Business in Ireland Abridged 2012

2.   Categorising SMEs by type of enterprise

In 2012, SMEs generated €42.2 billion in GVA.  Irish-owned SMEs that were solely engaged with the domestic economy (no exports or imports) accounted for 37.9% of GVA while they accounted for 63.3% of the employment in all SMEs.

Irish-owned SMEs that engaged in international trade (either exported or imported goods/services) in 2012 accounted for a further 27.7% of GVA while their SME employment share was 25.4%.

Foreign-owned SMEs that engaged in international trade accounted for just less than a quarter of GVA while foreign-owned SMEs solely engaged with the domestic economy accounted for the remaining 10.3% of GVA. While foreign-owned SMEs accounted for almost a third of GVA in all SMEs, they only accounted for 11.2% of total SME employment.  See Figure 1.2, Table 1.1 and Chapter 3.

 

 

3.  Signs of improvement in the business environment for enterprises

The number of enterprise births (new enterprises created) has fluctuated over the period 2007 to 2012.  In 2007 there were nearly 13,500 enterprises births but by 2010 this figure had fallen to just over 11,200. There were signs of improvement displayed in 2011 with over 11,800 new births registered and this trend continued in 2012 when nearly 12,600 new enterprises were set up.

The number of enterprise deaths (enterprises that ceased trading) rose steadily between the years 2007 to 2009 as the economy underwent a major contraction.  There was evidence of an improvement in the business environment in 2010 which continued in 2011. In 2010 the number of enterprise deaths was just over 18,300, while in 2011 this figure had fallen to around 18,100 enterprises.  See Figure 1.3 and Chapter 4.

 

4. Business productivity in Ireland (GVA per person engaged)

GVA per person engaged was almost €78,900 for all enterprises and over €44,300 for indigenous Irish-owned enterprises. 

GVA per person engaged for all micro enterprises (<10 persons engaged) was over €40,700 while for all large enterprises (250+ persons engaged) the figure was almost €149,300. 

When the foreign multinationals were excluded, the productivity measure for each of the size classes was reduced considerably.  This was particularly evident for large indigenous enterprises where GVA per person engaged at almost €74,700 was approximately half the figure for all large enterprises.  See Figure 1.4 and Chapter 5.

5.  Business costs facing enterprises

In the total business economy in 2012, nearly €39.2 billion was paid in personnel costs.  Almost €5.1 billion or 13.0% of this was in the form of employers’ social security payments e.g. employer's contributions to the PRSI scheme, superannuation funds, PRSA’s and other pension schemes.  The percentage was higher for large enterprises at 14.6% compared to SMEs at 11.9%. 

Enterprises in Ireland paid a relatively low rate of employers’ social security payments at 13.4% of personnel costs when compared to other European countries. There were only five countries, including the UK at 13.1%, that paid a rate lower than Ireland.  The countries that paid the highest rates of employers’ social security costs included Sweden at 31.0%, France at 30.3% and Italy at 28.3%.  See Figure 1.5 and Chapter 6.

6.   Irish multinationals abroad and foreign multinationals in Ireland

In 2012, Irish multinationals employed almost 246,000 persons in foreign affiliates.  These affiliates generated turnover of €75.9 billion.  By contrast, foreign multinationals employed near 256,600 persons in affiliates in Ireland.  These affiliates generated turnover of almost €183.7 billion.  See Figure 1.6 and Chapter 8.

   

  Figure 1.6 Irish MNEs abroad and foreign MNEs in Ireland, 2012

The Financial & Insurance activities sector and Industry sector had the highest number of persons engaged per enterprise at 17.1 and 14.6 respectively.  See Figure 2.3 and Table 2.1. 

Gross value added (GVA)

GVA is the gross income from operating activities and is the balance available to enterprises to pay employees and realise a return on investment.  See Appendix 2 for full definitions.

Business sectors generated €100.3 billion GVA in 2012.  Industry and Services contributed the most, accounting for 38.0% and 33.4% respectively.  Distribution contributed 15.7% of the total GVA with Financial & Insurance activities accounting for 8.9% and Construction accounting for 3.9%.  See Figure 2.5 and Table 2.1.

Distribution paid the highest proportion of GVA in personnel costs at 59.9% followed by Services with a figure of 55.8%. Construction recorded a figure of 48.3% while Financial & Insurance activities paid 38.5% and Industry paid the lowest proportion at 23.9%.  See Figure 2.7 and Table 2.1. 

How GVA is used in the business economy

GVA is split between gross operating surplus and personnel costs.  Gross operating surplus is the balance available to the enterprise which allows it to provide a return to shareholders, to pay taxes and to finance all or part of its investment.  Personnel costs are defined as the total remuneration, in cash or in kind, payable by an employer to an employee.  See Appendix 2 for full definitions.

Gross operating surplus accounted for the larger share of GVA in 2012 at €57.7 billion or 57.5%. Personnel costs accounted for €42.6 billion or 42.5% of GVA. See Figure 2.6 and Table 2.1

Services accounted for the largest proportion of personnel costs at 44.0%. Distribution and Industry both contributed just over a fifth each at 22.2% and 21.4% respectively.  Financial & Insurance activities accounted for 8.1% of personnel costs while Construction contributed 4.4%.  See Figure 2.9 and Table 2.1.

Turnover per person engaged and GVA per person engaged[1]

Turnover per person engaged and GVA per person engaged are simple measures of labour productivity[2].  Note that the presence of foreign multinationals in Ireland has a significant impact on these measures.  In later chapters, labour productivity will be presented with and without foreign multinationals.

Turnover per person engaged averaged over €288,500 in 2012 across all sectors.  There were large differences across individual sectors with Industry recording the highest figure at over €628,700 while Construction recorded the lowest figure at over €116,300.  See Figure 2.10 and Table 2.1.

GVA per person engaged averaged almost €78,900 across all sectors.  Each individual sector reported a figure less than the average business economy, with the exception of Industry, which reported GVA per person engaged of over €213,600.  This was followed by Services at almost €58,100.  The Distribution sector had the lowest GVA per person engaged at nearly €48,400.  See Figure 2.11 and Table 2.1.

Profitability

GVA as a percentage of turnover and gross operating surplus as a percentage of turnover are measures of enterprise profitability. 

Specifically looking at gross operating surplus as a percentage of turnover, the objective is to analyse the proportion of sales that remains in the enterprises after all expenses have been paid.  Profitability across all sectors in the business economy was 15.0% of turnover. 

Industry was the most profitable sector with an operating surplus of 25.9% of turnover. Construction recorded a profitability level of 22.6% of turnover, while Services and Financial & Insurance activities recorded profitability levels of 13.6% and 11.0% respectively. Distribution was the least profitable with an operating surplus of 6.1%.  See Figure 2.12 and Table 2.1.