Clarity and certainty are what businesses need
Sep 15, 2020
Speaking earlier today (15 September 2020) Chambers Ireland Chief Executive, Ian Talbot, said
“Chambers Ireland welcomes today’s announcement by government of a medium-term roadmap – something which our network has been seeking for a considerable period of time.
Covid-19 means that businesses are operating under uncertainty and against considerable economic headwinds. This morning’s report “COVID-19 pandemic and SMEs revenues in Ireland”, published by the ERSI, demonstrates the disastrous circumstances which SME and Microenterprise businesses are facing out towards the years’ end.
It now seems unlikely that our economy is on the ESRI report’s optimistic trajectory. The SME sector, which employs 63% of people working in Ireland, looks like it will be having a catastrophic 2020.
It remains the case that the risks adherent to this pandemic are asymmetric, the risks associated with under-reacting to the virus far outweigh the risks of over-reacting.
Businesses need a clear strategy outlined by government so that they know what will occur during the re-imposition of restrictions that many businesses are likely to experience over the winter. There cannot be room for ambiguity as a huge number of businesses will have to minimise their exposure to risks if they are to survive into the new year. If they are to know what the right decisions are to be, they will need to be certain of, and trust in, what the government’s response will be.
In addition to direct support to maintain employment through this exogenous economic shock, there is a clear case for the government to introduce a counter-cyclical and stimulatory budget next month.
There is an existing shortfall in infrastructure which needs to be made good – the demands of the Green Transition will necessitate the revitalisation of our urban areas, the modernisation and expansion of our transport networks, and the reinforcement of our energy grid. This budget must aim to close that gap.
Over the coming decade, these works will need to be done regardless. It makes sense to carry them out now when interest rates are negative and there is likely to be excess capacity in our construction sector for years to come.”
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Data from our Chambers Ireland business community surveys were used to model the cases where the lockdown severely impacted businesses.
The “optimistic” scenario outlined by the ESRI showed that even with the TWSS/EWSS wage supports that have been put in place, 39% of Microenterprises (businesses with fewer than 10 employees) are likely to have exhausted their cash reserves entirely by years end, with more than half of these businesses needing in excess of €21,000 to stay liquid. In the more “pessimistic” outcome 42% of these firms are likely to see their resources exhausted by December, with more than half of Microenterprises suffering a 2020 shortfall which will be in excess of €55,000.
For Small to Medium enterprises matters look worse. Under the “optimistic” scenario, 46% of them are likely to have outgoings which exceed both revenue and their cash reserves by the end of the year. Should our circumstances prove to be closer to the “pessimistic” scenario, then 54% of Small to Medium Enterprises will see themselves run out of reserves by the end of the year, and most of them will see their shortfall exceed €300,000.
Given that we have already seen the reintroduction of restrictions in three counties already, and Dublin is diverging from the rest of the country, the “optimistic” seems increasingly less likely, and downside risks predominate.
Chambers Ireland has published our Pre-Budget Submission for 2021 where we call for:
- Better investment in our towns and cities to help create Sustainable Cities And Communities.
- Decent Work and Economic Growth
- Expanded investment in Industry, Innovation and Infrastructure
- Sustained Climate Action, and
- Policy that supports Gender Equality