Pressure builds on Government to focus on economic reopening

Agenda: Businesses need guidance on return dates as examinership-lite process looms

A deserted Grafton Street: the rate of new infections is seemingly stuck at  about  500 cases per day. Photograph: Gareth Chaney

A deserted Grafton Street: the rate of new infections is seemingly stuck at about 500 cases per day. Photograph: Gareth Chaney

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Pressure is building once again in retail and, especially, the hospitality sector for guidance from Government on when businesses may be able to reopen. Scarred from the virus spike over Christmas that followed the last economic reopening, Ministers are giving little away. “Data not dates” will drive this reopening decision, the Government says. In the meantime, businesses grow ever more frustrated.

Killarney-based restaurateur Paul Treyvaud was among the first to break ranks last month, when he vowed on social media to reopen “no matter what” on July 1st because, he says, his businesses need certainty and a competent State would have had long enough by then to put in place the measures required to ensure that a reopening is possible.

It was a rallying cry for a devastated industry, but it was also a warning to Ministers: the fright from the Christmas surge won’t last forever and, eventually, desperate businesses will find their voice once more and the pressure will begin to crank up. A change to the 5km rule on April 5th is unlikely to ease it.

On St Patrick’s Day, Treyvaud, who is also a television chef, doubled down on what he described as his “Che Guevara moment”. He hosted a 45-minute Facebook Live video on Wednesday, during which he said his premises is “ready to reopen and all we’re looking for is a plan”. This time, he wasn’t alone.

The quirky video was shot, not at Treyvaud’s, but at the Kenmare Brewhouse pub and restaurant in the heart of another of Kerry’s beautiful heritage towns. Treyvaud presented it like a television show, a friendly get-together with food and cocktails. All the while, he managed to subtly highlight the impact of the lockdown restrictions on the people who depend on affected businesses for their livelihoods.

Packed pubs

Local musician Dan Sweeney, who normally earns his living gigging in Kerry establishments, played a few songs. For many viewers, the last time they will have heard someone sing a haunting number such as Carrickfergus will have been in a packed pub. It was highly evocative. Local Kenmare restaurateur, Bruce Mulcahy, cooked up a prawn dish, while Treyvaud questioned him on how difficult it is to stay closed.

From a social distance in one of the booths, Treyvaud also interviewed local independent TD Michael Healy-Rae, who comes from a family of publicans himself. Healy-Rae weighed in on the idea that businesses have to be given some sort a clue as to when they might be able to reopen, even if that exposes the Government to political risk.

“A lot of the people making the decisions have never paid a man or a woman on a Friday evening,” said Healy-Rae. “And what I mean by that is they have never run a business.”

He suggested that SMEs have to be given some sort of a clue, so that they can make the necessary arrangements to reopen: “The politicians above in Dublin, and the people with power, they don’t understand that you can’t just press a button and say ‘you can open your pub now’.”

One of the main “politicians above in Dublin” who will decide when businesses can reopen is Leo Varadkar, the Tánaiste and Minister for Business. He insisted to The Irish Times this week that he is “extremely aware” of the pressures facing businesses such as Treyvaud’s.

“I know it’s difficult but it would be irresponsible of me to give exact timelines on anything to do with the virus. It wouldn’t be fair to anyone,” said Varadkar, standing his ground on providing a date.

“People have experienced three waves now and three lockdowns and, you know, whether it’s the general public or whether it’s the business sector, nobody really wants to open up if they’re going to have to close down in two or three weeks. People want a sustainable reopening now. So we are reopening incrementally and carefully to make sure when we do reopen, we stay open.”

Infection stasis

With the rate of new infections seemingly stuck at about 500 cases per day, there seems little chance the Government is for turning. The December reopening took place when virus numbers were half that level, and within weeks, Ireland had the biggest spike in the world and over 1,000 people died in January alone. The Government boxed itself into a corner by providing a December 4th reopening date, and it was politically unable to renege on it when the time came and cases were still elevated.

Adrian Cummins, the chief executive of the Restaurants Association of Ireland (RAI), was one of the lobbyists who pushed the Government for a reopening before Christmas. He acknowledges that what happened subsequently makes the reopening conversation much more difficult to have this time round. But, he insists, in the interests of his members he has to advocate for the issue to be addressed.

“We accept the public health advice and we are not in the militant camp. But the conversation around reopening has to start. It should have started when the UK had its conversation. We need to lay the groundwork.”

Cummins points out that Scotland announced its reopening plan – with dates – this week, while Northern Ireland’s was announced earlier this month. Cummins believes the numerical focus that drives the conversation in the Republic should not just be on daily new infections.

Putative plans

“It should focus on three things: cases per 100,000, the percentage of the population that is vaccinated, and the numbers in intensive care versus its capacity.”

Eoghan O’Mara Walsh of the Irish Tourism Industry Confederation also wants a plan. He noted that if the Government can set a timeline for the end of June for up to 80 per cent of adults to be vaccinated, why can this not go hand in hand with a putative date for economic reopening?

“Nobody is saying it needs to happen next week or next month. We know the date could change. But the Government needs to have enough confidence in the industry to at least publish a plan.”

