ESRI report: SMEs face revenue losses of up to €15bn this year

SMEs could face 'uncovered losses' this year of €4bn-€8bn.

Small firms face a “severe” loss in revenues of up to €15bn this year, meaning the Government will likely have to keep its business supports on the table as long as the Covid-19 health restrictions continue to threaten their survival, according to a new report by the Economic and Social Research Institute (ESRI).

Two in five so-called micro-firms, which employ a small number of staff, and one in two small and medium-sized firms suffered losses totalling up to €10bn alone during the three months to June, when the Covid-19 health restrictions were at their most severe.

ESRI authors of the report, senior research officer Conor O’Toole and research professor Martina Lawless, said SMEs could face “uncovered losses” this year of between €4bn and €8bn after running down their cash reserves.

The ESRI research was carried out as part of a programme with the Department of Finance and looked at SMEs which post annual revenues of up to €50m.

Mr O’Toole said that, by number, small hotels and restaurants were “severely hit”; manufacturing small firms were hit to a lesser extent; and wholesale and retail small firms were affected in a limited way.

The research suggests the Government’s wage-support scheme, grants, and credit-guarantee schemes will continue to be important for the survival of many small firms and the supports ought to stay in place for the duration of the Covid health emergency, according to the ESRI.

The research did not recommend any specific Government measure but showed it was appropriate to continue to support small firms over the coming months, said Mr O’Toole.

Small firms had got some breathing space from their reserves but would continue to need support as they exhaust the cash buffers.

“Over the coming months, it is appropriate that firms are given a fighting chance to survive,” said Mr O’Toole, adding that support measures must continue to be offered as long as firms are being asked to follow health restrictions.

“This research gives a picture of the extent to which SMEs have been impacted by the pandemic,” said Ms Lawless.

“While the estimates for total accumulated losses estimates are extremely substantial, the results also show that these could have been much higher if there had not also been significant reductions in firm expenditure supported by the wage subsidy scheme and deferrals of other payments."

The research found that the reserves tapped by SMEs would likely fall short of bridging the gap between revenue and expenditure during the sorts of the lockdown.

"Even after their own resources are used, between €2.2bn and €4.3bn of a shortfall was accumulated over these three months," it showed.  

The research is the latest report to suggest that Irish-owned firms are facing much of the brunt of the Covid-19 economic fallout.