PwC has added its voice to the growing calls for the Government to substantially increase the amount of money it is committing to save companies at risk from going under due to the Covid-19 crisis.
The latest call comes ahead of an expected additional €200m suite of supports for manufacturing and exporting firms this week.
“Significantly more working capital will be needed and probably in the order of multiples of the amount already committed by the exchequer,” said PwC Ireland’s markets and strategy leader David McGee.
He said the estimated 3% of GDP that the Government has committed in income and working capital supports is not likely to be enough to replace lost demand and kick-start the economy, should it shrink by 8% as predicted.
Mr McGee said the choices for any country would be to wait for the market to correct itself — which could prove very slow and painful — or to set aside a large working capital fund to tackle the problem.
Last week, employers’ group Ibec called for a €30bn stimulus package — covering loans, crisis payments, and tax and rate deferrals — to inject emergency liquidity into the economy and help under pressure companies to survive the crisis.
A PwC survey shows that over 80% of businesses say they could be significantly impacted by the crisis, but 75% said they would be back to normal within three months if the virus were to end immediately.
The Government has also been urged not to shelve the planning and financing of important infrastructure projects because of the Covid-19 outbreak; with the warning that it could take up to two years to get them back on schedule.
“While work has been suspended on non-essential sites as part of measures to contain the spread of the coronavirus, we believe it is vital that finance and planning for state projects which are being progressed at the moment should continue as much as possible in the current circumstances,” said Society of Chartered Surveyors Ireland (SCSI) vice president Micheál Mahon.
“Issues in housing, health, and infrastructure will still be with us when we come out the other side of this crisis. If projects are shelved it might take 18 to 24 months to get teams back working and up to current levels.”
The SCSI said the Government must learn from the lessons of previous crises, most notably the 2008 financial crash.
“The current housing shortage, our infrastructure deficit, particularly in health, and widespread skills shortages can all be traced back to the failure to plan for the economic recovery in the post-crash scenario. That cannot be allowed to happen again, and it would give the sector some confidence if Government could demonstrate such planning was in train,” Mr Mahon said.
The SCSI’s call coincides with a slump in confidence amongst construction companies. According to Ulster Bank’s monthly industry barometer, around 45% of firms expect a fall in activity in the coming year amid virus uncertainty.