New Regional Aid Map increases the areas of the country eligible for Investment Aid to business – Minister Bruton

Kerry, Kells, Athy and Arklow added to list of areas fully eligible for Government aid to support investment and employment

Map represents significant win for Ireland in context of original proposals

25th April 2014

The Minister for Jobs, Enterprise and Innovation, Richard Bruton TD today (Friday) published the new Regional Aid Map, providing details of areas of the country in which the State can provide investment aid to businesses in order to support new investment and employment, under EU rules.

The new Map, agreed by Government recently, is expected to take effect from 1st July 2014. It has been drafted by the Department of Jobs, Enterprise and Innovation under the new Regional Aid Guidelines adopted last year.

It represents a significant win for Ireland in the context of the original proposals from the EU Commission. Ireland, through Minister Bruton and the Department of Jobs, Enterprise and Innovation, engaged intensively with like-minded member-states and the EU Commission in order to deliver changes which are reflected in the Map published today.

Under the new Map,

· areas accounting for 51.28% of Ireland’s population will be eligible for State Aid. This represents a substantial increase from the 25% originally proposed by the Commission, and an increase from the 50% under the 2007-2013 Map. This means that Kerry,Kells, Athy, and Arklow can be added to the areas covered;

· aid to large enterprises is permitted for new economic activities, expansions which involve new products or services, and product innovation. Under the original proposals aid to large enterprises was to be banned entirely in Ireland;

· aid intensity rates (30% for small enterprises, 20% for medium-sized enterprises and 10% for large enterprises) are maintained at current levels. Original Commission proposals would have involved a reduction in aid intensity rates

State aid to enterprises in more disadvantaged areas of the country is an important part of the Government’s jobs strategy. Typically in Ireland, such aid takes the form of capital grants from the Exchequer through the Department of Jobs for initial investment in new buildings or extensions, and employment grants linked to initial investment, paid to enterprises by IDA Ireland or Enterprise Ireland. Investment aid is also provided under schemes such as Údarás na Gaeltachta enterprise development, for tourism grants, marine tourism, urban and rural renewal and other tax-based development schemes.

The proposals from the EU Commission to reduce the levels of State Aid permissible in countries like Ireland follows enlargement of the EU as well as concerns about anti-competitive practices by national Governments providing very high levels of investment aid to ‘national champion’ companies.

Minister Bruton made today’s announcement at Dairymaster, a highly innovative Irish manufacturing company based in Causeway, Co. Kerry. Dairymaster is a client company of Enterprise Ireland, and provides an example of a large company which will from 1st July be able to receive Investment aid which has not been permitted to do so since 2007.

Making the announcement today, Minister Bruton said:

“Central to our Action Plan for Jobs is supporting jobs growth across all regions of the country, and it is very encouraging that over the past twelve months every region has seen increased employment. The important thing is that regions are supported to build on their existing strengths, and as part of Action Plan 2014 we are putting in place new measures including new IDA advance buildings in various locations, local enterprise offices in every county and a county-based X-Factor style competition to find the best young entrepreneur in the country.

“Government-supported exporting companies play an important part in this plan. I am very happy to announce today that following hard negotiations with the EU Commission we are in a position to increase the proportion of the country that is eligible for the full range of Government investment aid to businesses. Areas which have been badly affected by the employment collapse of the past decade including Kerry, Kells, Athy and Arklow have been added to the eligible areas, meaning in effect that only Dublin, Cork, and areas directly bordering Dublin are excluded. In the context of the original proposals from the EU Commission this represents a significant win for Ireland and I wish to pay tribute to all involved in the negotiations, particularly officials from my Department.

“Most importantly, today’s announcement will make it much easier to go into boardrooms of multinational and Irish exporting companies and convince them to create jobs in regional locations”.

NB It is important to note that all of the Country, including those areas not entitled to Investment Aid, can qualify for other forms of State support e.g. Research & Development Aid, SME Investment Aid, Training Aid, and Aid for Environmental protection etc

NOTES FOR EDITORS

The Regional Aid Guidelines enable the State to grant State Aid, at enhanced rates, to businesses in order to support new investment and new employment in productive projects in Ireland’s most disadvantaged regions. This helps the convergence of these regions with the more advantaged regions of the Union. All such grants come from the exchequer, i.e. there is no EU or other external funding.
The Guidelines specify rules for the selection of regions which are eligible for regional aid and define the maximum permitted levels of this aid. In line with EU cohesion policy, the Guidelines continue to focus regional aid on the most deprived regions of the enlarged European Union.

The current Regional Aid Guidelines, which govern the level of State aid which may be granted by Government Departments and development Agencies as regional aid, expire at the end of June 2014. Typically, regional aid in Ireland is given in the form of capital grants for initial investment in fixed capital for new establishments or extensions and employment grants linked to initial investment. Regional aid is also provided under schemes for tourism grants, marine tourism, urban and rural renewal and other tax-based development schemes. Ireland’s Regional Aid Map for 2014-2020 will cover 51.28% of the country’s population, a slight rise on the current coverage of 50%.

Implication of new Guidelines for 2014-2020

The initial Regional Aid Guidelines proposal from the Commission, published in May 2012, presented significant challenges for Ireland. This proposal prohibited aid to large enterprises, reduced our population coverage from 50% to 25% and reduced aid intensity rates.
Regarding population coverage, following sustained engagement with the Commission and likeminded Member States at Ministerial and official level, Ireland secured entitlement to maintain regional aid qualification for areas accounting for 50% of the country’s population, with coverage actually slightly increasing to 51.28%.

The Commission initially proposed a complete ban on aid for investments made to large enterprises in the more developed assisted areas, known as ‘c’ areas. The revised guidelines assert that large enterprises tend to be less affected than SMEs by regional handicaps for investing or maintaining economic activity in a less developed area. The Commission believes these firms would make the investment concerned even without financial support, rendering such support both ineffective and costly.

This proposal presented significant challenges for Ireland and the implications could have been very serious in terms of our enterprise agencies being able to attract investment into disadvantaged regions in Ireland

Following significant engagement by Ireland, at both official and political levels, the final proposal represents considerable progress from the initial Commission proposal in December 2012. The compromise agreed with the Commission will allow Member States to provide investment aid to large enterprises for ‘new economic activities and diversification of existing enterprises into new products or new process innovation’.

Aid intensity rates were also maintained at their current levels. Both the current 2007-2013 Regional Aid Guidelines and the upcoming 2014-2020 Guidelines outline that the aid intensity in Ireland must not exceed 30 % for small enterprises, 20 % for medium-sized enterprises and 10% for large enterprises.
The compromise agreed with the Commission will allow Member States to provide investment aid to large enterprises for new economic activities and diversification of existing enterprises into new products or new process innovation. In essence, the final version of the Regional Aid Guidelines negotiated by Ireland and likeminded Member States represents an important step in ensuring Ireland, and the EU in general, maintains the ability to strengthen the EU economy and to promote cohesion between regions.