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Wage subsidy utilisation by Irish companies

Author

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  • Lambert, Derek

    (Central Bank of Ireland)

  • McGeever, Niall

    (Central Bank of Ireland)

  • O'Brien, Eoghan

    (Central Bank of Ireland)

Abstract

We use novel company-level data to study wage subsidy utilisation during the COVID-19 pandemic and measure the exposure of the financial sector to subsidy claimants. We show that there were three claimaint cohorts: those that claimed in 2020 only, those that transitioned off the subsidy during 2021, and those that were persistent claimants throughout the pandemic. A large share of companies in the Accommodation & Food and Other Services sectors were persistent claimants, implying a large and persistent decline in turnover prior to the 2022 recovery. Persistent claimants of the subsidy had higher leverage and lower liquidity prior to the pandemic, indicating greater vulnerability coming into the crisis period. We further estimate that 9 per cent of Irish company loan balances at Irish retail banks are owed by borrowers who were still claiming the wage subsidy in 2022Q1, while 24 per cent of balances are owed by borrowers who were claiming the subsidy in mid-2020. The equivalent figures for non-bank lenders are 7 per cent and 32 per cent, respectively.

Suggested Citation

  • Lambert, Derek & McGeever, Niall & O'Brien, Eoghan, 2022. "Wage subsidy utilisation by Irish companies," Financial Stability Notes 8/FS/22, Central Bank of Ireland.
    • Handle: RePEc:cbi:fsnote:8/fs/22
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    File URL: https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/wage-subsidy-utilisation-by-irish-companies.pdf?sfvrsn=707a951d_5
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    References listed on IDEAS

    as
    1. Duignan, David & McGeever, Niall, 2020. "Which firms took COVID-19 payment breaks?," Financial Stability Notes 6/FS/20, Central Bank of Ireland.
    2. McCann, Fergal & McGeever, Niall & Yao, Fang, 2021. "SME viability in the COVID-19 recovery," Research Technical Papers 9/RT/21, Central Bank of Ireland.
    3. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
    4. Conor O'Toole & Fergal McCann & Martina Lawless & Janez Kren & John McQuinn, 2021. "New Survey Evidence on COVID-19 and Irish SMEs: Measuring the Impact and Policy Response," The Economic and Social Review, Economic and Social Studies, vol. 52(2), pages 107-138.
    5. Durante, Elena & McGeever, Niall, 2022. "SME Credit Conditions in the Pandemic Recovery," Financial Stability Notes 2/FS/22, Central Bank of Ireland.
    6. Robin Greenwood & Benjamin Iverson & David Thesmar, 2020. "Sizing up Corporate Restructuring in the COVID Crisis," NBER Working Papers 28104, National Bureau of Economic Research, Inc.
    7. McCann, Fergal & McGeever, Niall, 2022. "Enterprise policy issues for distressed businesses following the unwinding of pandemic supports," Financial Stability Notes 9/FS/22, Central Bank of Ireland.
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    Cited by:

    1. McCann, Fergal & McGeever, Niall, 2022. "Enterprise policy issues for distressed businesses following the unwinding of pandemic supports," Financial Stability Notes 9/FS/22, Central Bank of Ireland.

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