Dáil Éireann - Volume 386 - 01 February, 1989

Ceisteanna-Questions. Oral Answers. - ICI Chairman's Statement.

5. Mr. J. Bruton asked the Minister for Industry and Commerce if his attention has been drawn to a statement made [951] by the former chairman of ICI (details supplied), that in the next ten years more than half of Europe's factories would be closed and half its companies would disappear or be absorbed by mergers; and whether this has any implications for Ireland.

Mr. R. Burke: I am aware of the statement referred to in the Deputy's question. In the statement the former ICI chairman said that in his view at least half of European companies would disappear but that this did not mean that all of the factories would disappear; rather a process of consolidation would take place.

This is a view of the effects of market integration which is supported by the analysis in the Cecchini report. That analysis states that the removal of existing barriers to trade within the Community will facilitate the reaping of economies of scale, improved efficiency in enterprises and a rationalisation of industrial structures resulting from more competitive markets.

This view would also seem to have gained support amongst industrial leaders given the recent extent of mergers and acquisitions at both national and international level throughout Europe.

This view is not, however, unquestioned. The Deputy may have seen reports in recent days of another study published in the UK which disputes that Europe needs big companies to compete effectively. This study claims that there is much evidence that companies' efficiency decreases with size and that, in most countries, production scales were large enough to allow efficient operation.

It is the case that Irish owned industry is relatively small in European terms. There are two ways of dealing with this: encouraging companies to move to larger scale, and assisting them to develop those attributes which help to offset small scale.

A move towards larger sized firms, based on expansions or amalgamations, will allow firms to take advantage of economies of scale in production, distribution, marketing and product [952] development. Many of Ireland's top industries are already in the vanguard of this movement. The Government will support Irish industry in meeting the challenges. The State promotional agencies have been directed to encourage and assist Irish businesses to follow up on merger and acquisition opportunities where these can lead to optimum scale activities and thus maximise employment opportunities in Ireland.

Relatively small scale need not be a problem if the industry concerned is capable of differentiating its products or its markets from those of larger scale competitors. The increasing emphasis in industrial policy in strengthening the marketing and innovative inputs of industry is of particular relevance in this context. Thus, firms which develop niche markets on the basis of quality of product and performance need not be at a disadvantage. There can be considerable scope for international partnerships for industry, both large and small, to gain access to distribution and market outlets and to technology and product developments. The State agencies can provide a wide range of contacts and services in the building of such partnerships.

The primary thrust of the Government's EUROPEN Campaign has been to make Irish industry aware of the threats and opportunities which the completion of the single market will bring and to stress the need for all companies to take positive steps now to prepare for the changes. As I have already stated, the Government will support any measures which will maximise the employment opportunities in Ireland.

Mr. J. Bruton: Does the Minister think that half of Europe's companies will disappear in the next ten years?

Mr. R. Burke: No.

Mr. J. Bruton: I take it that the Minister does not agree with Sir John Harvey Jones of ICI in his diagnosis? Am I correct in believing, however, that the Minister is of opinion that some mergers [953] would be desirable in the case of Irish companies?

Mr. J. Burke: Yes.

Mr. J. Bruton: Will the Minister indicate the sectors in which he thinks mergers would be desirable here?

Mr. R. Burke: It varies from sector to sector and must bear in mind the needs of various companies. I see a need for companies to identify niches in the European market and to go for them. That move would be assisted by mergers but I am not in a position to identify specific areas for the Deputy at this stage.

Mr. J. Bruton: Is the Minister aware that the IDA have powers under industrial development legislation dating back 20 years or more and that those powers have remained completely unused?

Mr. R. Burke: I am so aware and I would like to see some activity in this area. The Deputy can rest assured that I will be encouraging a certain amount of activity in regard to it.

Mr. J. Bruton: Has the Minister given any instructions or advice of a formal kind to the IDA in regard to whether or not, and how, they might use the powers they have to assist mergers of Irish companies with other Irish companies or with European companies in order to strengthen their position vis-á-vis 1992? Does the Minister propose simply to allow the IDA to continue as in the past not utilising their powers in this regard?

Mr. R. Burke: I see the role of the IDA as being more of an aid to companies who intend to merge. I have discussed this topic at length with the IDA. If the Deputy is asking me if I have written formally to the IDA and given them instructions, that has not been done. The need for strong companies to tackle the opportunities and challenges of Europe after 1992 has been discussed with the IDA.