European markets rise at the end a tough week, as Ireland prepares for 'profound economic fallout'

This afternoon’s main points for business as Ireland plots a course through the Covid-19 outbreak.

By Philip Connolly & Zuzia Whelan
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 20 at 5:30 pm. We want to know how your business is dealing with the outbreak, drop us a line at news@fora.ie

Restrictions are ‘likely’ to last more than two weeks, as Ireland tries to stem the spread of the Covid-19 coronavirus. Our colleagues over at TheJournal.ie have the latest details on the county’s response while in Britain Boris Johnson has ordered pubs, restaurants and cafes to close across the UK from midnight tonight. 

A profound fallout

Business lobby group Ibec has announced a two-phased targeted submission to government on steering businesses through the “profound economic fallout” of the Covid-19 outbreak.

Phase one, “mitigation and preservation”, is focused on securing business, manufacturing and production continuity, an upscaled income-replacement model, tax deferral and credit guarantees to keep companies alive but “on ice” and “a fiscal package of much greater scale”.

Phase two, “reboot and recovery” pushes for fiscal stimulus measures to pull the economy out of recession when things begin to “normalise”, to upscale investment for housing and infrastructure, and target “sectoral stimulus measures for most severely impacted firms”.

Right now, the government’s Covid-19 Pandemic Unemployment Payment gives those who lost income due to the virus a flat rate of €203 for six weeks.

It its submission, Ibec wants this to increase to 70% of net wages lost, for 20 weeks for 500,000 people. For someone on €30,000 a year, that would be almost €400 a week.

The current measures should be “interim building blocks” which make way for “a more comprehensive response”, the report said.

“Government must match other European countries in moving from a ‘safety net’ to an ‘income continuance’ approach in their labour market response,” it said, otherwise we could see and supply and demand shock closing firms and prolonging economic crisis.

Ibec’s suggested income support measures would cost the state about €4 billion. 

“It is a lot of money, but you know what, we can afford it,” chief executive Danny McCoy said, adding that Ireland entered the crisis in a strong position.

“Other countries have been much more extensive in terms of State credit guarantees, with many countries  putting measures in place which would, if necessary, reach 10% of GDP and greater. Significant measures will need to  be put in place in Ireland in order to guarantee liquidity and prevent escalation of  cash-flow issues  throughout the supply chain,” he said. 

One of the major implications of the outbreak has been closures and job losses. The news that there have been 58,000 social welfare applications for Covid-19 unemployment payments suggests that employment could drop by 2.5% if the disruption is sustained through the second quarter of the year, according to researchers at stockbroker Davy.

“This isn’t too surprising given that close to 500,000 workers are employed in the retail, hotel and restaurant sectors, and we have calculated the hit to activity in these sectors could potentially knock 3% off GDP in Q2 2020,” Conall Mac Coille, the chief economist at Davy, said. 

On Friday evening, the European Commission said the EU would suspend its strict rules on public spending to allow governments to open the money taps to face the coronavirus pandemic. 

In an unprecedented decision, the EU executive triggered something called the “general escape clause”, giving countries free rein to “inject spending into the economy as needed,” EU chief Ursula von der Leyen said.

The temporary measure effectively halts strict oversight by Brussels of national spending and will be welcome in Italy, the country suffering most from the novel coronavirus and one often in violation of EU rules.

EU finance ministers are widely expected to formally approve the clause next week. According to EU law, the derogation is only allowed in cases of “an unusual event outside the control” of a member state.

Earlier, we took a look at some of the other measures taken to ensure the EU’s healthcare systems and economies are protected as much as possible

Bouncebackability

European stocks surged more than 5% in opening trade Friday as investors welcomed a vast global fightback against coronavirus fallout, before falling back somewhat over the day. 

  • Dublin’s ISEQ was up by more than 5% but has fallen back a little over the afternoon to close up by 3.8%
  • London’s benchmark FTSE 100 index of major blue-chip companies rallied 5.2% early on Friday but fell back to close up by 0.1%
  • The Euro Stoxx 600 gained 1.4%
  • Frankfurt’s DAX closed up by more than 3%
  • Paris CAC 40 gained 4.3%
  • Wall Street stocks were mostly lower Friday afternoon in volatile trading as more of the US economy shuts down in response to the coronavirus outbreak
  • Hong Kong stocks ended another bruising week with a much-needed rally Friday, tracking big gains across Asia 

Trying to get through 

Over the past few days, the team at Fora has spoken to several businesses about how they are feeling the fallout of the outbreak.

A lot of entrepreneurs are trying to help in the effort to stem the spread, with distilleries around the country changing tack to help tackle the spread of coronavirus by making hand sanitiser.

From opera to electricians, many involved in the entertainment trade have been affected by the Covid-19 outbreak. We spoke to some of those dealing with the show businesses shutdown.  

One of the Irish brothers behind Poland-based OpsTalent is trying to help business manage the impact of Covid-19, as his company builds software applications for its clients – including applications that assist with remote working, something that is quickly becoming a necessity for many businesses. 

Dubliner Kate McLaughlin, who is the founder of London-based We Got Pop, is doing her best to shift mentality in her business as it plots a path through the crisis.

“You’re not going to be customer-facing so how can you turn all the smart people you have in your business to value-driving activity?” she said. “If we use this time right, we can use this as a moment in our business’s history to create great value that we can come back to the industry with, once the production space is back up and running. “

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Damien Crowe, who runs Red Torch Ginger on Andrew Street in Dublin and Main Street Maynooth, along with a takeaway service Kanoodle and manufacturing unit in Baldoyle, decided to close his restaurants and associated business on Tuesday to safeguard his employees.

Crowe intends to continue paying his 80 strong staff. ”My staff are excellent, I value them hugely and I want to do my very best for them throughout the crisis.”

“We started to get call after call as events began to be cancelled,” said Brendan Moloney of Dublin formalwear business Bond Brothers as he deals with the uncertainty.

Grocery delivery startup Buymie is managing a “huge increase” in demand as people stay home. The company wants to help the government and retailers distribute groceries to vulnerable citizens.

Delivery could be key to keeping food businesses open and customers safe, as the arrival of Covid-19 brings about momentous changes in how every business works. Writing in Fora this week, Conor McCarthy of Flipdish lays out some of the steps that food businesses might be able to take.

“Across all industries, we need to pull together and offer support to each other where we can. The maxim, ‘We are stronger together than we are alone’ rings especially true in times like these,” he wrote.

Our colleagues over at TheJournal.ie have also been speaking to businesses turning to online sales to get them through

Something you might have missed

It isn’t easy living and running a business in uncertain times, particularly when our interaction with each other has changed. We spoke to some experts on how to manage anxiety in the workplace amid the spread of coronavirus.

Get our Daily Briefing with the morning’s most important headlines for innovative Irish businesses.

Note: This piece will be updated with additional information during the day. 

With reporting from AFP