Dargan Institute Position Paper: The Urgency of AI Adoption for Ireland's Micro-Businesses

Our director Eoin Costello presents a copy of our position paper to Peter Burke T.D., Minister of Enterprise, Tourism and Employment

Submission To: Fine Gael Small Business & Enterprise Conference 

1. Who we are: A social enterprise working at the coalface of tech adoption by micro-businesses

The Dargan Institute is a passionate advocate for redefining Ireland’s localities as platforms for sustainable jobs, innovation, and collaboration. Our mission is to ensure the benefits of digitalisation are available to the majority of small businesses and to address a rapidly increasing digital divide.

Through our direct experience at local, national, and international levels, we know what we are talking about. The Dargan Institute clg has created a unique ‘Digital First Communities’ model for upskilling micro-businesses provided from our Dargan Hub in the heart of Dun Laoghaire town. We run the Dargan Forum on Ireland’s Green & Digital Transition each July. We sit on the government's Enterprise Digital Advisory Forum (EDAF) at the Department of Enterprise, Trade and Employment. Internationally, our director, Eoin Costello, was appointed a Digital SME Ambassador for the European DIGITAL SME Alliance, and we are regular participants in the OECD's 'Digital for SMEs' (D4SME) Global Initiative roundtables in Paris, where we contribute to global discussions on SME resilience and digital transformation. Furthermore, our expertise was sought by the UK Government for its forum at Wilton Park on formulating its national 'Small Business Strategy'.

2. Why Ireland’s micro-businesses matter and why they are currently underserved

"What's the noun for a cluster of small businesses in close proximity - a town" — Eoin Costello, Dargan Institute

Micro-businesses, with fewer than 10 employees, are the backbone of Ireland's economy and local communities. They are by far the largest business population, representing 92.6% of all enterprises and accounting for 27.6% of the workforce. Including sole traders, this figure rises to 226,900 businesses. Crucially, they are predominantly located in rural areas and are essential to regional vibrancy.

Despite their importance, micro-businesses are often underserved by policy. Owners are extremely "time-poor," handling all aspects of the business themselves with limited capacity to navigate complex support schemes. Government supports are often designed with a "one-size-fits-all" approach, with eligibility criteria more suited to larger SMEs. There is also a policy focus on high-growth, export-oriented firms, which can leave traditional, domestic-focused micro-businesses with fewer tailored supports.

This leaves our largest business cohort vulnerable. This vulnerability is starkly highlighted by recent data from early 2024, which revealed a 41% increase in business insolvencies, with SMEs accounting for 85% of these failures. These businesses face immense pressure from the rising cost of business.

This vulnerability is particularly acute as we face the AI industrial revolution. Large Language Models are set to become the new operating systems for 'intelligence on demand', threatening to disrupt traditional professional services like accountancy and law in much the same way eCommerce impacted retail. Without urgent action, AI will accelerate the widening digital divide between large and small businesses, leading to a transfer of value from local communities to global tech giants and creating 'jobless growth'.

Our director Eoin Costello presents a copy of our position paper to Paschal Donohoe T.D., Minister for Finance.

3. Recommendation 1: Incentives to create collaboration for 21st-century challenges

Ireland’s enterprise support system, while comprehensive, is largely built on a 'winner takes all' grant model that supports individual businesses in isolation. This unintentionally incentivises competition over collaboration at a time when pooling scarce resources is more important than ever.

The European Union has long recognised the power of collective action, making collaboration a core requirement for grant eligibility. This very conference, with its "collaborative session where participants shared their perspectives" and "‘round table’ opportunity...to discuss matters with fellow business owners," serves as a practical example of the collaborative forums that foster resilience and innovation. Ireland must modernise its supports to reflect this 21st-century reality and foster local ecosystems.

We recommend shifting the focus of enterprise grants from individual businesses to collaborative cluster applications. Instead of solely funding competing businesses, a new category of grants should be introduced to incentivise micro-businesses to pool resources and share functions, thereby increasing collective productivity and resilience. This approach would foster local knowledge sharing and enable micro-businesses to tackle the challenges of AI adoption together.

4. Recommendation 2: The National Hub Network as an accelerator for LEOs

Local Enterprise Offices (LEOs) are a vital 'first-stop-shop' for business support, with over 60,000 people attending training in 2021 alone. However, their county-wide mandate means they cannot be seen to favour one locality over another, which can limit their grassroots reach. This is compounded by a significant awareness gap; a recent OECD survey found that a mere 18% of SMEs are knowledgeable about the government support available to them for adopting digital tools. This demonstrates that current outreach is failing to reach the 'long tail' of hard-to-reach micro-businesses.

Meanwhile, the Connected Hubs network provides a physical presence in over 400 communities across Ireland, acting as trusted focal points for hyperlocal economic development. These hubs are ideally placed to act as a catalyst for digital adoption on the high street.

We recommend that the national hub network be used to accelerate and augment the impact of the Local Enterprise Offices to support AI adoption at scale. This can be achieved by creating a competitive, LEO-managed fund, open to all hubs in a county, to deliver targeted AI digitalisation initiatives to micro-businesses in their direct catchment area. This model complements the LEOs' mandate, leverages the trusted grassroots presence of hubs, and provides a new, effective way to reach underserved micro-businesses, directly supporting the national target of 90% of SMEs achieving basic digital intensity by 2030.