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Government outlines further measures to support businesses impacted by Covid-19

Cork Business Association welcomes the publication of the Government's reopening road map. It provides some much needed clarity to all our members as to when they can reopen and re-employ their colleagues. We have been calling for this roadmap for some time and its publication will assist with a phased, secure and urgently needed return for businesses which have been closed as a result of the Covid-19 restrictions. However this roadmap must be kept under ongoing evaluation and earlier reopening permitted if all public health requirements are achieved within a shorter time-frame.
Some of the measures fall short of what the Cork Business Association has called for in particular we refer to commercial rates. We again reiterate our call for the cancellation of local authority rates for 12 months for all impacted businesses. We also ask for the introduction off a six months Government rent grant of 60% of rent payable to all impacted businesses. It is also essential that critical existing supports such as the Wage Subsidy Scheme are extended beyond the June deadline.
The speedy implementation of these supports will be vital for business and the proposed funds must be available for a rapid drawdown. The elephant in the room here is the formation of a new Government which needs to happen in order to pass the necessary legislation that will be required. The incredibly slow progress towards government creation may yet see a new administration formed, but if the talks fail then the ability to deliver help to businesses will be held up and this could be very costly.

 

The Government agreed on Saturday May 2nd, at a special Cabinet meeting, a suite of measures to further support small, medium and larger business that are negatively impacted by Covid-19.

 

It follows the publication yesterday evening of the Government’s Roadmap for Reopening Society & Business, which sets out a five stage plan to ease the Covid-19 restrictions and reopen Ireland’s economy and society. The Covid-19 emergency has had an unprecedented impact on our economy, as well as our society. As we begin the phased reopening of our economy, the Government recognises that businesses require significant additional supports. Today’s package of measures aims to help our businesses to restart, reconnect and rehire staff who have been laid off or furloughed.

 

The Government has already brought forward a series of measures to support those impacted by this global pandemic. They have included emergency income support such as the Temporary Wage Subsidy Scheme and the Pandemic Unemployment Payment. It is now necessary to introduce a number of additional measures to aid the economy as the Covid-19 restrictions start to be lifted.

 

Those measures are:

 

  • A €10,000 restart grant for micro and small businesses based on a rates/waiver rebate from 2019;
  • A three month commercial rates waiver for impacted businesses;
  • A €2 billion Pandemic Stabilisation and Recovery Fund within the Ireland Strategic Investment Fund (ISIF), which will make capital available to medium and large enterprises on commercial terms;
  • A €2 billion COVID-19 Credit Guarantee Scheme to support lending to SMEs for terms ranging from 3 months to 6 years, which will be below market interest rates;
  • The ‘warehousing’ of tax liabilities for a period of twelve months after recommencement of trading during which time there will be no debt enforcement action taken by Revenue and no interest charge accruing in respect of the warehoused debt;
  • A commitment to local authorities to make up the rates shortfall, so that local authorities can continue provide full services to the public.

 

The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, said:

Covid-19 has created a world that none of us could have imagined just a few short weeks ago. Our collective public health has been targeted; our businesses, and our economy, have been shouldered with an unimaginable burden; and our society is grappling with this new reality. But, by working together, we are minimising the damage. The hard work of the Irish people has ensured that we are getting to grips with this disease, our people are united in caring for one another under the most extreme of circumstances and our businesses are attempting to adapt to this new and most challenging environment.

On top of the measures previously put in place by Government, this suite of measures being outlined today is designed to build confidence, further assist businesses in terms of the management of their companies, and allow them to begin looking to the future and start charting a path forward for weeks and months ahead. We will continue to seek the best ways of supporting our people, and wider society, and rebuilding our economy so that we can get people back to work safely. We will do this by being cognisant of official public health advice and doing what is in the best interests of all our people.

 

Minister for Business, Enterprise and Innovation, Heather Humphreys TD, said:

The roadmap announced by Government yesterday outlines a pathway to reopening our economy. This suite of supports represents the next phase in our ongoing response to support businesses through the pandemic and will assist them as they plan for the future.

We now have a comprehensive suite of supports for firms of all sizes, which includes grants, low-cost loans, write-off of commercial rates and deferred tax liabilities, all of which will help to improve cashflow amongst our SMEs.

The new €250 million Restart Fund in particular will be a critically important tool to support small businesses in our towns and villages to reopen their doors and get back on their feet with supports of up to €10,000 available.

 

Minister for Housing, Planning & Local Government, Eoghan Murphy TD, said:

The commercial rates waiver is an important response from Government. This will provide relief to impacted businesses as well as certainty to local authorities as to their funding.

Rates alleviation will be complemented by the establishment of a Restart Fund for micro and small businesses which would provide a further €250m to support ratepayers.  The fund, which will provide up to €10,000 per business, will be implemented either through a rebate or waiver scheme based on rates payment for 2019, and will be targeted more widely at micro and small enterprises that have suffered large falls in revenue as a result of the crisis. Details of the scheme will be further developed by the Department of Housing, Planning and Local Government together with the Department of Business Enterprise and Innovation and the Department of Public Expenditure and Reform.

