30 03 2020 Insights Corporate & Commercial

What now for the engine of our economy


“In cities around the world work has stopped but bills have not”[1]

By Gillian Keating and Gavin Bluett
30 March, 2020

The COVID-19 outbreak is first and foremost a human tragedy of unimaginable scale. Addressing this with the urgency it demands has quite rightly engaged the brightest minds across the globe.

While we do not share Mr. Trump’s view that “the cure cannot be worse than the problem”, any prudent risk analysis mandates that we must now also consider how to best manage “the greatest threat that the Irish economy has faced since the financial crisis”[2].

Kristalina Georgievsmo of the International Monetary Fund (IMF) has warned that the world is facing a recession at least as bad as the global financial crisis or worse.

Mario Draghi former President of the European Central Bank has urged the world to “mobilise our entire financial systems” in an effort to protect jobs and sustain the real economy[3].

We need to interrogate all possible supports for business to ensure that the ESRI projected 7.1% shrinkage in the Irish economy represents the worst and not the best-case scenario.

In Ireland if we are to avoid the predicted recession turning into a depression we must focus supports on the engine of growth in our economy, namely the SME sector. The SME sector constitutes a substantial proportion of our enterprise economy, comprising approximately 99% of active businesses and 65% of people employed[4]. Many of these businesses measure their success not just in terms of economic profit and growth but in terms of long-term commitment to communities and employees[5] and this is precisely the type of commitment we need now more than ever.

As economies across the world shut down save for essential services bills must still be paid if not now then at the end of temporary payment holidays. In an attempt to to mitigate the worst a global recession might throw at us governments across the world have unveiled economic stimulus packages to keep economies alive while attempts are made to get the COVID-19 outbreak under control and to ensure, insofar as possible, that viable businesses can be sustained through this critical period.

Similar to their response to the health crisis presented by the COVID-19 pandemic, the Irish government has not been found wanting in this regard and has introduced a range of supports for enterprise across income, credit and investment. Their response to date has been immediate, well articulated and considered, but this is just the beginning.

Irish Economic Responses to COVID-19

Income Support

The COVID-19 Income Support Scheme was announced by the Irish Government on 24 March 2020 and offers assistance to:

  • employers in paying employees’ salaries in these difficult times; and
  • individuals who have lost their jobs as a result of COVID-19

Full details on the supports available under this scheme are available at https://www.gov.ie/en/news/a6d8fa-government-announced-new-covid-19-income-support-scheme/

Enterprise Supports

A €200m Package for Enterprise Supports including a Rescue and Restructuring Scheme is being made available through Enterprise Ireland for viable but vulnerable firms that need to restructure or transform their businesses.

Details of these supports are being finalised at this time.

Working Capital Facilities

The COVID-19 Business Loan from Microfinance Ireland (MFI), in partnerhip with Local Enterprise Offices, is a Government-funded initiative to support small businesses through the current period of uncertainty. Further details on this initiative are available at https://www.localenterprise.ie/Portal/response/Other-LEO-Supports/Other-LEO-Supports.html

The SBCI Covid-19 Working Capital Scheme is offered in partnership with the Department of Business Enterprise and Innovation, the Department of Agriculture Food and the Marine and is supported by the InnovFin SME Guarantee Facility, with the financial backing of the European Union under Horizon 2020 Financial Instruments. Full details of this scheme are available at https://sbci.gov.ie/schemes/covid-19-loan-application

Employment Focussed Supports

A Short Time Work Support is available from the Department of Employment Affairs and Social Protection and is an income support payment for employees who have been temporarily placed on a shorter working week due to COVID-19 and is intended to help employers during periods of temporary difficulty.

Further details of this support are available at https://www.gov.ie/en/service/c20e1b-short-time-work-support/?referrer=/stws/

Credit Supports

The Credit Guarantee Scheme is a government supported product from the banks for small and medium businesses who have difficulty borrowing from their bank. Businesses can apply for loans of up to €1 million at AIB, Bank of Ireland or Ulster Bank. Loans can be for terms of up to seven years. The scheme provides an 80% guarantee to participating banks which are AIB, Bank of Ireland and Ulster Bank.

Further details on the supports available under this scheme are available at https://dbei.gov.ie/en/What-We-Do/Supports-for-SMEs/COVID-19-supports/Credit-Guarantee-Scheme-COVID-19-FAQ.html