Challenging headwinds for the Irish economy will require continued budgetary flexibility

Pictured at the Shannon Chamber / Grant Thornton Budget 2023 briefing in the Radisson Hotel, Limerick (from left): Barry Gavin; Vic Angley, Grant Thornton; David Keating, Ei Electronics; Niamh Harte, Tekelek; Ed Rycroft, Chemifloc, Helen Downes, CEO and Eoin Gavin, president, Shannon Chamber. Photograph by Eamon Ward

Delivered against a backdrop of low unemployment, a lower-than-expected budget deficit, estimated corporate tax revenues of €20billion, a national debt of €225bn, amongst the highest in the world on a per person basis, rising interest rates and EU consumer confidence at a historic low, Budget 2023 was described as broadly positive at a Shannon Chamber post-Budget 2023 briefing delivered in conjunction with Grant Thornton.

However, caution was raised that Budget 2023 will need to be flexible and that the Government will need to be able to respond quickly, and where needed, to the impact of the escalating energy and inflation crisis.

Commenting on the contents of Budget 2023, Grant Thornton’s tax partner, Vic Angley, said that pre-Budget kite-flying had already anticipated much of Budget 2023’s content, most notably, the €1.1bn Tax package, the €1.2bn business support package, the health package and welfare packages as well as the €500 renters tax credit, the help to buy scheme extension and the new vacant property tax in the housing package.

He welcomed the introduction of the Temporary Business Energy Support Scheme (TBESS) given the catastrophic effect rising energy costs are having on business where energy makes up a large part of their cost base. While this new scheme is subject to EU approval, Mr Angley expected this would not be opposed given that rising energy costs are having a pan-European impact.

“Other measures impacting business in Budget 2023, for example, the option to call for payment of excess R&D credit or offset against other taxes, the removal of the existing caps on the payable element of the credit, the fact the companies can now receive the first €25,000 of a claim in the first year, will provide cash-flow benefit for smaller R&D projects,” stated Angley.

“The extension of the Knowledge Development Box for an additional four years is also welcome as also the increased limit from €500 to €1,000 of the small benefit exemption which will enable employers to give up to 2 tax-exempt gift vouchers annually,” he added.

Also commenting on Budget 2023, Shannon Chamber president Eoin Gavin echoed the sentiments of Chambers Ireland that the Government’s renewed commitment to the Rainy-Day fund of €6bn over the next 15 months is welcomed in view of the downside risks which the economy continues to face.

Reacting specifically to the introduction of the TBESS, Mr Gavin said that firms of all sizes and categories of activity are very worried about the dramatic increases in energy costs and have concerns regarding security of supply over the coming months.

“Enterprises right across the board regard the energy crisis as a fundamental stumbling block to their operations at present. It also represents a real threat to jobs and, in some cases, to the very survival of companies. This comes at a time when they are already trying to cope with the aftermath of Covid, Brexit, supply chain constraints, labour shortages and the rising cost of living generally.

“Multinationals in the Shannon area are being pressurised because of the massive energy price increases, adding to other pressures on costs. Being part of global corporations with multiple plants, they are at risk from a cost efficiency viewpoint internationally. For instance, American and Asian energy costs are not increasing as much as in Ireland and Europe.

“Energy price hikes and uncertainty of supply also add greatly to the existing challenges facing the SME sector – energy costs are a significant portion of their outlay in many cases and can seriously impact on their viability,” he added.

Responding to these concerns and following a special members’ brainstorming forum on the issue, Mr Gavin said that Shannon Chamber had formulated a set of proposals which it presented to Government pre Budget 2023 and that the Chamber is delighted to see one of its recommendations, the introduction of emergency subsidies, included in Budget 2023.

In tandem with its review of Budget 2023 and considering the requirement to conserve energy, Shannon Chamber’s budget review event also included a panel discussion on sustainability, moderated by sustainability professional Barry Gavin. Representatives from Chemifloc, Ei Electronics and Tekelek shared insights into what led their organisations to focus on sustainability, the areas they first focused on to gain quick wins, how they started the process and the benefits they are deriving from addressing sustainability.

Attendees learnt that the heretofore business focus on financial sustainability has been replaced by a focus on the three Ps – Planet, People and Profit.

“This is driven by both internal and external expectations at employee, regulatory, community, customer and stakeholder levels and the fact companies are being forced to address the risks of not addressing sustainability, particularly the reputational impact not doing so might have on their businesses.

The reasons cited for starting this journey varied from ’the right thing to do, a duty of care to employees, demand from customers to do so or becoming more aware of the opportunities presented by shifting focus.

All panellists agreed that the cleanest unit of energy is the one that is never consumed which prompted them to advise attendees to know their carbon footprint baseline before they consider embarking on their sustainability journeys.

“It’s a complicated field but once measured in advance, it is easier to gauge advances being made,” they said.

All agreed that the sustainability factor is attracting employees and enabling employee retention.

“It shows that companies care about people and the planet,” they added.