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Essential to preserve SME ecosystem – Ibec

Ibec has said that the SME sector has been the worst impacted by the enforced lockdown of business and consumers due to the COVID-19 pandemic.

The group, which represents Irish business, has announced its policy recommendations and says that a stable political executive and legislature is ‘crucial’.

Ibec believes that unless there is a dramatic intervention significant numbers of businesses will fail in 2020. 

“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.

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

July stimulus

The group, which represents Irish business, has announced its policy recommendations.  

“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.

“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,” said Brady.

Policy areas  

The three urgent policy area recommendations for SMEs in the ‘July Stimulus’ are: 

1.  Restart Grant: Significantly improve the overall fund to in excess of €1 billion, including a flat payment of €15,000 per company to match schemes in Germany and the UK. In addition, the link to the rates system which disqualifies many smaller operators should be removed. 

2.  Credit guarantee: Introduce a new and improved ‘bounce-back’ credit guarantees on loans with 100% guarantees, no portfolio limit and an interest rate holiday of 12 months to be followed by interest rates below the Eurozone average.

3.  Business fixed costs and debts: Introduce a fund to write down debts under the Revenue Commissioners tax warehousing scheme when they threaten business viability; extend the commercial rates waiver to six months with a further six-month deferral; and introduce a binding mandatory arbitration model for disputes over commercial leases. This arbitration model should include some State burden sharing based on the recent Swedish state-aid approval model.

Impacted

SMEs accounted for approximately 70% of overall employment in Ireland pre-COVID-19.

Across Ibec, 60% of its members employ under 50 people with 30% employing between 50 and 250 people.

The body’s research indicates that 100,000 firms nationally have been impacted by the COVID-19 related shutdown, and between them they employ over 500,000 people.