Fifth of SMEs tapping Covid payment breaks needed further support 

Report puts spotlight on the way SMEs have fared since the ending of automatic payment breaks

The Central Bank found that new lending to SMEs last year fell by 20% from the previous year.  Picture: Leah Farrell

A fifth of small firms that got a payment break on their loans during the Covid-19 economic crisis have required further support or have fallen into arrears.  

And just under half of the SME payment breaks have returned to full payment on extended terms, and a third on existing terms, according to a new Central Bank report. 

The report also found that around two-thirds of all SMEs in Ireland posted a drop in turnover, with many making losses, and "further losses are expected to accumulate until the pandemic recedes".

Banks offered payment breaks last year to home loan borrowers as well as to companies, and the report is the first to put the spotlight on the way SMEs have fared since the ending of the automatic payment breaks.       

The number of corporate insolvencies in Ireland, like elsewhere in Europe, has not risen during the crisis so far because of the billions of euro the Government has injected to stabilise the economy.

However, many economists say that the number of business failures will inevitably increase as the business supports are withdrawn as the roll-out of vaccines help to reopen the economy but expose the many firms that will not survive.   

The Central Bank found that new lending to SMEs last year fell by 20% from the previous year.

"Payment breaks were widely used for Republic of Ireland SME lending through 2020, with around a quarter of debt balances at end of January 2021 having availed of this support," the Central Bank said. 

Loan applications from Irish SMEs fell slightly in the six months to the end of October, despite posting an increase in the rest of the eurozone. 

Central Bank deputy governor Sharon Donnery said that “monetary, macro- and micro-prudential policies have complemented each other so that the financial system has worked to absorb rather than amplify the shock".