'Unprecedented actions for an unprecedented emergency'

IN THIS TURBULENT time, Fora is going to bring you updates every morning and evening on the most relevant issues for Irish business dealing with the outbreak of Covid-19. Here are the main points this morning, March 24 at 5 pm. We want to know how your business is dealing with the outbreak, drop us a line at news@fora.ie 

“I wouldn’t use the term lockdown,” Leo Varadkar said as he addressed the press following a speech laying out increased restrictions to stem the spread of the coronavirus that causes Covid-19. 

The raft of new public health measures include all non-essential retail outlets being told to close, with restaurants and cafes told to close unless they can offer a take-away option. Supermarkets and pharmacies will remain open. Individuals have been told they should work from home unless workplace attendance is essential, with measures set to remain in place until Sunday 19 April. Our colleagues over at TheJournal.ie have further details. 

Private hospitals will act as part of the public health system for the duration of the coronavirus pandemic, the government also said today. 

Alongside the restrictions, an income support scheme was also announced to provide financial support to Irish workers and companies affected by the crisis. The state’s support measures will be costly, with an initial estimated cost of €3.7 billion over 12 weeks. They include: 

• A temporary wage subsidy of 70% of take-home pay up to a maximum weekly tax-free amount of €410 per week to help affected companies keep paying their employees – the equivalent of €500 per week before tax;
• Workers who have lost their jobs due to the crisis will receive an enhanced emergency Covid-19 Pandemic Unemployment Payment of €350 per week, an increase from the previously announced €203;
• The Covid-19 illness payment will also be increased to €350 per week;
• Self-employed people will also be eligible for the Covid-19 Pandemic Unemployment Payment of €350 directly from the Department of Employment Affairs and Social Protection, rather than the Revenue scheme);
• There are also enhanced protections for people facing difficulties with their mortgages, rent or utility bills.

“The cost of this will be great,” Varadkar said, adding “we can bear it and we will be able to pay it back as a nation”.

“We do so willingly because it is the right thing to do and because we owe it to our fellow citizens. I believe that maintaining the link between employees and employers and companies will make it easier for us to bounce back when this is all over. We will keep our economic infrastructure intact. We will give businesses the best chance of making it through this,” he added. 

Economic partnership

Speaking after the Taoiseach, finance minister Paschal Donohoe said the measures aim to provide income support to those who need it while also giving confidence to employers to retain the link with employees so that when this crisis passes people can get back to work as quickly and seamlessly as possible.

“As we work to diminish the impact of this global health pandemic, we will ensure that the economic impact on those who have lost their jobs or had their hours or income reduced is minimised to the greatest extent possible,” he said.  

“We are in exceptional times. The health of our people, and ensuring we remain safe, is our number one priority. Supporting businesses and positioning ourselves so that we can bounce back when the time comes is also paramount,” he added. 

Heather Humphreys, the minister for business, said the government is entering into an “economic partnership with businesses and employers nationwide so that we can support them and their staff through this unprecedented crisis”.

Ibec, the Irish business lobby group, said the announcements, including that of a temporary wage subsidy scheme and the continued operation of essential businesses, will play a “crucial role” in enabling the economy to bounce back once the emergency passes. 

“We must do everything possible to prevent a deep demand shock and  do everything to allow the economy to recover at the end of this crisis,” Danny McCoy, the chief executive of Ibec, said. 

He added: “These income supports are a crucial and important further  step  towards  keeping  vulnerable  firms alive, keeping their employees engaged with them and protecting the income of individuals”. 

McCoy also said that the announcement that essential businesses, such as manufacturing and other necessary services, are to remain open, insofar as they can adhere to social distancing measures to protect the welfare of employees, is “to be welcomed”.

Stocks rally

World stock markets rallied strongly Tuesday after the US Federal Reserve launched an unprecedented bond-buying plan, the latest salvo in a global counter-attack against the economic fallout from the coronavirus outbreak.

• Ireland’s Iseq was up by more than 3% early in the day and closed up by 6.9%
• London’s benchmark FTSE 100 index rose 3.8% after Britain became the latest nation to impose a lockdown to combat COVID-19 and closed up by 7.5%;
• The Euro Stoxx 50 closed up by 9.2% 

Housing concerns 

In a note this morning, Colin Sheridan at stockbrokers Davy said the risks with COVID-19 are unquantifiable and will remain so for some time, as he took a look at the listed homebuilder sector in Ireland and the effects on Cairn Homes and Glenveagh Properties.

“We believe that even in an adverse scenario (no more sales), 40-50% of the companies’ full-year targets can be satisfied just from the current forward order book. The most immediate risk to numbers, in our view, would come from, for example, lost time in construction activity in the event of a lockdown,” he said

Sheridan added that both companies are in good health in relation to their balance sheets, with Glenveagh significantly so considering its net cash position at year-end.

“Cairn has a very low level of gearing, and both itself and Glenveagh have significant headroom relative to their funding facilities. Combining this with a very low level of fixed costs, we believe that both Glenveagh and Cairn have the ability to withstand a protracted period of downtime if that situation unfolds,” he said.

“The market sell-off has seen Cairn and Glenveagh trade down to price to book values of 0.67x and 0.51x respectively. We believe that these equity valuations have priced in falls of close to 50% in land values at these levels. This suggests that declines in house prices of maybe 15-20% have been priced in,” Sheridan added. 

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Note: This piece will be updated with additional information during the day. With reporting from AFP