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Pandemic forces firms to cut jobs and investments


The Central Bank

The Central Bank

The Central Bank

Irish businesses are cutting investment and headcount as a result of the coronavirus pandemic and a substantial minority is worried that any economic recovery will take more than a year.

A survey by consultancy PwC of 824 businesses globally, including 23 here, during the week of April 6 showed that three quarters of Irish respondents were considering cost containment measures, and six out of 10 were considering deferring or cancelling investments.

"Over four out of 10 Irish CFOs believe that if the pandemic were to end today, their business would return to normal within three months, compared to 56pc globally. At the same time, almost a fifth of Irish respondents stated that they would not expect recovery for over a year," PwC said.

The International Monetary Fund (IMF) this week forecast that the world economy would experience its sharpest contraction since the Great Depression as a result of the pandemic that has closed businesses across the globe and seen two billion people put under some form of lockdown.

There are now 533,000 people claiming the Government's pandemic unemployment payments and 255,000 receiving pay through a wage subsidy scheme where the Exchequer tops up payments made by employers. The PwC survey said a quarter of the Irish firms it contacted expected further layoffs.

The lockdown here has been extended to May 5 and the Government is now working on plans to reopen the economy, probably in stages.

Alongside the mass unemployment caused by the closure of the economy, new data from the Central Bank showed spending had fallen off a cliff and was likely €2.6bn lower than in April last year.

The Government has also stepped in to help businesses, although there are concerns, especially among small firms, that they might not survive long enough to last until meaningful sections of the economy are back at work.

"I also encourage Government, who have already indicated this is on the agenda, to give priority to a broad-based approach to further working capital measures to be made available to support businesses through this crisis and for the recovery," said PwC Ireland's David McGee.

The global scale of the pandemic was brought home by another surge in US jobless numbers released yesterday.

In just four weeks, 22 million Americans have now filed for unemployment benefits.

That number looks set to grow dramatically and the Federal Reserve Bank of St Louis says that the unemployment rate could hit 32.1pc, surpassing the previous high of 24.9pc, reached in 1933.

The health of the US economy is crucial to Ireland as it is a key market for chemicals and pharmaceuticals which are produced here and whose stellar export performance has driven most of our post-financial crisis recovery.

Data released earlier this week by the Central Statistics Office revealed the degree to which the economy here depends on a narrow range of export lines, when exports for February showed sales to the US alone took a €700m hit from the same month last year.

The IMF is forecasting that the economy here will shrink by 6.8pc this year, while the Central Bank of Ireland has pencilled in a contraction of 8.3pc, although both numbers could end up being underestimates if the lockdowns last into the second half of this year.

Irish Independent