KPMG Entrepreneurs Barometer

August 2019

How?

Research Details

• The survey was conducted using a telephone methodology from RED C’s call centre, located in Dundalk.

• The survey was conducted with a representative sample of companies within the more “entrepreneurial” sectors of the Irish economy. All companies interviewed have between 10-100 employees.

• The key decision maker within each company was interviewed, e.g. the owner, MD, CEO or CFO.

What?

How many?

When? • Fieldwork was conducted from the 24th June to the 12th July 2019.

• A sample size of 200 was achieved, with 150 companies having 10-49 employees and 50 companies having 50-100 employees.

• This is the 1st wave of the KPMG Entrepreneur Barometer, covering a wide range of topics affecting entrepreneurial companies in Ireland, e.g. business sentiment, Brexit, funding, infrastructure, human resources, state support and climate change.

• KPMG commissioned RED C to carry out the survey.

2

3

Topics Covered

Business Sentiment & Employment

Tax Regime

Funding

State Support

Human Resources

Infrastructure Climate Action

Brexit

Business Sentiment & Employment

67%

29%

4%

5

In spite of the threat of a hard Brexit, 2 in 3 companies within the entrepreneurial sectors expect their turnover to increase in the

coming year. Smaller companies and companies based in Dublin expect the highest growth in the next 12 months.

Turnover Expectations for the Next 12 Months(Base: All Entrepreneurial Companies; n=200)

Increase

Stay the same

(Q.3/4a/b)

Decrease

Expected Increase Over Next 12 Months(Base: All Companies Expecting an Increase)

0-5%

6-10%

11-20%

21-50%51-75%

76-100%

Average

TOTAL(n=133)

10-49employees

(n=98)

50-100employees

(n=35*)Dublin(n=56)

OutsideDublin(n=77)

16% 18% 10% 22% 12%

25% 27%20% 19%

29%

23% 21% 31%

17%

28%

35% 32%

42%

38%

32%

9% 12%0

11%

7%2% 2% 04%

02% 3% 0 4%1%1% 1%

0 2% 0%3% 2% 7% 4% 3%

*Note: Small base size

41%

57%

1%

6

2 in 5 entrepreneurial companies expect to increase their staff numbers in the next 12 months, with the average

expected growth being 8%.

Staff Expectations for the Next 12 Months(Base: All Entrepreneurial Companies; n=200)

Increase

Stay the same

(Q.5/6a/b)

Decrease

0-5%

6-10%

11-20%21-50%

Average

TOTAL(n=82)

10-49employees

(n=58)

50-100employees

(n=24*)Dublin

(n=39*)

OutsideDublin

(n=43*)

8% 9% 6% 9% 6%

44% 41%52%

36%51%

27% 29%

24%

26%

28%

22% 23%19%

26%

18%3% 4% 0

6%0%4% 4% 5% 6% 3%Don’t know

Expected Increase Over Next 12 Months(Base: All Companies Expecting an Increase)

*Note: Small base size

Brexit

8

2 in 3 are concerned that Brexit will have a negative impact on their business, with 1 in 3 expecting significant

negative impact. Companies which export are more concerned.

Expected Impact of Brexit on Business(Base: All Entrepreneurial Companies; n=200)

A significant, positive impactA slight, positive impact

No impact at all

A slight, negative impact

A significant, negative impact

8% 8% 7%4% 4% 4%

(Q.21)

36% 38% 33%

31% 31%27%

TOTAL(n=200)

Exporter(n=132)

Non Exporter(n=74)

17% 14% 23%

NET Positive Impact

NET Negative Impact

12% 12% 11%

67% 69% 60%

Don’t Know 4% 5% 6%

9

More than half expect to be impacted negatively if border checks are introduced between the Republic of Ireland and

Northern Ireland. Half will also be negatively impacted by currency fluctuations following Brexit.

