from the EU within sectors, are likely to have different
Digital Deployment report identified potential Recovery Plan could provide the resources digital investment needs, meaning advocating
measures including, but not limited to, easier required to close this gap at a national level. one-size-fits-all solutions is unlikely to be
access to infrastructure, fewer obstacles to Additionally, the Irish Government’s €3.4billion effective for all. To address this, government
obtain building permits and making spectrum COVID-19 Recovery Fund, set out in budget may want to consider offering a mix of
available quickly and at a reasonable cost. 2020, is also a vehicle which could deliver support measures, including: flexible grants
The EU Recovery Fund may be best placed to support for investment in digital infrastructure. or vouchers earmarked for digital investment,
facilitate investment and ensure widespread As part of this budget, the Government has incentives for the financial system to lend to
access to high-speed connectivity at a national also pledged €5million to be allocated to SMEs for digital investment, training in sector-
level. support Ireland’s Digital Hubs network. Digital relevant digital skills and/or sector-specific
Hubs, coupled with high-speed broadband, online resources.
Closing the connectivity can play an important role in supporting Likewise, as part of the Irish Governments
divide between large and rural businesses and economies to grow and budget 2021, previsions have also been made
flourish. to support SMEs to prioritise investment in
small firms. digitalisation. For example, the commitment
In order to close the wider digitalisation gaps, to a remote working strategy and the
and in particular, the usage and adoption gaps introduction of a tax relief for broadband
between large and small firms, a key starting usage for remote workers, in recognition that
point is closing the connectivity gap to enable connectivity is now a fundamental utility for
further digitalisation. If SMEs are unaware employees.
20 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthConclusion Like businesses across the world, the However, as has been captured by this story of Ireland’s SMEs throughout the research, due to the demographic make-up pandemic has been one of uncertainty, of Irish SMEs, of which the vast majority are financial insecurity, and increased anxiety. micro-businesses, their ability to make the However, it is also a story of adaptability capital investment required is challenging. and resilience, with SMEs capitalising on Therefore, as the cornerstone of Ireland’s new opportunities to build and grow their economy and a core driver of post pandemic businesses. economic recovery, it is of the utmost What is clear throughout this report is importance that financial support and that rather than remaining stagnant and practical policies are in place to allow SMEs pessimistic, Irish SMEs are keen to continue invest in digitalisation and compete with EU implementing change and make plans to and global SMEs within the digital economy. support the future of their business. They have recognised a need to make changes to their operations that will address long- standing challenges that existed even before the pandemic but have now become more apparent. Technology has been identified as a core enabler of their strategic ambitions, with SMEs showing an appetite to invest in digital solutions and IT capability within their business, and in new tools to support customer engagement, expansion of new markets and diversification of their supply chains. 21 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and Growth
Case Studies
Technology, agility and the ability to turn Based in Cookstown Industrial Estate in “We were already set up
a crisis into a new opportunity was central Tallaght, Dublin 24, Flying Elephant creates
to the survival of many SMEs in Ireland, bespoke builds for events such as concerts with our landline and our
including Dublin-based Flying Elephant and festivals. In 2020, the business led by internet. Vodafone’s service
and Elite Event Management in Killarney. Michael Keenan was set to have its biggest
year yet. However, when the pandemic hit, made our lives easy because
every job for the months ahead was cancelled. we had good, quick internet
Michael and his team wasted no time in and because we basically
coming up with an innovative solution to use changed into an online
the resources and products they had at their
disposable to service a different need and business overnight.”
customer base. Michael Keenan, Flying Elephant Co-founder
Equipped with reliable connectivity from
Vodafone, they were able to make the most After an unpredictable start to the year and
of their digital know-how to launch online having to adapt their offering during the
“Every job was cancelled” very quickly and began using the leftover coronavirus pandemic, Flying Elephant ended
Dublin Events Company Flying Elephant used materials to make bespoke office furniture for up expanding their business in 2020. The
technology to transform their operations, employees now working remotely. company now employs 20 full time-staff and
becoming a digital-first business. doubled its Tallaght warehouse to 25,000 sq ft.
Now the company offers a wide range of
custom-made, 100% Irish furniture products
– from garden furniture to standing desks to
wine racks.
22 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and Growth“Resilience isn’t an option
for Irish businesses - it’s a
necessity. We’re pivoting from
a bricks and mortar business to
a tech company, and we’re able
to use the mobile broadband
we get from Vodafone to do our
business anywhere.”
Oliver Kirwan, Co-founder
Elite Event Management
23 COVID19 AND THE IRISH SME SECTOR: Supporting Recovery and GrowthYou can also read
