ISME welcome the improvements in the COVID-19 Income Support Scheme, which will maintain a high level of income support for workers up to the average industrial wage should the companies they work choose to enter this scheme. However, we must remember that without aggressive action to introduce liquidity into the market, workers in Irish SMEs who avail of this income support will not have jobs to return to in a matter of weeks.
The schemes currently on offer through the SBCI, the Credit Guarantee Scheme, or the Microfinance Ireland COVID-19 Business Loan scheme, while comprehensive, are overly complex, too expensive, or both. We need easy-to-access funds, based on first quarter payroll expenditure, offered on low, zero, or negative rates of finance. Many of ISMEs members businesses have already been closed, earning no revenues, for two weeks. This catastrophic loss of revenue for many SMEs will force their hand to make choices with respect to their scarce cash resources. ISME has had numerous calls from businesses unable to collect payment on December and January invoices. This will only worsen.
Small and medium enterprises are sitting on what little cash they have left, if any; and considering whether it is possible for them to pay the invoices sitting on their own desks. Councils like Dublin City are refusing to do anything more than deal with businesses ‘sympathetically,’ while banks will pursue loan repayments within a matter of months, and Revenue has only issued guidance on payments due to the end of February.
ISME CEO Neil McDonnell said; ‘ Unless a simple, no-strings attached source of cash is found for SMEs in days, not weeks, these businesses will not continue to trade. Their employees will be made redundant and will be unable to access the enhanced schemes. They will be left with nothing but the revised payment of €203 per week.’ Our current laws on Statutory Redundancy increase the likelihood that many people will seek redundancy payments from otherwise viable businesses. The state used to reimburse businesses 60% of statutory redundancy payments, but stopped the rebate in 2013. ISME is approaching the stage where they will have to issue ‘recommended guidance’ to SME owners on how they manage statutory redundancy claims. The ultimate cost to the economy of driving these SMEs out of business will be massive, especially for the exchequer. ISME is getting reports on an hour by hour basis of businesses folding or suppliers withholding payment. Orders are being cancelled; cash conserved. Contagion arises from a loss of confidence in the cash payment cycle. Easy to access liquidity is the only way to avoid this vicious circle.
ISME is calling on Government to make big, bold, creative moves, to ensure SME liquidity right now.