Impact of Brexit – Border Checks & GBP Fluctuations(Base: All Entrepreneurial Companies; n=200)

55%45%

(Q.24a)

Total10-49

employees50-100

employees ExporterNon-

Exporter

(n=200) (n-150) (n=50) (n=132) (n=74)

Yes 55% 52% 64% 61% 40%

No 45% 48% 36% 39% 60%

Will be impacted by border checks to NI and UK

55%45%

Will be impacted Negatively by Currency Fluctuations from Brexit

Total10-49

employees50-100

employees ExporterNon-

Exporter

(n=200) (n-150) (n=50) (n=132) (n=74)

Yes 55% 53% 61% 64% 36%

No 45% 47% 39% 36% 64%

YesNoYesNo

10

Less than 1 in 5 entrepreneurial companies have done a full Brexit preparation, with 3 in 5 companies having done a few

thing here and there to prepare for Brexit. More than 1 in 5 companies have done nothing at all. Among companies who have done something to prepare for Brexit, more than 1 in 3 have incurred extra costs as a result of Brexit preparations.

Brexit Preparation(Base: All Entrepreneurial Companies; n=200)

(Q.25/26)

17%

60%

22%

Total

We have done a full Brexit analysis to prepare for Brexit

We have done a few things here and there to prepare for

Brexit

We have not done anything to prepare for Brexit

have incurred extra cost as a result of

Brexit preparations

36%

Companies who have carried out Brexit preparations

(n=156)

Exporter (n=132)

Non-Exporter(n=74)

21% 13%

64% 52%

15% 35%

Funding

10-49Employees

(n=91)

50-100Employees

(n=42*)

48% 60%

40% 42%

27% 12%

21% 12%

17% 14%

9% 13%

11% 3%

4% 0

2% 3%

0 3%

1% 0

5% 0

8% 6%

12

2 in 3 companies are planning to expand in the near future. This will mainly be financed by internal funds and bank finance but almost 1 in 4

expect to use private equity/venture capital. Leasing and state support are also popular sources of finance.

Sources of Finances Mainly Used to Finance Future Expansions(Base: All Entrepreneurial Companies; n=200)

(Q.11/12)

52%

40%

22%

18%

16%

10%

9%

3%

2%

1%

1%

3%

7%

Difference By Company Size

Working capital/internal funds

Bank finance

Private equity/venture capital

Leasing/Hire Purchase

State support/grants

Invoice Discounting/Debt Factoring

Tax relief schemes, e.g. EIIS

Peer to Peer lending

IPO/shares

Debt listing on the Stock Exchange

Crowdfunding

Other

Don't know

66%

34%

Plan to expand in near future?

No

Yes

Main Sources to finance expansion(Base: All who plan to expand; n = 133)

*Note: Small base size

13

1 in 3 feel it is easy to access funding at the moment while 1 in 5 find it difficult. Larger companies are more likely to

find it easy to access funding.

Ease of Accessing Funding for Your Business(Base: All Entrepreneurial Companies; n=200)

Very easy

Easy

Neither

Difficult

Very Difficult

Don’t know

21% 16%33%

13%13%

14%

(Q.13)

NET Easy

NET Difficult

12% 14%5%

6% 7%

2%

TOTAL(n=200)

10-49employees

(n=150)

50-100employees

(n=50)

41% 41% 40%

34% 29% 48%

8% 9% 6%

18% 21% 7%

Human Resources

15

Almost 3 in 5 feel that the availability of residential accommodation in Ireland is a significant barrier for staff recruitment and retention, with 2

in 5 companies claiming that it is difficult for their staff to find appropriate accommodation. Half feel it is difficult to recruit the right people for

the company while 1 in 3 feel the tax regime is a barrier for recruitment and retention.

Employee Recruitment & Retention - Attitudes(Base: All Entrepreneurial Companies; n=200)

Strongly agree

Agree

Neither

Disagree

Strongly Disagree

Don’t know

20% 27%11%

23% 17%

38% 22%

29%17%

16%

(Q.17)

NET Agree

NET Disagree

10% 12% 13% 18% 20%9%15%

28% 11% 6%

Availability of residential

accommodation in Ireland is a

disadvantage for recruitment and

retention of employees

We are having difficulties recruiting the right people for

the company

Our staff are finding it difficult to find

appropriate residential

accommodation

We are confident that we can recruit people

with the right qualifications and experience for our

business

The tax regime in Ireland is a

disadvantage for recruitment and

retention of employees

16% 21% 17% 29% 37%

58% 49% 40% 39% 34%

6% 3% 3% 3% 3%

20% 27% 41% 29% 26%

Infrastructure

95% 95% 96% 96% 94%

5% 5% 4% 4% 6%

17

19 in 20 companies are satisfied with their current premise. No difference by company size or location.

