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SME viability in the COVID-19 recovery

Author

Listed:
  • McCann, Fergal

    (Central Bank of Ireland)

  • McGeever, Niall

    (Central Bank of Ireland)

  • Yao, Fang

    (Central Bank of Ireland)

Abstract

Using survey data from a representative sample of Irish Small and Medium Enterprises (SMEs), we study how firms are likely to recover under macroeconomic forecasts of the pandemic recovery. The rate of financial distress among firms is expected to fall under baseline forecasts from a peak of 12 per cent in 2020 to 7 per cent by 2024. We find that those firms that struggle to recover by the end of our scenario window were mostly unprofitable or distressed prior to the pandemic. Beyond our baseline case, we further model three alternative recovery scenarios to study the effect of fiscal support tapering, a partial recovery due to structural change in sectoral demand, and a financing gap driven by credit risk retrenchment by lenders. Our findings highlight the continued importance of “bridging” liquidity finance provision to ensure the long term solvency of viable firms.

Suggested Citation

  • McCann, Fergal & McGeever, Niall & Yao, Fang, 2021. "SME viability in the COVID-19 recovery," Research Technical Papers 9/RT/21, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:9/rt/21
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    File URL: https://www.centralbank.ie/docs/default-source/publications/research-technical-papers/09rt21-sme-viability-in-the-covid-19-recovery.pdf?sfvrsn=4
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    Cited by:

    1. Lambert, Derek & McGeever, Niall & O'Brien, Eoghan, 2022. "Wage subsidy utilisation by Irish companies," Financial Stability Notes 8/FS/22, Central Bank of Ireland.
    2. Durante, Elena & McGeever, Niall, 2022. "SME Credit Conditions in the Pandemic Recovery," Financial Stability Notes 2/FS/22, Central Bank of Ireland.
    3. 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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