Living with COVID Will Require Long-Term Government Support – Latest Chambers Ireland COVID-19 Survey Shows 30% Decline in Turnover Even After Economy Has Reopened

Chambers Ireland and our nationwide network of chambers has today (24 September 2020) published results from a survey of the Irish business community. This survey seeks to quantify and highlight the impact of COVID-19 on businesses in towns, cities, and regions across the country.

The survey, which is the fifth in a series, captured over 860 responses during the lead up to the imposition of new restrictions on activity in Dublin. This is the first Chambers Ireland survey in the series that focuses on business activity and outlook during a period where most parts of the economy had re-opened following the Covid-19 restrictions introduced in March.

Business activity is typically down 32% across the sample, though with strong business-size and sectoral effects. Revenue expectations over the coming quarter are expected to be 36% below baseline and has finally aligned with the outlook for the next 12 months, at -33% below baseline.

Speaking this morning, Chambers Ireland Chief Executive Ian Talbot said,

“The data we are publishing this morning captures what the economy looks like while the virus was under control. Significantly, even during circumstances where the outlook is relatively stable and the economy is mostly open, businesses are telling us that, on average, they envisage turn-over to be 30% less than this time last year. Some sectors are suffering significantly worse than others, but no sector can be considered to be doing well.

This data also supports the theory of a more “K-Shaped” recovery, where larger firms are doing badly relative to a normal year, but SMEs are impacted significantly more. This may have to do with the predominance of SMEs in affected sectors, but the regional effects are important too.

In line with the ESRI’s report on SMEs which was published last week, the debt burden for SMEs is growing with Sole Traders believing that they will only be able to service 48% of their debt that falls due over the coming 12 months.

Liquidity is likely to continue to prove to be a problem for many businesses as considerable outstanding invoices are beginning to steadily build up. Again, the burden is being felt hardest by smaller businesses with as many as 50% of Microenterprises saying that they are having difficulty receiving payments for outstanding invoices.

It is important to bear in mind that this research illustrates sentiment in the economy while the outlook was stable, and before any of the new restrictions in Dublin were introduced, and as such represents a baseline for how the economy fares while Covid-19 is contained.

If we enter a phase where we swing between restrictions and relaxations, the impact on the business community will be significantly worse that the outlook presented in today’s research.

Where does this leave us?

The current “Living with Covid-19” strategy is set to last for the next 6 months, in all likelihood, we will be living with this economic impact for much longer.

Our members across the Chamber network understand the importance of protecting public health through reducing contacts and avoiding circumstances where people congregate. But this has a cost, and the business community cannot bear this alone. Supports introduced to date have been valuable in sustaining business through the first wave. However, it is likely that much more will be needed over the coming months.

The State’s highest priority at present needs to be assigning sufficient resources to ensure that contact tracing and testing becomes effective at limiting the spread of this disease. This has to become an imperative if we are to avoid large-scale community outbreaks.

It is only with better intelligence that public health officials will be able to track the virus and stop it spreading. The alternative will be repeated local restrictions across the country, the costs of which will be devastating to the economy. We must endeavour to do all that we can to avoid such an outcome.

Forbearance and flexibility from State agencies, banks and landlords must also continue to play a significant role in how we support the business community and our wider society. It is in nobody’s interest to see liquidations, business closures and increased vacancies in towns and cities throughout the country.

Finally, business needs certainty in the type of financial supports available to them, particularly if they are to be impacted by new restrictions. Any new funds committed to business supports must also be delivered rapidly.

Existing measures for firms which are in areas that have not yet suffered from extra restrictions must also be fit for purpose. For example, schemes such as the EWSS must be improved so that businesses can receive subsidies more promptly. The commercial rates waiver must be extended to a full 12 months. The sectors worst impacted are also likely to need further targeted interventions.

If protecting livelihoods is the objective, then Government, through Budget 2021 must recognise what the business community has come to understand, Covid-19 will be with us for some time, and every part of our society needs support.”