Family businesses are struggling with re-opening costs and will need to be prioritised in Government’s July stimulus plan.
Supports for family businesses are urgently needed to avoid a corrosive family business failure rate later in the year, according to Padraig Cronin, lead partner, Family Business & Tax, Deloitte.
“The July stimulus should provide viable businesses with speedy deployment of funds to cover their significant re-opening costs and outstanding creditors,” Cronin said.
“A failure to provide sufficient supports now will result in a wider adverse societal/community impact”
“These funds could be provided in the form of grant aid and/or very low interest rate loans, depending on the size of the business, while businesses that continue to be particularly impacted by the social distancing and hygiene requirements (such as hospitality, food service and retail) should be provided with some ongoing support through the continuation of the wage subsidy scheme until at least early 2021.”
Cronin said that businesses also need to be provided with additional tax credits for any expenditure they have had to incur to repurpose their premises or manufacturing plants to comply with the new Health and Safety rules.
Most importantly, he warned that consumer confidence and spending in our local communities is key to an overall recovery.
To encourage such spending, Cronin suggests increasing the limit on tax-free vouchers that can be provided by employers from €500 to €5,000 for 2020 and 2021, provided they are used to buy local goods and services.
As the government finalises its July Stimulus plans, Cronin highlighted these key recommendations following Deloitte’s submission to Government in April that outlined its proposed tax measures to support businesses through the Covid-19 crisis.
Deloitte’s Resilient Family Enterprise Series
The recommendations come as Deloitte launches The Resilient Family Enterprise Series, to support family businesses across the country through Covid-19.
Through a series of articles and insights over the coming weeks, Deloitte Private said it will share the insights of its family enterprise consultants from around the world, taking a deeper dive into the issues unique to family businesses, the challenges and opportunities these present amidst the Covid-19 crisis, and how you can address these in your journey to recover and thrive.
“Despite their reputation for resilience, optimism and agility, most family businesses have been under significant pressure to respond to the general health, safety, and welfare challenges introduced by the pandemic, along with the operational disruptions to their business,” said Ronan Murray, Regional Financial Advisory partner.
“This series is aimed at supporting family businesses through this crisis by providing them with insights and actions that they can take now, so that they emerge from this crisis and thrive.”
Murray said that the SME sector is of huge importance to the Irish economy, employing 68pc of the country’s 2.3m employees. He said that this sector, particularly those operating in tourism, retail and food service, all of which rely heavily on cash flow for survival, has taken the brunt of the burden of the economic crisis caused by Covid-19
Succession and the next generation
This crisis could be an opportunity for the next generation in family businesses to prove themselves by actively engaging in the business when resources are scarce, to be a valuable sounding board and source of fresh ideas.
As digital natives, their active engagement could be the difference between success and failure right now.
A recent Deloitte global family business survey found that successful family businesses tend to have one quality in common: a sense of purpose beyond being profitable.
This sense of purpose has been evident throughout the pandemic crisis with numerous reports of family businesses nimbly adapting their operations and production lines, and redeploying staff to support the relief efforts—from the mass production of personal protective equipment (PPE), to offering accommodations for healthcare and other key workers. It is these inherent values and solid organisational purpose that can secure loyalty far beyond the crisis.
“Family businesses possess unique characteristics that may position them to thrive as we emerge from the pandemic and play a significant role in the recovery of the economy. However, in order to do that they need support,” urged Cronin.
“The proposed Programme for Government in Ireland recognises the key role that they play in the country’s economy. The supports announced need to be enhanced and introduced quickly in July 2020 to avoid a corrosive family business failure rate later in the year.
“A failure to provide sufficient supports now will result in a wider adverse societal/community impact,” Cronin warned.
Written by John Kennedy (email@example.com)
Published: 14 July, 2020