Almost 40% of small firms hold unpaid invoices, with accommodation and food service among the sectors facing some of the worst challenges from the Covid-19 storm, a Central Bank report has confirmed.
The SME 2020 report focuses on the effects on firms of the Covid-19 fallout and comes as the Government prepares to unveil its long-awaited summer stimulus package that aims to keep as many as people from long-term unemployment by offering grant aid to vulnerable firms.
The Central Bank report underscores the huge problems facing small firms even for those areas where restrictions have been fully lifted. It will help bolster the arguments of many business groups and economists who have argued that large parts of the Irish domestic economy will be permanently scarred without extensive aid, as jobs-rich companies go to the wall.
The report which draws on a number of sources says 42% of firms are changing or deferring payments to manage cash flow.
It says 11% of firms had creased ceased trading temporarily or permanently by the end of May, compared with 24% of firms in April. However, the accommodation and food sector have fared badly and 62% of the firms in the sector have stopped trading temporarily or permanently at the end of May.
The report says a fifth of firms in accommodation and food have large amounts of debt that may constrain them from borrowing more, and 44% of firms in food and accommodation have no debt at all.
"Some of the sectors with the largest amount of outstanding bank debt --accommodation and food and wholesale and retail -- are more exposed to the shock from Covid-19," the report says.
Meanwhile, global shares climbed to their highest since February and the euro briefly hit its strongest since March on news that EU leaders had agreed terms over the €750bn Covid-19 stimulus package and the €1 trillion EU budget for the next seven years.
“This agreement sends a concrete signal that Europe is a force for action,” a jubilant European Council President Charles Michel told reporters, after the summit which ended in the small hours following almost five days of dispute.
French President Emmanuel Macron, who spearheaded a push for the deal with German Chancellor Angela Merkel, hailed it as truly historic.
Leaders hope the €750bn recovery fund and its related €1.1 trillion budget will help repair the continent’s deepest recession since World War Two after the coronavirus outbreak shut down economies.
Germany Economy Minister Peter Altmaier said that, with the agreement, the chances of “a cautious, slow recovery” in the second half of this year had increased enormously.
While strong in symbolism, the deal came at the cost of cuts to the proposed investment in climate-friendly funds and did not set conditions for disbursements to countries, such as Hungary and Poland, seen as breaching democratic values.
Irish shares joined in the rally. AIB and Bank of Ireland which are proxies for the Irish economy rose by up to 5% and the hard-hit housebuilders Cairn Homes and Glenveagh Properties gained by up to 3%.