Able to Source the Correct Premises for their Business?(Base: All Entrepreneurial Companies; n=200)

(Q.19)

Yes

No

TOTAL(n=133)

10-49employees

(n=150)

50-100employees

(n=50)Dublin(n=78)

OutsideDublin

(n=122)

18

1 in 5 feel that lack of suitable and affordable business premises is a barrier for their business while around 1 in 7 feel the

cost of their business premises is so high that it is a significant barrier for the business.

Business Premises - Attitudes(Base: All Entrepreneurial Companies; n=200)

Strongly agreeAgree

Neither

Disagree

Strongly Disagree

Don’t know

Total(n=200)

Dublin(n=75)

Rest of country(n=125)

12% 14% 11% 9% 9% 8% 6% 7% 5%

8% 9% 7% 7% 8% 6% 3% 5% 2%

(Q.7)

NET Agree

NET Disagree

Lack of suitable and affordable business premises is a barrier for

growth for our business

The cost of our business premises, e.g. rent/lease, is so high that it is a significant issue

for the businessThe location of our business is

not ideal

27% 29% 26% 24% 27% 22% 19% 16% 21%

33% 23%40% 37% 27% 45% 58% 55%

60%

20% 23% 18% 15% 17% 14% 9% 12% 8%

15% 22% 11% 20% 26% 16% 13% 17% 10%

60% 51% 66% 61% 54% 66% 77% 71% 81%

5% 4% 5% 4% 4% 4% 1% 0 1%

19

More than half of businesses located in Dublin feel that excessive road traffic and congestion is a significant issue for the

business and its employees. We also see a high level of dissatisfaction with public transport options.

Transportation – Attitudes(Base: All Entrepreneurial Companies; n=200)

Strongly agree

Agree

Neither

Disagree

Strongly Disagree

Don’t know

17% 22% 14% 17% 24%12% 12% 12% 12%

20%21%

20% 18%

30%

11% 11% 10% 12%

(Q.7)

NET Agree

NET Disagree

Lack of public transport options is a significant issue for our

employees

Excessive road traffic and congestion is a significant issue for our business and employees

Lack of a good quality road network is a significant issue for

our business

14% 10% 16% 17% 14% 20% 21% 24% 20%

31% 31%31% 27%

10%

38% 36% 33% 37%

37% 43% 34% 35% 54% 23% 23% 22% 24%

19% 17% 19% 20% 23% 19% 19% 21% 18%

44% 40% 47% 44% 23% 57% 57% 57% 57%

1% 0 1% 1% 0 1%

Total(n=200)

Dublin(n=75)

Rest of country(n=125)

13% 9% 16% 18% 17% 20%13% 17% 9%

36%48%

28%

20

Just under half agree that cybersecurity is a significant threat to their business. As expected given access to adequate

broadband is not universally available, a significant proportion of those based outside of Dublin claim that their broadband access is not adequate for their business needs.

Information Technology - Attitudes(Base: All Entrepreneurial Companies; n=200)

Strongly agree

Agree

Neither

Disagree

Strongly Disagree

Don’t know

22% 18% 25%14% 9% 17%

25% 31% 22%

18%11%

22%

(Q.7)

NET Agree

NET Disagree

Cybersecurity is a significant threat to our business

Our broadband access is not adequate for our business needs

47% 48% 47% 32% 20% 40%

26% 23% 28% 12% 14% 11%

26% 26% 26% 54% 65% 48%

1% 3% 0 2% 2% 2%

Total(n=200)

Dublin(n=75)

Rest of country(n=125)

Climate Action

22

Climate Action - Attitudes(Base: All Entrepreneurial Companies; n=200)

