Goodbody Stockbrokers today warned that the key challenge on fiscal support will be to balance risks of taking away supports too early versus continuing them and potentially keeping unviable businesses alive at a cost to the State.
This comes as the government is set to announce plans today that will cover the reopening of hospitality over the summer months, starting with hotels (June 2nd) and outdoor hospitality (June 7th).
As it currently stands, supports such as the Pandemic Unemployment Payment (PUP) and the Employment Wage Subsidy Scheme (EWSS) are due to expire at the end of June. It was never expected that these would end abruptly but the Irish Times reported yesterday that they may continue in their current form for the entire third quarter and in some form until the end of the year.
With some restrictions to remain in place in the third quarter, Goodbody say it makes sense to continue supports, but the government will need to think about how incentives to work may be impacted by the ongoing supports, particularly in those sectors that are to fully reopen over the coming weeks after over a year of lockdown.
Given the expected demand boom associated with reopening, Goodbody say the question will be whether the supply will be there to match it. Evidence from abroad suggests that firms are struggling to catch up resulting in supply chain problems, labour shortages and price increases. Goodbody says a system of one-off grants for rehiring and a tapering of the thresholds of support seems like the right way to go.
According to Goodbody Stockbrokers, "The Irish government has done an excellent job in protecting businesses and households since the beginning of the pandemic. In some ways, the decision to provide significant finance supports was the easy part. Taking it away is a lot harder."