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Ibec warns that significant number of businesses will fold this year unless there is 'dramatic intervention'

The draft programme for government has promised a July stimulus, and Ibec says urgent supports are needed for SMEs.

Image: SIPA USA/PA Images

THE ECONOMIC FALLOUT for businesses hit hardest by the Covid-19 pandemic could see significant numbers of small and medium-size enterprises (SMEs) fail this year unless there is a “dramatic intervention”, employers group Ibec has warned. 

It said this morning that there are three urgent policy areas the next government must act on to support SMEs, including a restart grant which would feature a flat payment of €15,000 per company. 

Ibec’s chief economist Gerard Brady said that its research indicated that for seven in 10 companies, their cash reserves wont last until demand returns to its “normal” level. 

“This ‘liquidity gap’ will need to be bridged by external funding in order for many of these companies to survive,” he said.

Many businesses across the country shut their doors from mid-March onwards, and employers groups such as Ibec have for some time called for greater supports to allow businesses get back on their feet once they were permitted to return to work.

At different stages, the government has outlined measures such as the extension of the wage subsidy scheme into August and a range of supports aimed at providing liquidity

However, business groups have warned that more is needed to meet the scale of the crisis and this new document from Ibec on “Sustaining SMEs” calls for a number of actions the next government should immediately take. 

If the membership of Fine Gael, Fianna Fáil and the Green Party agree to go into coalition, we’ll have a new government led by Micheál Martin as Taoiseach next week. 

In their draft programme for government, the parties commit to a July Stimulus – an immediate suite of measures aimed at supporting businesses through the crisis. 

Ibec’s Brady said: “The July Stimulus provides an opportunity to deliver emergency supports to the SME sector that can provide critical bridging finance while SMEs try to trade their way through and adapt to the new normal.

Not every SME will survive but it is imperative that we preserve as much of the SME ecosystem as possible to keep as many people in employment as we can.

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Under a heading of three policy area recommendations, Ibec said such supports will be “unprecedented, but we are living in unprecedented times”. 

The first is the restart grant, which recommends the government increase this fund to in excess of €1 billion. The government previously announced restart grants of €10,000 but Ibec said that should be increased to €15,000 and its link to the rates system which it said disqualifies many smaller operators should be removed. 

It also calls for a “bounce-back” credit guarantee on loans with 100% guarantees, no portfolio limit and an interest rate holiday of 12 months to be followed by rates below the Eurozone average. 

A further set of measures related to business fixed costs and debts such as a fund to write down debts under the Revenue Commissioners tax warehousing scheme when they threaten business viability. 

Ibec added that its research indicates the number of SMEs worst impacted by Covid-19-related shutdown are in excess of 100,000 who between them employ around half a million people around Ireland. 

About the author:

Sean Murray

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