Strongly agree

Agree

Neither

DisagreeStrongly Disagree

Total(n=200)

10-49employees

(n=150)

50-100employees

(n=50)

29% 26% 35%22%

33% 26% 24% 31% 23% 27%

56% 62% 38% 64%52%

27% 30% 20%18%

34%

(Q.20a)

NET Agree

NET Disagree

2% 2% 2% 1% 3% 9% 8% 11% 12% 7%2% 1% 3% 1% 2%

15% 18% 8%20%

12%

85% 89% 73% 86% 84% 53% 54% 51% 41% 61%

12% 8% 22% 12% 11% 22% 21% 26% 24% 21%

4% 3% 5% 2% 5% 24% 26% 18% 32% 19%

Dublin(n=78)

OutsideDublin(n=122)

I support the move towards more action on climate change

I am concerned that an increase in green initiatives will lead to an increase in costs for our businesses

An overwhelming majority of companies support the move towards more action on climate action but more than half are

concerned about increases in business costs because of these actions.

Tax Regime

24

The entrepreneurial companies feel dissatisfied with the current tax regime in Ireland, with 3 in 4 feeling that the Irish tax regime favours

multinationals over smaller domestic businesses. More than half feel the administrative burden attached to the tax regime is too high while

almost 2 in 5 feel that the Irish tax regime is less competitive than the tax regime in the UK and other EU countries.

The Tax Regime for Entrepreneurs in Ireland – Attitudes(Base: All Entrepreneurial Companies; n=200)

Strongly agree

Somehow agree

Neither

Somehow disagree

Strongly Disagree

Don’t know

24% 21% 17% 13% 12%

51%

33%21% 24%

8%

(Q.7)

NET Agree

NET Disagree

4%15% 12% 12%

25%2%

4% 4%

34% 17%

The Irish tax regime is more favourable for multinationals than

smaller domestic businesses and entrepreneurs

The administration burden attached to the Irish tax regime is too

big for smaller businesses and entrepreneurs

Irish entrepreneurs are disadvantaged by the

current tax regime compared to the UK

and other EU countries

The R&D tax credit available in Ireland is

relevant to our business

The tax regime encourages

entrepreneurship and growth

17% 25% 34% 12% 35%

75% 53% 38% 37% 20%

2% 2% 12% 5% 2%

5% 20% 16% 46% 42%

25

The larger entrepreneurial companies (50-100 employees) are less negative towards the Irish tax regime than the

smaller companies.

The Tax Regime for Entrepreneurs in Ireland by Company Size(Base: All Entrepreneurial Companies; n=200)

Strongly agreeAgree

Neither

Disagree

Strongly Disagree

Don’t know

Total(n=200)

10-49employees

(n=150)

50-100employees(n=50)

24% 22% 30% 21% 18%28%

17% 18% 17% 13% 10%22%

12% 12% 13%

51% 55% 37%33% 37% 21%

21% 23%14% 24% 23%

26%

8% 8% 11%

(Q.7)

NET Agree

NET Disagree

4% 4% 2%15% 12%

25%12% 11% 17% 12% 13% 12%

25% 24% 30%2% 2% 0%

4% 5%0%

4% 4%4%

34% 35% 30%17% 21% 4%

75% 78% 68% 53% 55% 49% 38% 41% 31% 37% 33% 48% 20% 19% 23%

17% 14% 28% 25% 26% 24% 34% 31% 41% 12% 14% 8% 35% 34% 41%

5% 6% 2% 20% 18% 25% 16% 14% 21% 46% 48% 42% 42% 45% 34%2% 2% 2% 2% 2% 2% 5% 6% 2% 2% 2% 2% 2% 2% 2%

The Irish tax regime is more favourable for multinationals

than smaller domestic businesses and entrepreneurs

The administration burden attached to the Irish tax regime is too big for smaller businesses

and entrepreneurs

Irish entrepreneurs are disadvantaged by the current

tax regime compared to the UK and other EU countries

The R&D tax credit available in Ireland is relevant to our

business

The tax regime encourages entrepreneurship and growth

10-49Employees

(n=150)

50-100Employees

(n=50)

28% 19%

22% 18%

13% 17%

15% 8%

13% 11%

6% 20%

3% 2%

26

1 in 4 would most like to see an alignment of the personal tax rates for self-employed with PAYE in Budget 2020. This is

followed by capital gains tax reforms which is the preferred initiative by 1 in 5.

