Longer-term support for small firms needed as energy crisis lasts, warns banking group

'Likely that current inflationary pressures through energy price increases will continue in the short term', report on SMEs says

Banking and Payments Federation Ireland chief executive Brian Hayes said the Government would likely have to go beyond its €4.1bn in emergency budget measures to help firms and households because the fallout from soaring prices   is likely to last for years. Picture: Sam Boal/Rollingnews.ie

The Government will likely have to go beyond its €4.1bn in emergency budget measures to help firms and households because the fallout from soaring prices is likely to last for years, Brian Hayes, the boss of the business group that represents Irish banks, has said. 

Mr Hayes, who is chief executive of the Banking and Payments Federation Ireland, or BPFI, said longer-term assistance would be required for small firms in particular because the crisis is unlikely to be over anytime soon. 

It is "likely that current inflationary pressures through energy price increases will continue in the short term," said Mr Hayes in its latest report on SMEs.

"And even if the rate of inflation declines, price levels will still be higher in the future; hence one-off measures may need to be replaced in the future, with structural measures around energy efficiency both for households and businesses, such as the Ukraine Credit Guarantee Scheme, so that the economy does not face similar challenges in the years to come given the continued geopolitical uncertainty,” Mr Hayes said.  

Household spending under pressure

With household spending likely to be under pressure, the SME report highlights the latest crisis could again hit accommodation and food services and administrative services, two sectors which it says have lost a total of 21,000 jobs since before the onset of the Covid crisis. 

Banking and Payments Federation Ireland also warns other big users of energy, including transport and manufacturing firms, "are exposed to further cost pressures in addition to potential reduced demand from households given their focus on essential expenditure in the short term, particularly due to higher energy bills over the winter". 

Neil McDonnell, chief executive of business group Isme, said he broadly welcomed the banking group's call for the Government to consider supports for small firms beyond the winter. 

However, SMEs were sceptical of the Government supporting more loan schemes because many of the new debt offerings were not wanted, Mr McDonnell said.                                     

"Almost unanimously, businesses do not see debt solutions such as the Ukraine Credit Guarantee Scheme as viable propositions to tackle energy and other inflation. Debt solutions are not attractive in these circumstances — either to borrowers or lenders," he said.