1. 1. Presentation from Hardware Association Ireland (HAI) to Joint Committee on Jobs, Enterprise and Innovation Attending: Annemarie Harte, Chief Executive Hardware Association Ireland Alex Taylor, Sales Director Uppercross Enterprises Ltd Jim Copeland, Head of Member Relations Hardware Association Ireland Subject: Policy options to support business growth and job creation and retention in town and village centres. Introduction Hardware Association Ireland (HAI) is the national representative body for hardware, builders merchants, DIY, homewares, garden and agricultural suppliers, at retail, wholesale and manufacturing level. From family run businesses to publicly quoted companies, HAIs 300+ members serve their local communities competitively, representing and employing over 20,000 people throughout the country. HAI is a truly representative body, monitoring the interests of independent retailers with single outlets as well as larger national retailers with outlets nationwide. Our sector has been particularly badly affected by the downturn given the direct consequences of the collapse in both the construction and retail markets. HAI members, both suppliers and hardware merchants, continue to face huge challenges and difficulties. Increased taxes and ever increasing business costs applying to the domestic economy have hoovered out any disposable income from consumers. Our members are making every effort to provide consumers with the best value products and services. However, the market is still struggling as is evidenced by the latest HAI members' survey conducted in June 2014 by Behaviour and Attitudes, which indicates overall business activity is the same or lower than the previous 12 month period for half of hardware merchants. All the indications continue to suggest that the market remains most challenging for firms in rural Ireland and any uptake in business activity is focused primarily in the Dublin/Leinster region. Our policy proposals to support growth in town and village centres fundamentally seek to address this imbalance. Being in a niche sector means we are closer than most representative organisations to our members concerns and needs. We call for and support the following policy proposals: 1. Rural Investment In recent months there have been two strategy documents published which are to be welcomed. They are the CEDRA report Energising Irelands Rural Economy published in April by The Commission for the Economic Development of Rural Areas and the Governments Construction 2020 Strategy for Ireland published in May. September 30th 2014 1
2. 2. a) Implementation of CEDRA report The CEDRA Report has over 30 excellent recommendations which would energise social and economic life in rural Ireland. A number of the recommendations made in this study could be implemented immediately without any significant cost to the State. For example: Recommendation 8 - State agencies to strengthen their collaboration to bring small and niche FDI to rural areas. Recommendation 5 - the facilitation of Rural Economic Development Zones (REDZs). Recommendation 14 - the introduction of a funding mechanism, either stand alone or in partnership with other finance instruments, to incentivise and support the early stage development of social enterprises. Allied to the need to energise rural economic conditions is the need to stimulate consumer spending with the inevitable benefit of increasing employment, particularly among SMEs. In rural Ireland, outside the five main cities 92% of economic activity is generated by SMEs. b) Implementation of Construction 2020 Strategy Construction 2020 contains 75 specific actions and while it is welcome it will take some time for any benefits to accrue. The change proposed in the strategy for the National Pension Reserve Fund (NPRF) to become the Ireland Strategic Investment Fund (ISIF) and have the ability to invest in commercial activities is one very welcome proposal. Both of these strategy documents are welcomed by HAI because they deal with two of the fundamental policy needs that impact on the business of our members. They are the need to rebalance economic activity with a greater focus on towns and villages in rural Ireland and stimulating the building/construction industry. 2. Construction / Building Stimulation a) Home Renovation Incentive (HRI) scheme Extend the scheme beyond 2015. The scheme has taken some time to be recognised by homeowners and building contractors. The latest Revenue information, as of 15th September, is that the value of the works registered to date is 171 million, with an average job value of 16,500. HAI believes that this scheme has increased employment levels among builders and helped maintain employment in the hardware sector. However, the bulk of the work registered for the scheme to date is focused in the Dublin/Leinster area (77%). HAI believes that an extension of the scheme would allow time for it to be better promoted in more rural areas. The Revenue has stated that it is considering ways of promoting the scheme and we, as an association, are prepared to assist in that promotion as our members are a key point of contact with consumers and builders requiring building material and household goods. We could combine promotion of the scheme with a drive to support the local independent merchant whilst this in no way disenfranchises our wider membership, a buoyant local economy in towns and villages will help the overall sector to recover more quickly and will support local job creation. September 30th 2014 2
