Pandemic is a blow for smaller firms as one in four firms could fail in the future – Central Bank
DUBLIN: The Central Bank has warned that a quarter of Ireland’s smaller firms could fail as the COVID-19 pandemic continues.
A Central Bank survey has revealed that more than 70% of small and medium-sized enterprises (SMEs) saw a decline in turnover last year. The survey found that the hospitality services sector (hotels and restaurants) was the worst affected and the wholesale and business services sectors were the least affected.
According to the survey, which was conducted in collaboration with the Economic and Social Research Institute (ESRI), about 40% of companies reduced their spending by 8.5% to cope with the pandemic. More than 30% of businesses made losses during the pandemic period.
Central Bank Governor Gabriel Makhlouf said many companies had tried to cope with the pandemic but could not avoid losses. “These figures suggest that, while companies have indeed managed to adjust to the realities of the pandemic, this adjustment for many reasons has not been enough to avoid companies experiencing losses,” he said.
The survey found that 5.4% of smaller firms were loss-making and struggling in 2019 and 2020. According to the Central Bank Governor, these 5.4% who have been struggling over the past two years are most likely to fail once economic supports begin to be withdrawn.
At the same time the Bank said that another 42% of smaller companies that were profitable in 2019 and struggling in 2020 should have better chances of returning to growth once the economy reopens.
The Minister for Finance, Paschal Donohoe, said the State will provide economic supports for SMEs, and that this is a “cautious approach” that would continue until a significant level of vaccination is achieved.
“Once the public health situation allows, supports will be unwound in an appropriate and incremental way. There will be no cliff-edge in the removal of support. Supports will continue for as long as is necessary to ensure a strong recovery,” the minister added.
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