As business owners try and fathom out what the future of their enterprises looks like in the post pandemic world, a new organisation has mapped out the direction they believe the government needs to go in to ensure the survival of as many businesses as possible.
The SME Recovery Group has published a roadmap urging the government to introduce a bailout for small to medium sized businesses not dissimilar to the way banks were rescued in the last recession.
The group led by John Moran — a former secretary general of the Department of Finance wants the Government to draw up a two year plan and to use European funds to make ultra-cheap loans to help SMEs to survive the Covid-19 storm.
The SME Recovery group includes Isme chief executive Neil McDonnell, Retail Excellence chief executive David Fitzsimons and Restaurants Association of Ireland chief Adrian Cummins.
The vision outlined by the alliance will be music to the ears of under pressure business owners.
The group argues ‘Improved liquidity schemes up to €6 bn are required that better target small businesses and makes it easier for small businesses to recover. Small businesses require time to recover, hence why they need a minimum 1 year payment holiday when accessing government liquidity. This also allows for the compensation fund to assess their compensation which would be netted against the loans.’
‘Loan funding should also come at a zero % interest rate. Key to all loan schemes should be making the funds easier to access which means government channelling liquidity to a broader group of lending partners and increasing the level of guarantees on this capital.’
Other recommendations include:
- An expanded mandate for the SBCI with greater scale and more favourable and diverse lending terms
- A new national compensation fund to compensate business for losses incurred from the crisis by closures imposed by public health measures
- Additional measures to stabilise the small business sector and boost consumer demand over the critical two years of recovery.
“People have called for liquidity to be provided for viable businesses. Government has responded with increasingly scaled measures to help businesses cashflows. While commendable, this adaptive approach now needs to be replaced by the next government with an approach that is comprehensive in scale and design. It must accept that equitable distribution of compensation for losses must form part of the plan ”, Mr. Moran said.
The group maintains that while adequate for the lockdown period, measures announced to date – amounting to a total of €3.5 billion – will prove inadequate to tackle the challenges of economic downturn once the lockdown ends.
The SME Recovery group also calls for significant improvement in the design and delivery of supports. ”While well intended some of the measures are incorrectly channelled and too expensive” Derek F. Butler CEO of Grid Finance and group coordinator commented.
He also noted that ‘the National Small Business Recovery plan provides a comprehensive framework for the government to restore our small business sector.
‘Without a small business sector we don’t have an economy after our public health crisis has passed’ He added that by forcing SMEs to take on more debt during the crisis, the current approach risks ”kicking the can down the road” by forcing SMEs into debt for a situation not of their own making. ‘
The SME Recovery group believes that businesses that were viable before the crisis have acted in the national interest and should not have to incur debt as a result.
A Small Business Resilience Compensation fund – administered by Revenue and the NTMA – is recommended to both ensure equity in the distribution of compensation and to protect against future systemic business shocks in the same way the PRSI Fund and Deposit Guarantee Scheme protect against unemployment and banking failure.
“We are talking about saving the dreams and futures of our neighbours and friends who own or work in our favourite local businesses. They shut their businesses down to help safe our lives. Now we need to help them get back on their feet. It was not their fault.”, Mr Moran said
“We need to act quickly to provide ready access to cash to pay bills and buy stock to reopen. That will keep money flowing in society and allow them to reopen to reemploy hundreds of thousands of our fellow citizens, family members, neighbours and friends”, added Derek F. Butler, CEO Grid Finance
Already the government’s weekend SME recovery plans are being questioned.
In particular the fact that two key planks of the blueprint are some weeks away from being rolled out, a point raised by Kildare Chamber of Commerce CEO Alan Shine.
‘We find it incredible that the Taoiseach stated that the next government may not be formed til June whilst then announcing two business measures that require legislation.’
‘The warehousing of tax liability for 1 year and the SME credit guarantee scheme both require legislation and according to Leo Varadkar a government may not be formed til June, we then require a Seanad to debate and pass the legislation before it is put to the floor of the Dail . This legislation may not become law until July at the earliest. ‘
‘Business needs certainty and this is not been provided by the present government.
‘Cash flow is drying up for many businesses. Many businesses, especially in the tourism, hospitality and leisure industries see no light at the end of the tunnel.’ says Shine.
There has been a broad welcome for the confirmation that the Exchequer will replace funding lost to Local Government through waivers on rates with central funding.
But Kildare Chamber also want to see the immediate setting up of a SME taskforce.
“It has now become very clear that government and the political system at large need private sector influence. We do not need access to loans, we do not need endless grants that are not addressing the issues we face. We need certainty, we need state backed accessible grants that are meaningful . We need an SME taskforce to influence change in Kildare Street.’ said Allan Shine.
“We are facing the largest deepest recession in our lifetime, we need clear, precise and decisive action. We require a functioning government now not hopefully in June.’ remarked the Kildare Chamber CEO.
Plenty more distance to be travelled before you see real developments that assist business owners by the looks of things.