Most Preferred Initiative in Budget 2020(Base: All Entrepreneurial Companies; n=200)

(Q.10)

26%

21%

14%

13%

12%

10%

3%

Alignment of the personal tax rates for self-employed with PAYE

Capital Gains Tax reform

Share scheme incentives tailored for SMEs

Improved social protection payments for self employed

Enhanced Entrepreneur Relief

Other

Don't know

Difference By Company Size

27

1 in 3 have claimed R&D tax credits since its introduction in 2004 while just 4% have used the Knowledge Development Box

tax incentive. Bigger entrepreneurs and export companies are more likely to have claimed R&D tax credits.

Incidence of Claiming R&D Tax Credits/ Using The Knowledge Development BoxTax Incentive(Base: All Entrepreneurial Companies; n=200)

32%

61%

8%

(Q.9a/b)

Total10-49

employees50-100

employees ExporterNon-

Exporter

(n=200) (n-150) (n=50) (n=132) (n=74)

Yes 4% 5% 2% 6% 2%

No 85% 84% 87% 85% 84%

Don't know 11% 11% 11% 9% 15%

R&D Tax Credits

4%

85%

11%

Knowledge Development Box

Total10-49

employees50-100

employees ExporterNon-

Exporter

(n=200) (n-150) (n=50) (n=132) (n=74)

Yes 32% 29% 41% 39% 17%

No 61% 64% 50% 52% 76%

Don't know 8% 7% 9% 8% 7%

Yes

No

Don’t know Yes

No

Don’t know

28

The main suggestions for how to lighten the administrative burden attached to the Irish tax regime are to reduce the

amount of paperwork and red tape and to simplify the process.

Suggestions for How To Lighten The Administrative Burden Attached to the Irish Tax Regime

(Base: All Who Agree That The Administrative Burden Attached to the Irish Tax Regime Is Too Big For Smaller Businesses & Entrepreneurs, n=91)

(Q.8)

41%

27%

20%

14%

10%

8%

13%

Reduce the Amount of Paperwork

Reduce the Amount of Red Tape

Simplify The Process

Provide More Help/Information

Less Frequency of Returns

Better Online System

Other

Reduce paper work and red tape, There are too many loops and to jump through at the minute.

More help and advice for smaller businesses on how to administrate it to make

it less onerous

Continuous admin - no let up -someone is always working on our tax. For a small business it uses up a lot of man hours. If

everything was done in the proper manner we should only

have to do maybe bi-annually. A lot of duplication of information. I have to fill out government

forms so if government departments could talk to each other and have one form on a

monthly basis.

Provide more online forms and

availability for filling out tax reforms.

The bureaucracy is a big hurdle. When we were setting up our business there were far too many regulations we had

to go through and there was a huge amount of paperwork.

State Support

30

Just over half have used Enterprise Ireland in the past while 1 in 5 have used services from a Local Enterprise office. Over

80% of those who have used these services say this engagement resulted in receipt of grants/investments.

State Support Services Used – Enterprise Ireland & LEOs(Base: All Entrepreneurial Companies; n=200)

Enterprise Ireland

(Q.14/16)

Local Enterprise office

52%

21%

Engagement resulted in receiving grants/investments

(Base: Among those who have used either service; n=116)

Services used10-49

employees50-100

employees ExporterNon-

Exporter(n-150) (n=50) (n=132) (n=74)

47% 67% 66% 28%

24% 13% 23% 16%

None of these 41% 43% 33% 29% 59%

81%

31

Impact of State Support Services – Enterprise Ireland & LEOs(Base: All Who Used Services in the past)

Strongly agree

Agree

Neither

DisagreeStrongly Disagree

38% 32%

37% 49%

(Q.15a)

NET Agree

NET Disagree

Benefited from the engagement Would recommend to other businesses

4% 3%9% 8%

76% 81%

11% 9%

13% 10%

* Small base size

29% 28%

51% 60%

Benefited from the engagement Would recommend to other businesses

3% 0%4% 3%

80% 88%

12% 8%

7% 3%

Local Enterprise Office

(n=42*)

Enterprise Ireland

(n=103)

Satisfaction with Enterprise Ireland and LEOs are high with 4 in 5 claiming to have benefitted from the engagement.

