Coronavirus punches €8.3bn hole in public finances

The coronavirus crisis has punched an €8.3 billion hole in the public finances, according to the latest exchequer returns.

The figures show the Government’s budget deficit – the difference between what it spends and what it takes in in taxes – swelled to €7.4 billion in July as VAT receipts crashed and spending on income supports related to the pandemic soared.

This compared with a surplus of €900 million this time last year, marking a year-on-year deterioration of €8.3 billion.

The headline deficit was driven by a large increase in Government spending, which was 30 per cent up on last year at €38 billion, reflecting increased spending in the Departments of Health and Social Protection.

Social protection spending was 83 per cent or €5.3 billion above profile as a result of increased spending related to the Government’s two wage support schemes for workers affected by the lockdown.

With consumer activity severely restricted in April and May, VAT receipts also took a battering. They were down 22.7 per cent, or €2.2 billion, on the same period last year, reflecting what the Department of Finance described as a “significant decline in personal consumption”. Revenue from the sales tax was down 30 per cent or €692 million in July alone.

Overall, the figures show the Government took in €31.1 billion in taxes for the seven-month period, down 2.5 per cent on last year.

Income tax, the Government’s largest tax channel, generated €12.1 billion, which was only marginally down on last year and above profile.

Corporation tax receipts were €6 billion for the period, which was €1.7 billion, or 40 per cent, above profile.

However, business tax receipts for July were just €165 million, down 62 per cent or €271 million on the same month last year.

While July is not a major corporation tax month, this under-performance, in contrast to the over-performance trend seen in the year to date, serves to underline the volatility of this tax head, the department said.

Positive signals
Minister for Finance Paschal Donohoe said while the figures were stark the total tax performance was “very much in line with what we were expecting”.

He said that despite all that had happened, including the upheaval to business and to families, there were still some positive signals, including the fact that the tax-take was down only 2.5 per cent compared to a year ago.

“While the figure is big, the percentage change is a better-than-hoped-for performance,” he said at a media conference to coincide with the publication of the figures.

He said there continued to be a strong performance in corporation tax, but a more significant indicator was that income tax at the end of July was nearly unchanged compared to a year ago.

“In July [income tax] was down 8 per cent compared to July 2019. In the context of the unprecedented loss of jobs for many months, that income tax [figure] is a positive note in our total tax collection.”

He said two factors underlined that. The first was that strong sectors of the economy such as technology, pharma and exports continued to perform well.

The second was the sectors that have suffered most were those that employed most part-time workers – and that meant a smaller fall-off in tax revenue.

However, he said the figures showed the effects of changing consumption. He said excise was down 18 per cent, for example.

He said the July stimulus offered a huge array of different measures worth over €5 billion of tax changes. It was a priority of all government departments to make sure they were implemented.

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Services sector grows in July for first time since lockdown

Activity in the services sector grew in July for the first time since the economy entered lockdown restrictions earlier this year, according to data from AIB.

The July purchasing managers index (PMI) witnessed a modest expansion but the volumes of income new sales fell further, while employment continued to decline.

The business activity index rose to 51.9 in July from 39.7 the previous month. Any reading above 50 indicates a sector in expansion.

“While this is a very welcome development it is still a relatively low reading for the Irish services PMI – the index stood at 59.9 as recently as February, indicating that the sector is still far from being back to normal,” said AIB chief economist Oliver Mangan.

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RDI Hub in Kerry marketing itself as ‘remote’ location

A NON-PROFIT hub for start-ups in Killorglin is reporting interest from firms seeking a ‘remote’ base for workers living in Kerry, Cork and Limerick.

The RDI Hub – a joint venture of Fexco, IT Tralee, Kerry County Council and Enterprise Ireland – opened earlier this year in the Co Kerry town and already hosts operations for tax compliance firm Taxamo and Swiss equipment manufacturer Liebherr.

The 12,000-square-foot facility beside Fexco’s headquarters reopened yesterday following a four-month closure because of Covid-19 restrictions.

Liam Cronin, chief executive of the RDI Hub, said it has been approached by several potential tenants seeking a second workplace.

Some are seeking extra space because their existing offices would be too tightly packed to maintain social distance; others are considering a base in the south-west for regional workers who otherwise would keep working from home.

“We anticipate that having a second-site presence will become the norm over the coming years, and the benefits for companies are extensive,” Mr Cronin said. “Sharing of knowledge, fostering innovation and growth mindset, while offering employees the flexibility they now desire, will positively impact business performance.”

A NON-PROFIT hub for start-ups in Killorglin is reporting interest from firms seeking a ‘remote’ base for workers living in Kerry, Cork and Limerick.

