A ROBUST and fit for purpose July stimulus package that delivers the urgent low-cost liquidity, required by small businesses, must be the Government’s principal method to ensure the SME sector survives according to SME Recovery Ireland.
On Friday, July 17, the group released findings from its second Covid-19 loss assessment survey which reveals that small businesses, employing between 1-50 people, have reported that they have incurred fixed cost losses of up to €153,583 since the COVID crisis began.
Chair of SME Recovery Ireland, John Moran said it is clear from the group’s analysis that “small firms are continuing to accumulate significant COVID losses” and a “multibillion-euro void” remains as well as “a destruction of the resources needed to survive in the SME sector” that has not gone away.
SME Recovery Ireland is calling for a stimulus package that provides low-cost liquidity “ideally in the form of grants” to ensure the survival of the SME sector.
The sample survey conducted among 349 small and medium-sized businesses between Monday, July 6, and Tuesday July 14 shows eight per cent of SME have ceased trading permanently, with 84 per cent of businesses availing of Government income subsidies for their employees.
The research shows 90 per cent of SME businesses have experienced a reductions in revenue of 25 per cent or greater.
Mr Moran said, “This fragility in the sector is resulting in a growing lack of hope among business owners and today’s findings demonstrate the low levels of confidence in the current government schemes.”
With just 12 per cent of businesses surveyed feeling current government supports are sufficient to help them recover, Mr Moran said the fragility of the sector “is resulting in a growing lack of hope among business owners” with the findings demonstrating “the low levels of confidence in the current government schemes”.
Just 29 per cent of businesses felt confident that they could meet their current debt and leasing commitments if their pre-Covid trading levels did not resume.
“The low take-up of those demonstrate simply that they do not work to fix the problem. Going down the same road again will lead to the death of firms across the country and the lack of confidence will inhibit investment and rehiring by the firms that survive,” said John Moran.
The SME Recovery Ireland Chair said next week’s July stimulus is the Government’s opportunity to “demonstrate that they are listening to small businesses and fully grasp their challenging situation”.
“It is an opportunity to correct the mistakes made in the development of the existing failed support schemes,” he said, continuing,” The domestic economy can be stimulated by instead injecting large scale liquidity into the sector, building confidence and demand which will in turn help to save the 1.5 million jobs supported by SMEs prior to Covid-19.
“It is also vital that the package contains the correct tools to stimulate spending by businesses and customers and that the measures do not result in businesses having to pile on additional debt or defer tax bills.”
Mr Moran noted the National Small Business Recovery Plan set out that the “July stimulus must provide ambitious and targeted grants that will allow businesses get back on their feet by compensating them for the losses incurred while closed”.
He said other EU countries have had a correct approach, pointing to Denmark as an example and urging Government to take a similar approach:
“Denmark has introduced a €6bn small business compensation fund while at the same time supporting wage subsidy schemes. Ireland needs to take the same approach at a sufficient scale, and we can do this by utilising our access to low cost borrowing at EU level.
“Lack of time is the biggest treat now and for many small businesses the July stimulus will be their last chance. We must get it right if we are to avoid a case where only the strongest survive. That approach may help a few strong firms but not enough to save the domestic economy and towns and villages all over the country.”
The National Small Business Recovery Plan put forward by SME Recovery Ireland sets out the critical contribution small and medium businesses make to the social and economic fabric of Ireland’s local communities, towns, and neighbourhoods.
SME Recovery Ireland believe a required €15bn bailout for small businesses including a €9bn compensation scheme and €6bn of liquidity supports is needed.
They say there is a need for supports required to ensure there is consumer demand for small businesses when they are recapitalised and reopen.
Tourism and travel is one industry worst affected within the SME sector during Covid-19, with 75 per cent of businesses reporting they are experiencing 90 per cent or greater reduction in business activity when responding to the SME Recovery Ireland Survey.
Foxford Woollen Mills an SME based in Co. Mayo employing up to 80 people is one such business that heavily relies on tourism and travel. Managing Director, Joe Queenan, said, “While we were able to reopen the retail and food operation of the business, the manufacturing end still remains on a skeleton staff as the tourism customer base on which we heavily has completely dropped off.
“A lot of uncertainly remains ahead and from a manufacturing point of view the next six to nine months will be a write off. We expect it will be a very slow return to whatever will be the new normal.
“The retail tourism industry is huge and it employs a lot of people in the West of Ireland both directly and indirectly. When you are trying to rebuild a business that has been flattened, adding more debt to the balance sheet just is not the solution. It must be mixed in with grant supports.”
For full details of SME Recovery Ireland’s National Small Business Recovery Plan, visit: www.smerecovery.ie.