Irish businesses on edge over prospect of Level 5 lockdown

The economic impact of the spectre of another full lockdown could be a bitter pill for many businesses.

Ireland is on tenterhooks over the enormity of what the recommendations by the National Public Health Emergency Team (NPHET) for the highest level of restrictions for the entire country (Level 5) could mean.

The recommendations by NPHET have been sent to the Government.

It has been recommended that the entire country could be put on level 5 for up to four weeks.

“Next week’s Budget must see the Government continue to take the right decisions, by introducing targeted measures to protect those most impacted sectors and workers from the twin threats of Covid and Brexit”

The recommendations could send a shockwave through Ireland’s business community, which has been slowly reopening and adapting to ensure safety for customers and staff.

If such a measure is taken there is concern that additional measures and funding will need to be made available to businesses, above and beyond the State’s €7bn July stimulus package.

“Given the seriousness of the NPHET recommendation for our economy and society, the Government’s Senior Officials Group must seek, review and publish the evidence that is underpinning these recommendations,” urged Ibec CEO Danny McCoy.

“It is intolerable that after six months we are still receiving both vague and changing criteria to advance such serious restrictions.”

K-shaped recovery

In related news Ibec, in its new Quarterly Economic Overview, said that Ireland is experiencing a ‘K-shaped’ recovery, with a growing gap between firms and households whose economic prospects have proven resilient during Covid and those which face significant falls in income and opportunity.

This is borne out in recent data, which shows that domestic demand fell by one fifth in Q2, while conversely our exports proved more robust than anywhere else in the EU.

Commenting on the report, Ibec chief economist, Gerard Brady, said: “Q2 saw the collapse of domestic demand, with consumption and investment both falling dramatically amid some of the strictest lockdown measures seen in the EU. On the other hand, the strong performance of our exports gives cause for optimism.

“In Q2 of this year exports in Ireland were flat, while in most European countries they fell by between 10pc and 40pc. As an open economy with access to one of the World’s biggest markets, our export model will again provide the opportunity to grow our way out of a difficult economic position. But this strategy of export-led growth will only succeed, for all sectors and regions, if workers in growing sectors can spend their incomes in local economies.”

Brady said that a minority of sectors and workers are being asked to take a significant economic hit, and are bearing the brunt of the public health measures.

“Constrained opportunities for spending in our experience economy meant that households saved €9.8bn in the first seven months of 2020. They now hold €20bn more in Irish banks than they owe in debt. This is a turnaround from a figure of minus €70bn in 2008. These resources and our ongoing export and public investment strength are the key difference between this recession and the last. The key to Budget 2021 is not a challenge of a society with too little resources, it is a challenge of finding the right channels to get those resources moving, and people back to work.

“The Government has already made the right decisions by committing to make this the first crisis in modern history where we prioritise ongoing investment in key infrastructure. Next week’s Budget must see the Government continue to take the right decisions, by introducing targeted measures to protect those most impacted sectors and workers from the twin threats of Covid and Brexit.”  

By John Kennedy (john.kennedy3@boi.com)

Published: 5 October, 2020