Atradius response to Irish budget and what it means for businesses
Wednesday, September 28, 2022.
Atradius – response to the Irish budget and what it means for businesses this coming quarter and winter…
Sheena Bohan, head of commercial at Atradius Ireland says: “In a financially uncertain time, the 2023 budget announced by Paschal Donohoe today sadly doesn’t offer businesses the level of reassurance that they will need to confidently be able to weather the financial storm in the months ahead.
For a country that has a surplus of long standing family-run businesses, and local small firms at the cornerstone of their county or community, today’s budget has too many shortcomings for Irish SMEs – despite Mr Donohoe noting that “small businesses are the backbone of our economy” in Ireland.
Aside from today’s announced plans to help firms with rising energy and gas prices – which will be a welcome reprieve – there is little else to support businesses struggling with inflationary costs, ground rent, or consumer footfall shortcomings as the cost of living rises and restricts domestic spending. Late payments are also a factor affecting businesses in supply chains, and we’ve seen a significant rise in these reported in the last six months in Ireland.
The new Temporary Business Energy Support Scheme for smaller firms will see financial assistance of 40% for utility bills up to €10,000 per month. Although this will help some SMEs, it will leave many in the dark – perhaps literally – if they fall below the electricity rise of 150% needed to qualify for support or struggle with their application. As things stand it’s not entirely clear what this means for the spectrum of different industries beyond the winter too, where it remains to be seen how long this scheme will be in place for.
This energy relief scheme will support some international businesses and SMEs in need, to an extent, but without it being individually means-tested or scaled based on industry type, those who need support the most may not get adequate help for their business to survive this winter, and beyond. Similarly, whilst the recently agreed 80c rise in minimum hourly wage is long awaited and needed for employees, there was no counter mention today of government support for businesses to assist in these increased costs either.
As the IFA recently reported an overall increase in costs for farmers of 40% this year, the construction sector has faced the largest insolvencies and well known failures of Roadbridge and Sonica Fit-out Ltd, and the hospitality industry continues to struggle with unrealistic overheads.
The reduced VAT rate of 9% ending in February 2023 and returning to 13.5%, will contribute to liquidation fears for businesses in the hospitality sector. For an industry that is still very much feeling the lingering effects of the pandemic and consumer footfall and tourism declines, this reduced VAT was a lifeline for already struggling hospitality businesses..
Beyond energy support, today’s budget leaves the farming, construction and hospitality industries for example – alongside many more – very much in the dark about how they will get through this winter. It’s a bleak picture across the whole Irish economy, with more than 378 company insolvencies in the first three quarters of this year so far according to Deloitte . It also reports that the number of corporation insolvencies in the first half of 2022 rose by 50% on the same time last year; with 253 insolvencies in the first six months of the year compared to 169 last year.
The government is certainly making steps in the right direction to help domestically and support families this winter, but this stability, government attention and long-term support is exactly what businesses need too to survive beyond this critical winter. Businesses in some industries today will certainly feel a little pressure/relief from the 2023 budget, but more needs to be done to avoid more insolvencies.”