SME viability in the COVID-19 recovery

Fergal McCann, Niall McGeever and Fang Yao
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Fergal McCann: Central Bank of Ireland
Niall McGeever: Central Bank of Ireland
Fang Yao: Central Bank of Ireland

No 9/RT/21, Research Technical Papers from 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.

Date: 2021-12
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:cbi:wpaper:9/rt/21

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