Isme chief 'baffled' over coolness to 100%-backed Covid-19 loans for firms
The head of business group Isme said he was “baffled and astounded” by the signals that the 100%-guaranteed loans may not be part of the July stimulus package for small firms.
Chief executive Neil McDonnell said it appeared until recently that ministers and officials had constricted ideological barriers to offering loans through the commercial banks that were 100% guaranteed against default by the State. He was nonetheless hoping for new thinking as the new coalition ministers get their feet under the table, he said.
The 100%-guaranteed loans have had a huge takeup in European countries where they have been a main feature of business supports from an early stage of the Covid-19 economic emergency, including in Britain where the loans have taken off following an uncertain start when they first came with less than 100% guarantees.
“We are trying to get them to understand that if you take a Darwinian approach that small firms going under will end up in a huge losses and costs for the State,” Mr McDonnell said. “We are baffled and astounded by it,” he said, referring to an apparent pushback by officials to the loans fully guaranteed by the State.
He could only speculate that officials were looking at the bank guarantee of 12 years ago and were wrongly concluding that any new State guarantee would saddle the country with debt, he said.
The State can raise debt at interest rates which were either negative or at a little above zero whereas SMEs were in no position to borrow and take on more debt with costly borrowings, Mr McDonnell said.
AIB - which is 71% owned by the Irish State - and Bank of Ireland, in which the Government has a 14% stake - are both participating in the British-government scheme which lends to small firms in the North with 100%-guarantees.
Mr McDonnell said the stimulus measures need to work immediately for the benefit of firms.
“It needs to be material, it needs to be quick, and it needs to come with no strings attached,” he said. “It is going to be far cheaper to do that” than let businesses go under, he said.
Meanwhile, Bloomberg reported that almost half of businesses taking part in the UK government’s coronavirus jobs programme expect to let go of furloughed staff when support ends in October.
The problem is more acute for medium-sized businesses, of which two-thirds say they’ll have to cut jobs when the subsidies expire, according to polling by Opinium and the think tank Bright Blue. A quarter of businesses will struggle to increase their share of employee salaries between August and October, the report showed.
More than 9m people in the UK have been furloughed since the lockdown started in March. The government has been paying 80% of salaries, with companies able to top it up to 100%.
