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Irish SMEs face revenue shortfall of up to €15bn this year, ESRI warns

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Small and medium-sized businesses face a revenue shortfall of up to €15 billion this year, depending on how the Republic’s economy responds to the Covid-19 crisis, research from the Economic and Social Research Institute (ESRI) has found.

A report examining the financial resilience of SMEs here established that about half of small and medium-sized businesses saw revenue fall below expenditure in the main Covid-19 lockdown period between March and June.

Over that period, the total shortfall was estimated to be between €6 billion and €10 billion.

An estimate shows that the total revenue shortfall for SMEs this year could amount to between €8 billion and €15 billion, “depending on the epidemiological situation”, the ESRI said. That assumes that recovery in the State’s economy is slow. A rapid return to near normal turnover levels could see the shortfall come in between €7.4 billion and €10.7 billion for the year, the ESRI said.

The research paper, authored by Maria Martinez-Cillero, Martina Lawless, and Conor O’Toole, noted, however, that if SMEs ran down internal resources some of this shortfall would be covered although it would still amount to between €4 billion and €8 billion for the year.

“This research gives a picture of the extent to which SMEs have been impacted by the pandemic. While the estimates for total accumulated losses estimates are extremely substantial, the results also show that these could have been much higher if there had not also been significant reductions in firm expenditure supported by the wage subsidy scheme and deferrals of other payments,” Ms Lawless said.

The report found that two in five micro businesses faced a revenue shortfall in the main lockdown period, lower than that seen in SMEs.

The median revenue gap per month for those micro enterprises included in this study was between €3,000 and €3,500. For the small and medium business, the median gap ranged from €30,000 to €40,000 per month.

About 40 per cent of SMEs didn’t have sufficient resources to cover the revenue gaps that occurred during the height of the lockdown.

The Government yesterday announced a new grant of up to €1,000 for small businesses most affected by coronavirus restrictions to help them adapt to be able to reopen during the pandemic.

Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar unveiled the €2 million Micro-Enterprise Assistance Fund that will be open to businesses with fewer than 10 employees who were ineligible for existing grants to help them manage the restrictions.

Speaking at the launch of the fund in Naas, Mr Varadkar said the scheme would be open first to businesses in Kildare because they had endure a national lockdown and additional local restrictions last month. It will then offered to up to 2,000 businesses across the country.

The authors of the ESRI report noted that implementing ongoing social distancing measures are quite different for small hospitality businesses than for office settings and those types of costs weren’t fully reflected in the scenarios presented.

The report also detailed how the shortfall could be lower if companies ran down existing funds. “While it helped to cushion the current blow, the longer-term outlook for the sector’s growth could be severely hampered in terms of limiting investment,” it states.

The authors added: “The results are subject to considerable uncertainty, particularly in the case of the forward-looking scenarios which depend to a large extent on health developments and the control of the pandemic.”

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