Tue 20th Oct 2020
View from the Chair: No amount of government support can compensate for an open, fully-functioning economy
The intensified restrictions announced by the NI Executive last week are a real blow to many businesses who have put hard work and money into ensuring that they are COVID-secure.
The need for additional restrictions cannot be blamed on a lack of care by hardworking people in businesses, who have worked tirelessly to implement government guidance and create a safe environment for their employees, visitors and customers. Despite these conscientious efforts, many are now in the midst of a four week period of trading restrictions. At NI Chamber, we will fully support our colleagues in hospitality, retail and close contact services over these coming weeks.
It is vitally important to note that these new measures will not only have an impact on hospitality venues and close contact service providers, but also the hundreds of local companies who supply goods and services to them. Those business-to-business transactions are a critical part of how the economy works and as such, the knock-on effects of these restrictions on other businesses in the supply chain are extremely serious and not to be underestimated.
It is therefore essential that any new restrictions go hand-in-hand with truly commensurate financial support for wages and day-to-day running costs. Whilst the NI Executive’s support package announced by the Finance Minister last week, along with the UK Government’s Job Support Scheme, will go some way to helping firms forced to close, many of our members tell us it will not be enough to stave off mass unemployment.
Furthermore, at this stage businesses can no longer add employees to the UK government’s furlough scheme. Alarmingly, this leaves employees in businesses forced to close from last Friday evening facing a gap in income until November, when the UK government’s new Job Support Scheme kicks in. A significant proportion of firms have already used up cash reserves and taken on additional loans, so are not in a position to plug that gap. This could potentially lead to countless job losses with a devastating impact on lives and livelihoods. It should therefore go without saying, that it is vital the UK government addresses this issue urgently.
The next period is going to be extremely challenging for businesses, their employees and the NI economy in general. Businesses here entered the COVID-19 crisis in March in an already weak position, with little to no growth in the Northern Ireland economy. Many members therefore had an already weak cashflow position as well.
Even with government support, the fall-out from the pandemic has brought this to a critical point for many. In fact, our most recent Quarterly Economic Survey results showed that four in five members are worried about their cashflow position. The practical implication of depleted cashflow is that they are worried about paying wages, rent and the suppliers (many local) that help them to do business. The survey also showed that around 30% of members have taken on new debt through the COVID-19 loan schemes to help them get by. However, one in five have concerns about their ability to pay back these loans going forward.
Policy makers must realise that no amount of government support can compensate for an open, fully-functioning economy. They must also be aware that if we are to limit the impact of any further restrictions on businesses and jobs, and take a long term approach to tackling the virus, business people need sight of the evidence behind decision making which has such an impact on their operations. A transparent, collaborative approach is vital to instil confidence in any exit strategy. If this is not the case, business and consumer confidence will take a further hit and the economic consequences will be huge. Until such times, NI Chamber calls for much more wide-ranging support measures to be introduced urgently.