IVCA warns local businesses suffering from a lack of innovation
Ireland’s success in attractingforeign direct investment (FDI) has masked the fact that it has one of the weakest innovation records compared to other small, advanced economies, according to the pre-budget submission from the Irish Venture Capital Association.
“We need an increased focus on developing a dynamic SME sector. But indigenous, innovative enterprises and entrepreneurs with global ambition face considerable challenges in accessing risk finance to scale their businesses,” said Sarah-Jane Larkin, director general, Irish Venture Capital Association.
In it’s submission, The IVCA outlined how other European countries, including Denmark, France and the UK, have already generated scaling finance for start-ups and SMEs through access to pension and sovereign wealth funds.
The report recommended a mandatory ‘opt in’ to invest in Irish companies or funds by participants in the new auto enrolment pension scheme. Since the introduction of a similar scheme in France in 2008, the amount of capital allocated to French funds grew to €6 billion from €200 million between 2002 and 2016.
Larkin said that similar schemes could “unleash a wave of investment, allowing innovation to drive our indigenous economy and our most promising companies to scale from Ireland”.
The IVCA has also called for changes in the EIIS (employment investment incentive scheme) which is a tax relief vehicle which offers individual investors tax relief of up to 40% as an incentive to encourage investment in small and medium sized companies in Ireland.
Updates to the scheme made in the Finance Act 2023 have created uncertainty for investors and diminished the capital available and the appeal of the EIIS for start-ups.
“Our members who operate designated investment funds are reporting a 30-50% decrease in the euro value of investor applications to EIIS funds since these changes were made,” added Larkin. “Irish investors have been besotted by investment in property assets to the detriment to the more productive sectors of our economy.”
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