Closed pub in Temple Bar on St Patrick’s Day: the ability of businesses to survive may depend upon how leveraged they were before the pandemic. Photograph: Peter Morrison
Closed pub in Temple Bar on St Patrick’s Day: the ability of businesses to survive may depend upon how leveraged they were before the pandemic. Photograph: Peter Morrison

In the meantime, whole sectors of the economy remain on taxpayer-funded life support. The employment wage subsidy scheme (EWSS) pays the bulk of the wages of workers at qualifying businesses. The Covid recovery support scheme (CRSS) pays qualifying businesses up to 10 per cent of average weekly turnover. About 465,000 workers laid off due to the pandemic receive enhanced unemployment benefits with the €300-per-week pandemic unemployment payment (PUP).

According to Dermot O’Leary, the chief economist at Goodbody stockbrokers, the Government “deserves credit” for the scale and speed of its interventions. He says it has directly contributed to keeping businesses alive. Insolvencies barely rose at all last year, despite the carnage.

“We’ve been looking for the canary in the coal mine with insolvencies, and it hasn’t come yet,” says O’Leary. “You’d think the numbers would be rising but they are not and it is all because of the supports. They have cost about €9 billion to date. That is roughly equivalent to the cash burn of Irish SMEs.”

Continuing supports

Cummins wants the current supports to be doubled, with EWSS still in place for hospitality businesses for a further six months after reopening, a restart grant, further rates waivers and “no question of a VAT increase for the lifetime of this government”. O’Mara Walsh says the economic supports, which currently are due to end in June, must be extended for hospitality until the end of the year.

The Government’s mantra in recent months is that there will be “no cliff edge” to the ending of the supports, suggesting they will be reduced gradually. Varadkar declined to provide more detail on it.

“We’d have to look at that means closer to the time, but it likely involves a tapering-off of certain grants and wage subsidies, rather than a hard stop. It’s without question that there will be certain sectors – aviation, tourism, entertainment events – which may not open fully for a very long time. So, I would envisage us needing special schemes for those sectors later. Hospitality would be another one too. So, we just have to keep responding dynamically to a changing situation.”

Neil McDonnell, chief executive of the Isme, the small business lobby group, likens the economic supports to a “patient getting a transfusion”. But, he says, for many businesses it still does not cover their fixed costs and “insurance, leases, those things haven’t gone away”. He says the ability of businesses to survive after the economy reopens may depend upon how leveraged they were before the pandemic, and how much forbearance banks, and also landlords, are prepared to give.

Debt burden

“SMEs that are highly liquid and not too heavily leveraged, and don’t have a significant fixed-cost base, they will probably make it. A family pub with no outside staff, for example. But other more exotic places, maybe one that did a refit just before the pandemic, it isn’t getting out from under those loans anytime soon. The longer this goes on, the less financially viable they become.”

Other criticisms of the Government’s approach to future reopening remain.

Gardaí patrol a deserted Temple Bar on St Patrick’s Day: whole sectors of the economy remain on taxpayer-funded life support. Photograph: Peter Morrison
Gardaí patrol a deserted Temple Bar on St Patrick’s Day: whole sectors of the economy remain on taxpayer-funded life support. Photograph: Peter Morrison

McDonnell queried why antigen testing – rapid (but less accurate) on-the-spot virus tests that don’t need to go to a lab – have not been used more in this country to help the economy reopen. McDonnell and O’Mara Walsh also support the use of “vaccine passports” to facilitate greater economic freedoms for vaccinated people – the tourism confederation chief executive believes Ireland, as an island nation dependent upon tourism, should be “leading the conversation in Europe” on this issue.

“And if we have decided to put all our eggs into the vaccine basket, why have we not adequately resourced that basket?” asks McDonnell, who suggested that the Government should have tried to acquire additional vaccines from outside the European Union’s bulk-buying scheme.

Legal bills

Antigen tests and vaccine passports seem like less important issues, however, compared to the crux of the debate over business supports and reopening. For how long can the State afford to keep paying out and what impact will this have on the decision to reopen? O’Leary believes the Government should keep “as many businesses alive as it can for as long as it can”, but ultimately, some of them may fail.

McDonnell and Isme have been pushing for a low-cost form of examinership for debt-addled businesses that doesn’t come with hefty legal bills. Varadkar suggested this could happen later in 2021, after supports are removed.

“It’s only when the restrictions are gone and financial supports are removed, that we’ll know what the economy is going to look like post-pandemic,” said the Tánaiste.

“One thing we are working on is an examinership-lite process for companies that need to restructure. It’ll follow a similar model to personal insolvency. Minister [of State for Enterprise Robert] Troy is taking the lead on this and we’ll have it ready in the second half of the year. It might be a lifeline for some companies.”

A rapid insolvency process may not be the type of Government help that Treyvaud and other struggling business owners have in mind when they make appeals to Ministers. Unfortunately, the longer the pandemic goes on and the closer we get to the inevitability of the tapering of financial supports, a legal process to save companies from going bust may be exactly what the economy requires.

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