The RDI Hub – a joint venture of Fexco, IT Tralee, Kerry County Council and Enterprise Ireland – opened earlier this year in the Co Kerry town and already hosts operations for tax compliance firm Taxamo and Swiss equipment manufacturer Liebherr.

The 12,000-square-foot facility beside Fexco’s headquarters reopened yesterday following a four-month closure because of Covid-19 restrictions.

Liam Cronin, chief executive of the RDI Hub, said it has been approached by several potential tenants seeking a second workplace.

Some are seeking extra space because their existing offices would be too tightly packed to maintain social distance; others are considering a base in the south-west for regional workers who otherwise would keep working from home.

“We anticipate that having a second-site presence will become the norm over the coming years, and the benefits for companies are extensive,” Mr Cronin said. “Sharing of knowledge, fostering innovation and growth mindset, while offering employees the flexibility they now desire, will positively impact business performance.”

He cited anecdotal evidence “that while working from home is having a positive impact on productivity, both creativity and innovation have taken a hit. You really need people together to brainstorm.”

Mr Cronin said tenants were being encouraged to participate in the RDI Hub’s on-site wellness programme as part of wider community-building efforts. The goal, he said, was for staff within and between firms “to come together and collaborate and have those serendipitous moments where new ideas come up”.

The RDI Hub also is running mentor and accelerator programmes with input from Accenture’s head of strategy, Karen O’Regan; the chief executive of Scale Ireland, Liz McCarthy; the CEO of Phelan Energy, Louise Phelan; and Fexco’s director of strategic business development, Karl Aherne.

Taxamo chief executive John McCarthy praised the RDI Hub as providing “amazing physical space, cutting-edge technology and access to a network of expertise to help and support the expansion of our business”.

He said such facilities help “to retain and attract talent outside of the main urban centres.”

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Bounceback in manufacturing sector gathered pace during July

THE manufacturing sector clocked up its fastest pace of growth in almost two years in July, rebounding from the worst period of the lockdown.

The pace of a recovery that was under way in June accelerated last month, according to AIB’s manufacturing Purchasing Managers’ Index (PMI).

The index tracks growth and decline on index either side of 50 – where a number above 50 indicates expansion. The index rose to 57.3 in July from 51.0 in June, having plunged to a low of 36 in April.

Ireland’s manufacturing recovery as the lockdown eased is on trend in other countries, according to AIB chief economist Oliver Mangan.

“The strong reading for July points to a sharp pick-up in activity, but from a low base in previous months during the lockdown period,” Mr Mangan said.

Output and new orders both expanded at some of the fastest rates ever recorded by the survey, although the 12-month outlook remained relatively subdued.

The manufacturing sector is largely able to operate, unlike swathes of the services sector which remain subject to restrictions including the continued closure of pubs and the quarantine rules for many foreign visitors.

Data showed manufacturing activity across the eurozone expanded for the first time since early 2019 last month as demand rebounded after more easing of the restrictions imposed to quell the spread of the coronavirus, a survey showed on Monday.

Just over 18 million people have been infected by the coronavirus. But governments around Europe have eased some restrictions that had shuttered vast swathes of the bloc’s economy.

To offer support to the ravaged economy, the European Central Bank (ECB)has ramped up its stimulus measures and European Union leaders have agreed on a €750bn recovery fund.

Still, the economy contracted a record 12.1pc last quarter, official data showed on Friday, although a July Reuters poll predicted 8.1pc growth this quarter.

IHS Markit’s final euro area Manufacturing Purchasing Managers’ Index (PMI) bounced to 51.8 in July from June’s 47.4 – its first time above the 50 mark that separates growth from contraction since January 2019. An initial “flash” release had it at 51.1.

An index measuring output which feeds into a composite PMI due today leapt to 55.3 from 48.9, its highest since April 2018.

“Eurozone factories reported a very positive start to the third quarter, with production growing at the fastest rate for over two years, fuelled by an encouraging surge in demand,” said Chris Williamson, chief business economist at IHS Markit.

“Growth of new orders in fact outpaced production, hinting strongly that August should see further output gains.”

Forward-looking indicators in the survey were generally more positive. However, policymakers are likely to be concerned that factories again reduced headcount, and at one of the sharpest rates in the survey’s 23-year history.

The employment index only nudged up to 42.9 from 41.3.

“The job numbers remain a major concern, however, especially as the labour market is likely to be key to determining the economy’s recovery path,” Mr Williamson said.

Most economists predict unemployment will rise sharply as government supports fade.

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Regulator says insurers should pay legal bills for customers’ business interruption cases

Insurance companies should pay the legal costs of customers who challenge refusal to pay out on business interruption claims, the Central Bank say.

