Ibec warns of mass business closures unless Government acts

Tens of thousands of coronavirus-hit businesses are likely to go bankrupt within the next six months unless there is a “dramatic intervention” on the part of the Government, Ibec has warned.

The employers’ group wants the Government’s stimulus plan for the economy to be centred on emergency supports for small and medium-sized enterprises (SMEs), describing them as “the lifeblood of the Irish economy”.

It claimed that there are more than 100,000 Irish-based SMEs, employing 500,000 people, impacted by the Covid-19-related shutdown and many would go out of business in 2020 without financial support from the State.

It called on the Government to provide an additional €2.7 billion in restart grants, debt write-offs and 100 per cent loan guarantees to help them trade their way back to viability.

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"Unless there is a dramatic intervention significant numbers of businesses will fail in 2020," Ibec chief economist Ger Brady said.

“The SME sector has been the worst impacted by the enforced lockdown of business and consumers due to the Covid-19 pandemic,” he said.

“Our research indicates that for over seven in 10 companies, the minimum period in which they expect ‘normal’ demand to return is greater than their existing cash reserves,” he said.

“This liquidity gap will need to be bridged by external funding in order for many of these companies to survive,” Mr Brady warned.

The Government announced a €6.5 billion package of supports for business in May but critics say the schemes are too small in scale and have terms, such as high interest rates, which make them unsuitable for helping SMEs .

They also point to the fact that only €95 million in liquidity funding has actually got through to the SME sector since March while the Central Bank estimates that up to €5.7 billion is needed to shore up the sector after three months of lockdown.

Stimulus package

Ibec said the proposed July stimulus package, as proposed in the recently-published programme for government, provided an opportunity to deliver emergency supports to the SME sector.

Specifically, it called for an additional €1 billion in restart grants, including a flat payment of €15,000 per company to match schemes in Germany and the UK.

The Government should also introduce new and improved “bounce-back” credit guarantees on loans with 100 per cent guarantees with no portfolio limit and an interest rate holiday of 12 months with below-euro-zone average interest rates.

Ibec also called for a fund to write down debts under the Revenue Commissioners tax warehousing scheme when they threaten business viability and an extension to the current commercial rates waiver to six months with a further six-month deferral.

“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,” Mr Brady said.

“A stable political executive and legislature is crucial to enable implementation of urgent policy measures. These proposed measures across SMEs and the wider business community are unprecedented, but we are living in unprecedented times,” he added.