3. 3. b) Help to Buy We understand that the Government has requested the Department of Finance to consider a Mortgage Insurance Scheme based in part on the Help-to-Buy scheme in the UK, which has been a success, in particular outside London. Outside the M25, the Help-to-Buy scheme has resuscitated new building, especially for first time buyers. Our proposal is that help-to-buy should be thought of in terms of help-to-build also. The availability and accessibility of appropriately zoned land to meet current demand is vital. Unlike the UK where the threshold is 600,000, we would recommend that the threshold for an Irish scheme should be lower to focus first on the family-type home in areas of need and disadvantage. Nowhere has the collapse in the construction market been more obvious than on the fringes of towns and villages. Adoption of such a scheme will support housing regeneration and will stimulate commercial activity in town centres. c) Credit Guarantee Schemes Obtaining working capital through credit or loan facilities is currently a major problem for small builders and SMEs in the building construction industry. In an effort to alleviate this problem in the UK there is currently a pilot scheme in operation whereby trade customers can apply for a credit account in builders merchants of up to 25,000 underwritten by the Government. Many small businesses struggle to secure credit due to lack of security or adequate credit history and would only have been eligible for a fraction of this amount. That made it more difficult for them to take on projects due to being unable to afford the upfront cost of the materials. The pilot scheme is being backed by the UK Government with a multi-million pound fund in order to stimulate viable small and sole trader construction businesses and in an effort to provide alternatives to bank lending. We understand that there is an ongoing review of the Credit Guarantee Scheme and we would recommend this proposal as part of that review. 3. Support local entrepreneurship a) Expand and promote Microenterprise Loan Fund Scheme The existing Microenterprise loan fund scheme, which was introduced in October 2012, originally intended to provide over 90m in extra lending to 5,500 businesses and create an estimated 7,700 jobs over a ten year period, needs to be revamped. The latest report up to 31st March 2014, after a year and a half in operation, shows that only 3m in loans have been approved and 437 jobs (net) created in 192 businesses. Only 51% of applications were approved and 83% of the approvals were for businesses employing three people or less. These figures are so far off the original target that it is clear a revamp is required. The current eligibility thresholds for micro businesses are that they have been declined bank credit, employ less than 10 people and have turnover less than 2m. These should be changed to include those companies employing up to 20 employees with a turnover of up to 5m. September 30th 2014 3
4. 4. The loans available of between 2,000 and 25,000 are welcome, but must be promoted and made available to all companies within retail, especially in our hardware, building material, DIY sector where the economic downturn has been most evident. Local Enterprise Offices must work in partnership with Micro Finance Ireland to proactively assist with training and guidance in preparing the applicants business plan. This includes initial evaluation of the quality of the business proposal for the loan application, mentoring and advice on an on-going basis. 3. Social policy reform a) Introduce voucher system for winter fuel allowance We urge the introduction of a fuel voucher system where those who currently receive a winter fuel allowance, would have to use a dedicated fuel voucher/smart card to purchase a fuel product only, from registered and tax compliant retail fuel outlets. Currently the allowance is paid by way of a cash top up on the recipients current payment, which can be spent on anything, not exclusively solid fuel, and from any source of supply without any traceability or recovery for the State. The Department of Social Protection says that a total of 410,000 people currently claim 20 in fuel allowance per week, including those in receipt of social welfare and HSE payments. The allowance costs the State 211m per year. The fuel allowance is paid for 26 weeks from October to April. A fuel voucher system scheme would allow the Government to recoup some of this 211m back through legitimate outlets tax returns; ensure that the money was spent with legitimate suppliers and not those operating in the shadow economy and ensure that the payment was fully used to help in reducing fuel poverty. This could again be combined with a support your local independent merchant campaign driving much needed support to the local retailer. a) Incentivise jobseekers to take up temporary seasonal positions We propose a revamp of the social welfare conditions to incentivise job seekers to apply for seasonal temporary employment positions. The situation whereby temporary seasonal positions are not taken up by the unemployed due to the fact that it could take a number of weeks to re-register on the live register is archaic. The hardware, building materials, DIY industry can create thousands of part-time positions at peak trading periods including Summer and Christmas. We see this as another boost to job creation at local level. Conclusion Despite huge job losses over the past 6 years, the retail sector continues to play a significant role in the Irish economy. It accounts for approximately 10% of GDP (approx. 16bn) and together with the wholesale sector, is still the largest private sector industry employer with over 270,000 employed. It is a sector represented in every city, town and village in the country (c. 15% of the workforce). (Retail Consultation Forum June 2014) HAI members both suppliers and merchants, are directly affected by weaknesses in construction activity, as well as by continued weakness in consumer demand generally. So as to ensure an equitable spread of the green shoots we have heard of over the last couple of months in consumer September 30th 2014 4
5. 5. confidence and increase in commercial activity we need to target our local town centres and villages with a proactive and realistic approach. We hope our suggestions are both practical and helpful. September 30th 2014 5
6. 6. confidence and increase in commercial activity we need to target our local town centres and villages with a proactive and realistic approach. We hope our suggestions are both practical and helpful. September 30th 2014 5