In updated guidance, the regulator said that where cover and related issues are disputed, the Central Bank expects firms to pay the reasonable costs of customer plaintiffs in agreed test case litigation. The most high profile of such cases at the moment involves claims taken by four publicans against FBD, that are representatives of hundreds of similar claims. FBD last week increased its estimate for the likely costs in relation to the actions from €22m to €30m.

Where customers have an entitlement to claim under a business interruption insurance policy, the Central Bank expects that claims will be processed and paid promptly and fully.

The Central Bank said that some business interruption insurance policies provide cover for the circumstances of interruption related to the outbreak of COVID-19, while others clearly do not. And in some cases the position is unclear but a strong or reasonable argument can be made that they do provide cover.

Director General of Financial Conduct, Derville Rowland, said: “The Framework reiterates our core message to firms: that they honour valid claims in full and pay them promptly.”

“Furthermore, where cover is disputed and businesses have pursued litigation, insurance firms should be cognisant of the significant costs burden faced by their customers. We therefore expect that in circumstances where the firm obtains the benefit of a court’s interpretation of issues at hand, a firm should agree to pay the reasonable costs of customer plaintiffs in agreed test case litigation and should not seek its costs against these plaintiffs.”

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Family car costs fall due to drop in prices at the pumps

The cost of running a family car has fallen, largely due to lower fuel prices at the forecourts.

The average cost of running a family car fell to €10,386, according to the AA’s annual survey of motoring costs. This is down €207.26 on last year.

The biggest year-on-year change is due to an almost 10pc drop in the average cost of fuel. Average insurance costs have also fallen.

It comes as Liberty Insurance is investing €100m in a technology upgrade that will allow motorists to customise their insurance cover.

A collapse in global demand for oil due to the Covid-19 outbreak has seen pump prices fall in recent months, even though they have begun to creep up again lately with travel volumes increasing.

The average cost of a litre of petrol fell from 139.5c last year to 125.9c this month. Diesel prices fell from 129.9c to 117.3c.

The AA said there has been a drop in insurance prices, but it warned of high costs for non-standard risks and said promised insurance reform has still not been delivered.

AA director of consumer affairs Conor Faughnan said figures from the Central Statistics Office show the average cost of motor insurance dropped by 7.6pc in June compared with the same month last year.

But he said there are plenty of motorists whose insurance costs have not reduced.

This was particularly the case for returning emigrants and those with claims, or other non-standard risks.

The AA called on the Government and the insurance industry to ramp up insurance reform efforts.

Meanwhile, Liberty Insurance said it had designed a “unique” cloud-based technology that will effectively eliminate the need for it to rely on its complex legacy systems.

The IT upgrade offers customers a range of cover options as part of a basic package and then allows them to customise a product that most suits their needs, with a ­number of optional add-ons.

This will mean motorists deciding if they want to add or subtract the likes of windscreen breakage cover or breakdown assistance to ­policies.

Further product enhancements are planned for the new year, the company said.

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Opportunities offered for researchers and enterprises under Horizon 2020

Research and innovation is the bedrock of success for the most ambitious companies that scale internationally, diversify their export base and create jobs at home.

A higher education sector and research ecosystem that is outward looking and internationally engaged, and collaborating with Irish companies, is of critical importance to Ireland’s place in the world and to our global competitiveness.

As citizens we rely on our innovators and researchers as engines of economic growth and to help us overcome some our greatest societal challenges.

With the emergence of Covid-19 and the challenges posed by climate change, the truth of this has never been clearer. A key pillar of Enterprise Ireland’s client engagement strategy is therefore to support companies and researchers to individually and collaboratively achieve their global ambition.

The European Union’s Horizon 2020 programme is designed to support innovators and researchers, by funding research excellence, industrial leadership and tackling societal challenges.

To date, Irish companies and researchers have been awarded and contracted in excess of €987m in funding under Horizon 2020 – with more in the pipeline.

Horizon 2020 will be succeeded by Horizon Europe. However, many opportunities remain over the next six months.

Following a call in May for applications focusing on the EU Green Deal, the European Commission’s European Innovation Council (EIC) Accelerator recently announced that 64 European startups and SMEs are to be awarded some €307m.

The EIC Accelerator pilot supports high-risk, high-potential SMEs and innovators to help them develop and bring onto the market new innovative products, services and business models that could drive economic growth.

Applicants are able to apply for up to €2.5m in grant support, and for up to €15m in equity investment.

Two Galway-based companies were among the successful applicants.

NVP Energy Limited is to receive funding for its Ambi-Robic technology for treating municipal sewage wastewater, and GlasPort Bio Limited is to receive funding for its GasAbate N+ technology for removing greenhouse gas emissions from animal manure. Stored manures account for 16pc of all greenhouse gas emissions from EU agriculture.

