Ireland's extended lockdown and "conservative" and "unclear" reopening plan will leave many businesses permanently closed, with the "grave" economic impact of Covid-19 threatening the State's attractiveness to foreign investors, a government report has warned.
The grim economic assessment presented to Cabinet ministers last Friday comes as a former top civil servant has warned that unless retailers, creches and other businesses are given a bailout of at least €10bn, the State is facing another banking crisis.
John Moran, who was Department of Finance secretary general during the Troika bailout years, told the Sunday Independent: "If we don't rescue businesses and stabilise employment, we will end up bailing out the banks."
As thousands of workers prepare to return to work under phase one of the reopening plan tomorrow, the dire Department of Business report states that the economic lockdown in Ireland has been longer, and there is "a conservative approach to phased reopening", compared with other countries.
The Government's unprecedented emergency income supports are described as "large and unsustainable", while the extended closures not only compounded the already large fiscal impact of the crisis, but also reduced the prospects of recovery and "may lead to permanent loss of output and employment in some sectors".
The report warns that a desire by some countries to onshore production of critical goods and "rising protectionist sentiment" could "threaten Ireland's attractiveness for foreign direct investment and our economic model generally".
Businesses do not have clarity as to where they fit on the roadmap, which prevents them from taking actions to resume trading and the report suggests that the phases may have to be accelerated.
It says the current approach "will leave many retailers closed for several further weeks and it would be important to keep the roadmap under constant review and accelerate reopening if public health objectives are met within in a shorter timeframe".
The report, entitled Economic Considerations for Reinstating Economic Activity, says that 220,000 jobs will be lost, with unemployment exceeding 25pc in the second quarter of this year as a result of the pandemic which has caused "a severe shock without historical precedent".
It warns that many businesses in the hospitality sector will not be able to operate effective social distancing and "will therefore be unviable and remain closed", while the arts and culture sector is vulnerable to large-scale permanent closures, with promoters not surviving this period.
It warns that the manufacturing sector risks losing orders and market share to countries reopening sooner. "If large orders are lost and investments made in plants elsewhere, it is unlikely they will be regained, and some sites may face permanent closure or significant job losses," the report states.
Elsewhere, the budget to cover the revenue shortfall in public transport services, where passenger demand has fallen by 90pc since the lockdown, will only last another two weeks, the report warns.
Some labour-intensive sectors have seen almost their entire workforce avail of income supports, with "significant disincentive effects" for close to 40pc of the recipients of the €350 per week pandemic payment who previously earned less than €300 per week.
The report states that a staggering 96pc of people working in accommodation and food are on wage supports. The figure is 86pc in construction; 65pc in administrative and support services; 64pc in wholesale and retail trade; and 63pc in other services like arts, entertainment, recreation and personal services like hairdressing.
The report states the most heavily impacted sectors will be accommodation and food, construction, administrative and support services, wholesale and retail trade, and other personal services like hairdressing and beauticians.
It notes that, unlike in Ireland, other countries are allowing outdoor areas of restaurants to reopen sooner as well as allowing so-called contact professionals, like hairdressers and beauticians, to reopen in earlier phases.
Amid the dire warnings, Mr Moran has said many of these stricken businesses face major liquidity and solvency issues in the months ahead as they can only reopen at reduced capacity.
He has called for a multi-billion euro bailout package to be extended to them in a manner similar to how the banks were bailed out over a decade ago with the State taking equity in some bigger firms that are rescued if necessary. Mr Moran said he is concerned that the issue is not being considered seriously at the highest levels of Government. A €6.5bn business package announced earlier this month was insufficient, with at least a further €10bn being required, he said.
"What worries me is people are saying 'I don't think we can find a way to pay back the money, so therefore we won't do it'. We didn't think we had any money until the Troika gave us the €85bn we needed to fix the problem. But the problem remained to be fixed until we paid to fix it," he added.
"At the moment, people who booked foreign holidays are being bailed out, private hospitals got bailed out, nurses and doctors who came home got paid, as they should. But that means we are making decisions on bailing out some sectors. We need to work out how to do bailouts fairly and not do it piecemeal.
"For example, if cash is limited, you could devise a scheme where all businesses of up to five people have all their losses covered, and then for businesses of five to 50 people you cover 80pc of their losses and then 60pc if they have more employees than that. You taper it down accordingly or even take back equity in bigger businesses that are rescued."
Mr Moran said childcare providers should be given money to expand their facilities to comply with distancing guidelines.
"Private childcare companies and creches work like any other business. They have been shut down for weeks now by order of the Government. Bills have accumulated - rent, insurance etc. We asked them to close. Those are our bills.
"Now if we ask them to reopen but restrict the revenue, we should at least not be asking the owner to go into work and continue to operate at a loss until they can operate at full capacity. So we subsidise them in the greater good of allowing others like healthcare workers to go to work and save grandparents' health.
"If they need money to build an extension to ease crowding, to make changes to the building, we should provide financing and not try to make a profit on it. If we get it at 0pc, why let the banks or microfinance Ireland charge 5pc?"
He warned that without major State support for businesses across the country, there would be a knock-on impact on the State's banking sector, which was bailed out a decade ago, if workers and employers cannot repay mortgages and other debt.
"If you can't get cash to business owners today to pay their bills, they are not going to pay their bills - then the contagion spreads. One business's bill is another business's income," Mr Moran said.
"The public health emergency meant that the State sequestered businesses all across the State, but nobody's paying their rent, nobody's paying their insurance. I do not consider that fair.
"They should not be left with those bills, but more importantly if you don't like the fairness argument, there is an economic argument, if you are on the edge with too many bills, you give up and let yourself go to the wall.
"What we need to do is collectively enlist the support of 150,000 businesses owners to work hard with us to try and help us get their way out of this. We help them and they'll hire staff and just get on with it.
"If you don't we're going back into groundhog day, we'll have an economy not working, high unemployment, no one paying their bills, nobody paying mortgages, banks failing and then what happens to the money we put into the banks already, not to mention our deposits?"