New research shows that Irish small and medium-sized companies may have lost between €6 billion and €10 billion in revenue between March and June as COVID-19 restrictions disrupted the economy.

The study, carried out by the Economic and Social Research Institute, said firms are likely to have used their existing cash reserves to cover some of these losses. Even after this, however, the ESRI estimates that small firms suffered a shortfall of between €2.2 billion and €4.3 billion.

Uncovered losses

The ESRI looked at revenue shortfalls – where income fell below spending on a monthly basis – since the onset of the pandemic.

It estimates that the losses could climb to between €8 billion and €15 billion by the end of the year, depending on the broader public health situation.

“Running down internal resources would cover some of this shortfall for firms but would leave between €4 billion and €8 billion in uncovered losses for the sector,” the ESRI says.

One of the report’s authors, Conor O’Toole, said many firms’ cash buffers were likely to deplete, leaving many struggling to survive.

State supports not enough

Martina Lawless, another of the report’s authors, said losses could have been much higher if there had not also been significant reductions in spending supported by the wage subsidy scheme and deferrals of other payments.

But the report adds that while state supports will important, they will not on their own fully bridge the gaps suggested by the research.

The ESRI research finds that, before the onset of the pandemic, the share of firms making a profit was lowest in hotels and restaurant sector, at 58%, while the share of firms that have missed a payment on debts was also higher in this sector.

“This is a serious concern in the context of vulnerability to the COVID-19 shock as the hospitality sector has been subject to the most stringent restrictions and is likely to have to deal with limitations on activity due to social distancing requirements for the longest,” the institute says.