 

Minister for Agriculture, Food and the Marine, Michael Creed TD, said:

I welcome the announcement of the expanded Credit Guarantee Scheme. I have worked with my colleagues to ensure that our primary producers (farmers and fishers) would be included in the new Scheme and I am now happy to confirm that they will. Cashflow and liquidity is a key issue right along the food chain and this Scheme will give confidence to all businesses that assistance will be available when required.

 

The further measures to support businesses impacted by COVID-19 in their planning for reopening include:

  • A €2 billion Pandemic Stabilisation and Recovery Fund within the Ireland Strategic Investment Fund (ISIF), which will make capital available to medium and large enterprises on commercial terms.
  • A €2 billion COVID-19 Credit Guarantee Scheme to support lending to SMEs for terms ranging from 3 months to 6 years, which will be below market interest rates.
  •  The ‘warehousing’ of tax liabilities for a period of twelve months after recommencement of trading during which time there will be no debt enforcement action taken by Revenue and no interest charge accruing in respect of the warehoused debt;
  • The waiving of commercial rates for a three month period beginning on 27 March for businesses that have been forced to close due to public health requirements.
  •  Provision of a Restart Fund for micro and small businessesof €250 million for micro and small enterprises

 

In addition, Minister Donohoe also welcomed the Banking and Payments Federation of Ireland announcement of an extension of payment breaks for businesses and households to 6 months for those requiring assistance which is being provided to bank and non-bank customers impacted by COVID-19.

It is essential that customers fully engage with their lender to avail of these extensions.

These measures, with a value of over €6 billion show Government’s commitment to supporting businesses.

 

Continued Stabilisation measures to support businesses announced today include:

  1.     Ireland Strategic Investment Fund – Pandemic Stabilisation and Recovery Fund

The Ireland Strategic Investment Fund (ISIF) is revising its investment strategy to establish a sub-portfolio within ISIF called the Pandemic Stabilisation and Recovery Fund.  

This sub-portfolio will invest up to €2 billion of ISIF’s readily available capital in medium and large enterprises (more than €50m in annual revenue or more than 250 employees) to assist them meet the challenge of COVID-19.  It will complement ISIF’s extensive work to date within its existing portfolio of over 100 investments of €2.7 billion invested capital to mitigate the impact of  COVID-19.

The ISIF Pandemic Stabilisation and Recovery Fund will mirror the approach of ISIF’s existing and proven investment strategy:

The fund will act as an accelerator, investing on a commercial basis in businesses that can meet the investment requirements and can use ISIF investment to return to long-term viability.

Investments can be across the range of instruments from senior debt, hybrid instruments to equity, and can be tailored to take account of the particular circumstances of each investee.  This will enable businesses to access the capital they need in the most appropriate form that best suits their individual circumstances.

In making investments, ISIF will seek to maximise the quantum of additional capital that the investee business can access from its existing shareholders and banks, from potential new co-investors and from European sources (such as the European Investment Bank), thereby minimising the amount of ISIF capital that may be needed.  To date, ISIF has led to overall investment levels of three times ISIF’s initial investment.

Further details are available on the ISIF website.

 

  1.       SME Credit Supports

Government moved quickly to put €1 billion of liquidity measures in place for SMEs by reorienting existing supports for SME credit and adding additional measures to address the demands arising from the crisis. These included repurposing the Brexit Loan Scheme, with the agreement of the European Investment Fund, to become the SBCI COVID-19 Working Capital Scheme.  Minister Humphreys also announced an expansion in this scheme to bring it to €450 million, an expansion in the Future Growth Loan Scheme to above its original allocation of €300 million, and improvements in the maximum loan size available to COVID-19 affected microenterprises from Microfinance Ireland along with reductions in the interest rates.  This means that microenterprises can avail of loans of up to €50,000 with no interest and principal repayments in the first six months.  In addition, Minister Humphreys has introduced a range of grant measures, such as the €180m Sustaining Enterprise Fund for manufacturing and international services sector.

Today, Government is announcing the €2 billion COVID-19 Credit Guarantee Scheme.  It will provide an 80% guarantee on lending to SMEs until the end of this year, for terms between 3 months and 6 years.  SMEs will be able to go directly to the banks in the Scheme, and the guarantee can be used for a wide range of lending products between €10,000 and €1 million that have a maximum term of 6 years or less.  It will be available to all SME sectors, including primary producers.

Interest rates will be below current market rates.  This Scheme forms a major component of the Government’s strategy to aid SMEs in these difficult times.

The COVID-19 Credit Guarantee Scheme is a further development of the existing Credit Guarantee Scheme which is already available from AIB, BOI and Ulster Bank, and it will be possible for other lenders to get access to the Scheme.  Lenders will be subject to a portfolio cap of 50%.  This reduces the contingent exposure to the Exchequer, meaning that the size of the Scheme can be larger.