Enterprise Ireland scores slightly higher than LEOs.

Executive Summary

33

Executive Summary – I

2 in 3 are concerned that Brexit will have a negative impact on their business, with 1 in 3 expecting significant negative impact. Naturally, exporting companies are more likely to expect negative impact.

More than half expect to be negatively impacted by a potential introduction of border checks and currency fluctuations – these are more likely to be larger and exporting companies.

Only 17% of companies have done a full Brexit analysis, while 60% say they have done some form of preparation for Brexit. Of those who have carried out any Brexit preparation, 36% say they have incurred extra costs as a result of these preparations.

Brexit

Business Sentiment & Employment

In spite of the threat of a hard Brexit, business sentiment is quite positive among entrepreneurs. 2 in 3 expect their turnover to increase over the next 12 months. The average expected increase is 16%, with the increase being higher among smaller companies and those located in Dublin.

While the majority of companies (57%) expect to maintain the same level of staff over the next year, 41% say they expect to see an increase in their personnel.

Funding

66% of the entrepreneurial companies have plans for expansion in the near future. They will mainly be funded by working capital/internal funds (52%) and bank finance (40%). Smaller companies are more likely to use private equity and leasing/hire purchase to fund their expansion. However, these companies are less optimistic than larger companies in relation to the ease with which they can source funding. Just 1 in 3 feel it is easy to access funding for their business.

Human Resources

58% of entrepreneurs believe that the availability of residential accommodation in Ireland is a disadvantage for their recruitment and retention. In addition, 40% report that their staff are finding it difficult to find suitable residential accommodation, while 34% feel the tax regime is a barrier for recruitment and retention.

34

Executive Summary – II

Climate Action

Infrastructure

An overwhelming majority have been able to source suitable premises for their business and most tend to disagree that lack of suitable and affordable business premises, the cost of rent/lease for their business premises or the location of their business premises are significant issues for their business. However, Dublin based companies are somewhat more likely to consider the above as issues. These companies are also more likely to face issues due to lack of public transport and excessive traffic congestion. As expected given access to adequate broadband is not universally available, a significant proportion of those based outside of Dublin claim that their broadband access is not adequate for their business needs.

An overwhelming majority of companies support the move towards more action on climate change but more than half are concerned about increases in business costs because of these actions.

Enterprise Ireland has proven popular among entrepreneurs, with just over half saying they have used their services in the past compared to 21% who have used the services offered by Local Enterprise Offices.

Engagement with these state support services has been beneficial with more than 4 in 5 having received a grants/investments as result of the engagement.

State Support

Tax Regime

Irish entrepreneurs tend to be critical of the current tax regime in Ireland. 75% believe the regime is more favourable to multinationals, 53% say the system places a significant administrative burden on smaller businesses, and 38% believe the current tax regime puts Irish entrepreneurs at a disadvantage compared to those in Europe or the UK. 46% say the R&D tax credit is not working effectively for their business, while 42% disagree that the tax regime encourages entrepreneurship and growth. Smaller companies are more likely to endorse these statements.

Among Irish entrepreneurs, alignment of personal tax rates for self-employed, capital gains tax reform and share scheme incentives tailored for SMEs are the top 3 preferred initiatives for budget 2020.

For any queries on this report, please contact:

Jimmy Larsen Sara EslamiDirector Project Manager

RED C Research & Marketing LtdGround Floor, Block G, East Point Business Park, ClontarfDublin 3, IrelandD03 H2N1T / +353 1 818 6316E / jimmy.larsen@redcresearch.ie / sara.elsami@redcresearch.ieW / www.redcresearch.ie