Broad support for Government’s €6.5bn package for businesses
Up to €2bn in guaranteed loans to be made available to SMEs impacted by Covid-19
Minister for Finance Paschal Donohoe: Measures are designed to ‘minimise the damage’ of the pandemic. Photograph: PA
There has been broad support from business groups for the Government’s suite of measures worth up to €6.5 billion to help businesses impacted by Covid-19, including a commercial rates holiday.
However, there is uncertainty over the implementation of the big ticket items as they need legislation to be introduced. This requires the formation of a new government, which might not happen until June, according to Taoiseach Leo Varadkar.
Announced on Saturday by Minister for Finance Paschal Donohoe, the measures include up to €2 billion in State-backed loans for SMEs. The loans will range from €10,000 to €1 million and will be 80 per cent guaranteed by the State and offered at below market rates.
The move is designed to provide emergency liquidity to cash-starved businesses and comes amid criticism of the existing schemes, which are viewed as too onerous to access and not competitive enough.
As part of the Government’s expanded rescue plan for business, Revenue will also “warehouse” VAT and payroll tax debt accrued by companies during the lockdown at zero interest rates and for a period of 12 months .
A €2 billion Pandemic Stabilisation and Recovery Fund has also been established, to be operated by the Irish Strategic Investment Fund, which will make capital available to medium and large enterprises on commercial terms.
There is also a new Restart Fund, worth €250 million, to assist micro and small businesses directly through grants.
And there will be a waiver on commercial rates for affected businesses for a period of three months, out to June 27th. This measure amounts to €250 million.
Mr Donohoe said the measures are designed to “minimise the damage” of the pandemic. “Our collective public health has been targeted; our businesses and our economy have been shouldered with an unimaginable burden; and our society is grappling with this new reality,” he said.
“But, by working together, we are minimising the damage. On top of the measures previously put in place by Government, this suite of measures being outlined today is designed to build confidence, further assist businesses in terms of the management of their companies, and allow them to begin looking to the future and start charting a path forward for weeks and months ahead.”
Wage subsidy scheme
In relation to the Government’s temporary wage subsidy scheme and the special Covid-19 unemployment benefit, set up at the end of March for a period of 12 weeks, Mr Donohoe said he was aware of the approaching end point for those schemes and of the need for clarity in advance of those end dates.
More than 1 million workers are availing of those schemes but they are scheduled to expire before the economy reopens under the Government’s five-phase plan to exit the lockdown, announced last Friday.
Mr Donohoe also said the Government has not taken a decision on whether to reduce the VAT rate for the tourism and the hospitality industry.
Employers’ group Ibec welcomed what it described as a “further significant package of business liquidity and cashflow supports”.
“The scale of business collapse in recent weeks has been spectacular and unprecedented and the significant low interest loan guarantee; other liquidity and investment measures; grants; and tax deferral and waiver supports; are an important further step in addressing the cashflow crisis which so many businesses are dealing with,” Ibec chief Danny McCoy said.
Brian Hayes, chief executive of the Banking & Payments Federation Ireland, said the credit guarantee scheme is an “important step” in improving the liquidity challenges facing SMEs, and said banks would work to ensure it operated efficiently.
‘We need certainty’
Allan Shine, chief executive of County Kildare Chamber called for the immediate setting up of an SME taskforce. “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 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.”
Sven Spollen-Behrens, director of the Small Firms Association, welcomed the move on rates. “The commitment to local authorities to make up the rates shortfall, so that local authorities can continue to provide full services to the public is welcomed, as it will ensure that our town and city centres remain attractive to consumers.”
The measures come amid criticism of the Government’s existing schemes operated by the Strategic Banking Corporation of Ireland (SBCI), which are seen as too difficult to access.
The Government’s €200 million Covid-19 working capital fund for small businesses has had a low take-up to date with €17 million of loans being granted to 100 borrowers, according to figures provided to The Irish Times.