The government’s recent announcement of a scheme targeted at Small and Medium Enterprises (SMEs) is indeed commendable, albeit the size of the crisis encountered by this sector can question its substantial efficacy. According to PwC, the alarming rate of SME insolvencies in the initial quarter of this year constitutes 85% of the total. The situation is gravely conspicuous in the areas of hospitality and retail, making up 40% of insolvencies in this time frame.
Reports from PwC align with informal reports of a significant rise in shutdowns of restaurants and pubs since the year’s beginning. But these figures don’t encapsulate the numerous small businesses presently on the brink of insolvency or ones who chose to cease operations ahead of their decline into bankruptcy.
The government’s initiative is primarily aimed at supporting these businesses, the feature point being a claim of up to €10,000 in commercial rates. Grants are also provided for innovating and boosting energy efficiency, however, their singular impacts might fall short of acting as a safety net for small businesses facing a crisis, partly due to the delay in the money transfer.
The introduction of the initiative would undoubtedly offer struggling yet potentially successful SMEs more room for manoeuvre. Other remedial strategies including raising the limit for employers’ PRSI lower rate and potentially stalling the incorporation of extra statutory sick days plus minimum wage augmentations could aid this sector, though it would bear a cost on the impacted employees.
The decisive factor in securing the future of struggling SMEs hinges on the government’s ability and intent to address challenges confronting all businesses, major ones being the cost of labour, inflation and energy. While the trends in energy prices and inflation seem favourable, labour costs continue to be a concern due to high living costs and the scarcity of affordable housing.