Ireland had the lowest rate of business failures of any EU country at the peak of the Covid crisis in 2020, reversing its position among the worst member states for liquidations during the financial crisis.
The Government response to Covid was characterised by massive taxpayer-funded supports for small business and households, unlike the previous financial crisis when taxes were hiked and incomes hollowed out.
The Irish economy has been the fastest growing in the EU since the start of the pandemic.
New figures from EU statistics agency Eurostat show just 1.6pc of Irish companies closed permanently during 2020, compared with an average of 7.2pc across the EU.
That failure rate was less than in a normal year, despite the lockdown of swathes of the economy.
A prominent small business lender has hailed government Covid supports after new figures showed Ireland had the lowest percentage of business failures of any EU country in 2020.
The founder and CEO of SME lender Grid Finance, Derek Butler, campaigned in 2020 for direct business supports to ride out lockdown and says the justification for that policy is borne out by the results.
Mr Butler was a founder of SME Recovery, a group established at the start of the pandemic as tens of thousands of businesses were forced to close their doors.
He said the new Eurostat figures show that schemes such as the employment wage subsidy scheme, where the government spent billions helping companies affected by the outbreak pay their staff, were extremely effective.
“It looks like there is a direct correlation between all the supports which were introduced for the SME sector and the low insolvency rate,” he told the Irish Independent.
“We’re reaping the benefits of the success of that Government intervention, and I don’t think there has been enough recognition of that.”
It looks like there is a direct correlation between all the supports which were introduced for the SME sector and the low insolvency rate
However, he warned that some businesses that have been propped up by those supports may yet fail, with insolvencies merely delayed rather than prevented.
Figures published earlier this week by credit risk analyst CRIFVision-Net found there were 410 insolvencies in the first six months of the year, a jump of nearly 50pc from the same period in 2022, though still low by historic standards.
Mr Butler said while the number was still relatively low, it was indicative that some of the companies which can no longer rely on state supports are likely struggling.
“Many of these are businesses which would have naturally failed in 2020 or 2021, but were sustained by Government supports. It’s those ones who are failing now, and the reason we didn’t see it last year is because many businesses would have come out of the pandemic with a cash buffer.”
However, Mr Butler said despite this, he feels the billions spent supporting SMEs was still a good idea during the pandemic.
“Theoretically yes, I would say it would have been better to target it, but like with the Pandemic Unemployment Payment for workers, the time you would have spent designing a perfectly targeted scheme would have been time away from saving the majority of businesses which needed it, so I think it was fair that there was a blanket approach.”
The Eurostat figures also show that Ireland had the highest ‘survival rate’ for businesses – 68pc of firms set up in 2015 were still operating in 2020, compared with an average of less than half across the EU.
Mr Butler said while this figure was encouraging, he felt it was more indicative of the overall strength of the Irish economy.
“Other European countries tend to be more SME-friendly than Ireland,” he said.
“I think the high survival rate has more to do with the fact that there is a rising tide in our economy, our growth rates have been significantly higher than in other countries.”
Source : Independent.ie