As published on: https://www.businesspost.ie/analysis-opinion/caroline-dunlea-irish-smes-are-symied-by-digital-red-tape/

There is a saying going around at the moment suggesting “American innovates, China replicates and Europe regulates.” To be fair to both China and Europe, there is a lot of innovation happening in both regions. But there is no doubt, Europe is way ahead when it comes to regulation, and nobody is feeling this more than Irish SMEs in the digital sector. Last year’s landmark Draghi report on European competitiveness contained stark warnings on how Europe is lagging behind in the breakthrough digital technologies arena, with over-regulation cited as a key challenge to growth in the sector.

The Draghi report’s warnings have evidently hit home, with the European Commission prioritising a campaign of regulatory simplification. This would alleviate the pressures on small businesses. Revision of the EU’s digital rulebook is ostensibly included as part of the simplification agenda. But the level of regulation of European tech is so immense that the challenge of simplification will be equally immense. The report noted that there are over 100 tech-focused laws and over 270 regulators across the EU.

Nobody is saying that there shouldn’t be digital regulation. Both citizens and businesses need these laws to protect our data, to protect our rights and to protect our children. With new digital technologies such as AI evolving at an exponential rate, more new regulation will be expected and will be welcomed in many areas. But with so much regulation, it is only right that we pause and ask how much might be too much.

The snowballing and gold-plating of regulation is eroding European competitiveness and impairing the EU’s attractiveness for innovation. When we say Europe, this very much includes Ireland and our SMEs.

Right across the Irish economy, businesses in all sectors are being impacted by digital regulation. On the one hand, businesses are encouraged to accelerate their digital transition; on the other hand they are being tied into knots by the red tape associated with digital compliance.

Ireland needs to do better when supporting businesses in their digital transition.

In the first 10 months since the Grow Digital Voucher was launched through local enterprise offices to help businesses embrace digitisation, only 119 small businesses have been approved for a grant, which is up up to a maximum of €5,000.

In Budget 2026, Digital Business Ireland is calling for a tiered system of grants – including a much higher grant – to support Irish SMEs in accelerating their digital transition.

Also, look at the new EU accessibility law which requires websites and digital platforms to be accessible to all. This is an example of good regulation which Digital Business Ireland ran an awareness campaign on. But there was very little done by government or state agencies to raise awareness among Irish businesses, many of whom could now face hefty fines for not complying with a regulation they don’t know about.

With the government committed to addressing Ireland’s competitive challenge, now is an ideal time for ministers to strike a better balance between digital regulation and growth. A twin-track approach is needed.

First, there is much to be done at an EU level over the next 18 months, including in the run-up to Ireland’s presidency in the second half of 2026. Given the country’s position as a leading European tech hub, Ireland should champion an accelerated simplification on of digital regulation, including the AI Act, to boost innovation and growth. At the same time, Ireland should push for more international data transfer agreements, similar to the EU-US Privacy Framework. Remarkably, the EU has data sharing agreements in place with only 15 other countries. More agreements will help slash compliance costs for businesses while strengthening the global protection of personal data.

Second, at a domestic level, the government should mandate the Data Protection Commission and the state’s enterprise agencies to do more to support businesses to navigate and ensure compliance with EU digital regulation. For many Irish businesses, particularly SMEs, being signposted to a webpage with guidance is not enough. Enhanced advisory and support services are needed. In the UK, where the Labour government has just completed its first year, the government’s ‘Growth Mission’ has mandated state agencies to do more to drive growth. As part of this, the UK Information Commissioner’s Office has introduced free data training programme for SMEs and is developing new guidance on international data transfers. Similar proactive, pro-business intent is needed here.

Digital regulation has its value. It is here to stay. But that doesn’t mean digital regulation has to overburden business or smother innovation. Regulation must be fit for purpose and foster a path to growth. To remain competitive, this is a balance that Ireland cannot afford to get wrong.