Implementing this scheme will require legislation, the drafting of which has been approved by Government. In parallel with the drafting of the legislation and its passage through the Houses of the Oireachtas, the Department of Business, Enterprise and Innovation, the Department of Agriculture, Food and the Marine, the Departments of Finance and Public Expenditure and Reform, and the Strategic Banking Corporation of Ireland will work to put in place arrangements to ensure that the Scheme can be implemented as soon as possible after the enactment of the legislation.

 

  1.     Revenue Warehousing of Tax Forbearance

The Revenue tax deferrals have been a vital liquidity support that is easily accessed by those businesses severely impacted by COVID-19.  This allowed these businesses to retain cash, which proved to be a key liquidity support and also gave an assurance that the State will support these businesses through the pandemic.  It is important that companies availing of this forbearance must continue to file tax returns and keep in contact with  Revenue, which ensures tax compliance and assistance is targeted at those most in need.

It is also recognised that businesses need clarity on how and when this level of tax debt forbearance will be gradually unwound to allow firms to trade their way back to profitability and repay this assistance.  In the normal course, Revenue would work closely with businesses to put in place arrangements, appropriate to the circumstances and viability of each business, to secure payment of those debts over a reasonable time frame.

However, in the current circumstances, businesses that have had to close or have been significantly impacted by the restrictions will not be able to enter into arrangements to clear the COVID-related tax debt, pay their normal trade and other non-Revenue creditors, make any necessary restructuring to deal with the new trading arrangements in the context of social distancing, build up their stock, etc. In that context, Revenue will Warehouse Deferred Tax Liabilities associated with the COVID-19 crisis.  This will represent a direct support for affected businesses where a commitment to a phased payment arrangement is not possible.

Arrangements will be put in place to allow debt that cannot be paid during the COVID-related period, to be warehoused interest-free for a year from recommencement of trading, during which time there will be no debt enforcement action taken by Revenue in respect of the debt.  Moreover, there will be no interest charge accruing in respect of the warehoused debt (no capital or interest payments).  Prior to the expiry of the warehousing period, the business will be expected to engage with Revenue to reach an agreement on an exit strategy more suited to the specific business needs and the need for continued viability.  Businesses will qualify for a significantly reduced rate of interest of 3% on outstanding debts on agreement of such arrangements, to be set out in legislation. For continued qualification by businesses for these arrangements, it will be a prerequisite that the businesses remain compliant with all their return filing and tax payment obligations in respect of tax periods that postdate the periods covered by the warehoused debt.   The operational details are being finalised and the necessary legislative amendments will be brought forward in Finance Bill 2020.

The scheme will apply to businesses in all sectors of the economy who have been negatively impacted by COVID-19, and further underlines the Government’s commitment to supporting business and positioning the economy for return to a new normal when the time comes.

Further details are available on the Revenue website.

 

  1.     Commercial Rates Payment Break/Reductions

The Government prioritised support for those businesses most directly affected by Covid-19 with its decision in March to defer rate payments for a three month period for the hospitality, retail, leisure and childcare sectors.

While a review of options to support enterprises and employment is being commenced, the Government recognises that many businesses are facing immediate difficulties and uncertainty. To provide clarity, commercial rates are being waived for a three month period beginning on 27 March for businesses that have been forced to close due to public health requirements. This measure will complement the tax, banking and SME measures also announced today.

The Government will continue to actively engage with business owners and representative bodies. Local Authorities, who have longstanding experience in dealing with ratepayers and showing an understanding of their financial situations, are assessing the impact of Covid 19 by engaging directly with individual ratepayers, recognising that there may be impacts on sectors outside of those initially identified as being most under threat. It is estimated that this waiver will reduce Local Authority income by €260 million and the Exchequer will meet these costs.

 

  1.     Provision of a Restart Fund for micro and small businesses

The economic impacts of Covid-19 have been felt across the country and particular for small or micro firms. Measures that have been announced including income support schemes and enhanced liquidity supports have played a role in supporting these firms but as we move towards the next phase of the pandemic it is necessary to introduced further targeted supports in this area.  In this context it is intended to create a Restart Fund of €250 million for micro and small enterprises.

The purpose of this fund will be to assist these businesses in reconnecting with the market, their employees and their customers. Details of the scheme will be worked on by the Department of Public Expenditure and Reform in consultation with the Departments of Business, Enterprise and Innovation and Housing, Planning and Local Government and finalised in the coming weeks but it is intended that the fund will operate through a system of rebates/waivers of commercial rates payments from 2019. It is intended that companies will receive a total amount equivalent to no more than their 2019 rates bill and that there will be a cap per business of €10,000. This fund can act as a further targeted support to small and micro enterprises that have been impacted by Covid-19.

 

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