Impact of COVID-19 on Irish enterprises has been sudden, large and uneven

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  • Direct fiscal supports have provided significant financial support to the sector and the broader economy, but challenges will remain for the most adversely affected Irish SMEs
  • After accounting for reported reductions in wage and non-wage costs, revenue shortfalls for 2020 are estimated between €10.3bn and €11.7bn across the SME sector, although these estimates are subject to significant uncertainty.
  • In aggregate, these shortfalls can be met by a combination of utilisation of pre-existing cash reserves, draw-down of existing credit commitments, new borrowing, additional cost reductions or loss-sharing, or if necessary governmental non-wage grants, reliefs and guaranteed loans.

Today the Central Bank published a Financial Stability Note, written by Derek Lambert, Fergal McCann, John McQuinn, Samantha Myers and Fang Yao, entitled “SME finances, the pandemic, and the design of enterprise support policies”. The FSN estimates the likely losses that are being experienced in the SME sector over the whole of 2020 and discusses the potential supports that can meet these shortfalls.

Due to the nature of many of their business models, SMEs are likely to be facing considerable financial strain in the current pandemic relative to larger corporations and households. The uneven nature of the shock across sectors has become apparent, with firms in some sectors such as the accommodation and food sector continuing to report the largest falls in activity relative to pre-COVID-19 norms.

After accounting for reported reductions in wage and non-wage costs, revenue shortfalls for 2020 are estimated between €10.3bn and €11.7bn across the SME sector, although these estimates are subject to significant uncertainty. The authors note that the uncertain outlook and the use of firms’ survey responses during the pandemic contribute to this uncertainty in the estimates. In aggregate, these shortfalls can be met by a combination of utilisation of pre-existing cash reserves, draw-down of existing credit commitments, new borrowing, additional cost reductions or loss-sharing, or if necessary governmental non-wage grants, reliefs and guaranteed loans.

Source: Central Bank, Impact of COVID-19 on Irish enterprises has been sudden, large and uneven

Vithoria Escobar

Masters educated Public Relations and Marketing professional, with seven years international experience planning and managing strategic communications. Results-driven, with substantial knowledge across multiple industries and markets, including Digital, Technology, Corporate and Public Affairs. Available for both permanent and temporary roles in Digital Marketing, Social Media, Content Creation & Public Relations.

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