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Enterprise policy issues for distressed businesses following the unwinding of pandemic supports

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  • McCann, Fergal

    (Central Bank of Ireland)

  • McGeever, Niall

    (Central Bank of Ireland)

Abstract

The unwinding of COVID-19 pandemic supports and the effects of renewed inflationary pressures have the potential to expose latent distress among a cohort of Irish businesses. In this Note, we discuss the options available to policymakers to address a potentially large volume of business distress that may emerge if these risks were to crystallise. We argue that an effective policy response will require a trade-off between the targeting of restructuring options at viable firms and the scalability of policy action in the short term. The introduction of the Small Company Administrative Rescue Process (SCARP) is a positive development and provides a useful restructuring tool for many small companies. However, we flag some potential risks associated with the rollout of SCARP and we consider potential policy actions to mitigate these risks. We also discuss contingency options in the event that formal insolvency channels have difficulty processing a large number of cases, were they to emerge.

Suggested Citation

  • McCann, Fergal & McGeever, Niall, 2022. "Enterprise policy issues for distressed businesses following the unwinding of pandemic supports," Financial Stability Notes 9/FS/22, Central Bank of Ireland.
    • Handle: RePEc:cbi:fsnote:9/fs/22
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    References listed on IDEAS

    as
    1. McCann, Fergal & McGeever, Niall & Yao, Fang, 2021. "SME viability in the COVID-19 recovery," Research Technical Papers 9/RT/21, Central Bank of Ireland.
    2. Gaffney, Edward & McCann, Fergal & Stroebel, Johannes, 2021. "The economics of mortgage debt relief during a pandemic," Financial Stability Notes 6/FS/21, Central Bank of Ireland.
    3. Lambert, Derek & McGeever, Niall & O'Brien, Eoghan, 2022. "Wage subsidy utilisation by Irish companies," Financial Stability Notes 8/FS/22, Central Bank of Ireland.
    4. Conor O'Toole & Fergal McCann & Martina Lawless & Janez Kren & John McQuinn, 2021. "New Survey Evidence on COVID-19 and Irish SMEs: Measuring the Impact and Policy Response," The Economic and Social Review, Economic and Social Studies, vol. 52(2), pages 107-138.
    5. Arnoud Boot & Elena Carletti & Hans-Helmut Kotz & Jan Pieter Krahnen & Loriana Pelizzon & Marti Subrahmanyam, 2020. "Coronavirus and financial stability 3.0: Try equity – risk sharing for companies, large and small," Vox eBook Chapters, in: AgneÌ€s BeÌ nassy-QueÌ reÌ & Beatrice Weder di Mauro (ed.), Europe in the Time of Covid-19, edition 1, volume 1, chapter 1, pages 41-47, Centre for Economic Policy Research.
    6. Durante, Elena & McGeever, Niall, 2022. "SME Credit Conditions in the Pandemic Recovery," Financial Stability Notes 2/FS/22, Central Bank of Ireland.
    7. Robin Greenwood & Benjamin Iverson & David Thesmar, 2020. "Sizing up Corporate Restructuring in the COVID Crisis," NBER Working Papers 28104, National Bureau of Economic Research, Inc.
    8. McGeever, Niall & Sarchi, Cecilia & Woods, Maria, 2020. "Irish company births and insolvent liquidations during the COVID-19 shock," Economic Letters 13/EL/20, Central Bank of Ireland.
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    Cited by:

    1. Lambert, Derek & McGeever, Niall & O'Brien, Eoghan, 2022. "Wage subsidy utilisation by Irish companies," Financial Stability Notes 8/FS/22, Central Bank of Ireland.

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