The success of these companies followed the announcement in June by the EIC that eight Irish companies secured more than 10pc of the funding allocated under this call and have been awarded grant and equity funding totalling more than €31m.

The budget for this call was increased by the EIC to ensure that many Covid-19 relevant innovations were supported in addition to other thematic areas.

Among the successful applicants were seven Enterprise Ireland clients. They included Kite Medical, OneProjects Design Innovation, Provizio, Remedy Biologics, Kastus Technologies, SiriusXT and Aquila Biosciences.

These results are a testament to the vibrancy of the Irish commercialisation and startup eco-system and should be celebrated. The final EIC Accelerator call for applications closes on October 7 – and it has no thematic focus.

Importantly, it has a focus on female entrepreneurship where, should the first-round evaluation show that a minimum of 25pc of companies selected for the final-stage interviews are not led by women, additional interviews will then be planned.

The EIC accelerator is a real opportunity for entrepreneurs to raise funding, innovate and scale their businesses. The only real challenge that these companies can have is if they are not being sufficiently ambitious.

In the autumn, a Horizon 2020 call for applications totalling close to €1bn will be launched to respond to the urgency of climate change and to the ambition of the European Green Deal objectives.

This will be a cross-cutting work programme covering a vast array of European Green Deal-related topics. And there will be opportunities for innovators and researchers across Europe to collaborate and compete for funding.

Under the umbrella of the European Enterprise Network (EEN), Enterprise Ireland and our colleagues in Invest NI will be running a virtual brokerage event on the European Green Deal call on October 13.

This event will be an opportunity to get further information and to meet potential consortia partners from across the island of Ireland and the wider Horizon 2020 family.

See here to register:

For more information about the extensive supports available to innovators and researchers under Horizon 2020 and the Horizon 2020 National Contact Point Network please refer to

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An Post’s ‘one-stop shop’ for greener homes

An Post is to launch a “one-stop shop” for householders who are upgrading their homes to make them more energy efficient.

The scheme involves a package that includes cheap loans, having the work carried out for homeowners, and applying for the grant for the consumer.

The all-in-one approach will mean that those taking a loan from An Post will have the retro-fitting work carried out for them, project management looked after, and the grant- application process handled.

The Green Finance offer is being launched at a time when there is a national push to retro-fit up to 500,000 houses.

The scheme will enable householders to make environmentally responsible decisions when investing in their homes or when replacing ­petrol or diesel vehicles.

It comes under the State company’s An Post Money brand, which already offers current accounts, personal loans and credit cards, with plans to offer mortgages and loans for small firms in the future. An Post has set up what it calls a Green Hub on its website, but consumers can also access it in 950 post offices.

The ‘green loans’ are issued by AvantCard for An Post with a rate of 4.9pc on amounts over €20,000.

Managing director of An Post Retail Debbie Byrne said this was a market-leading rate.

The loans are expected to be typically used for installing heat pumps, solar panels and wall insulation. The repayments on the loan can be stretched over 10 years.

Ms Byrne said: “This one-stop-shop approach will cover loan-only or full retro-fit services, from initial home assessments to completed works and a seamless Sustainable Energy Authority of Ireland (SEAI) grant application and payment process.”

The offer also includes the provision of a survey.

An Post has partnered with the SEAI and energy company SSE Airtricity to carry out the works, and provide access to grants.

The SEAI administers grants, with up to €6,000 available for external-wall insulation on a detached house.

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Impact of COVID on government welfare

Social Support for businesses and employees impacted by COVID-19

People all over the world have started to feel the real impact of COVID-19. In Ireland, the government has created different funding schemes for people who wish to claim from them. This is to help subsidize their income during these hard times. Businesses have also requested that they be allowed to start working again.

COVID 19 unemployment recipients rise to 600,000

During this pandemic, nearly 598,000 people have become dependent on the Covid-19 Pandemic Unemployment Fund. This is a sharp rise of 7000 from the week before. During this time there have been 52,000 people who have been given subsidized payment from the Temporary Wage Subsidy Scheme. While there is no requirement for this payment, officers from each branch have been “cross-checking” payments to check for “mis-claiming” by individuals.

Housing Alliance seeks permission to restart building works.

The Ó Cualann Cohousing alliance is seeking permission to restart building on a housing development in Ballymun, Dublin. Even though the cohousing alliance isn’t on the list of 35 housing developments which have been given permission to start building.

Covid-19 Welfare subsidies may be tapered

The Minister of Finance, Public Expenditure and Reform Mr Paschal Donohoe says that he will be tapering and changing the Covid-19 welfare subsidies at the end of the 12 week introduction period. He said that he would like to keep the public payouts safe, as well as giving the 40,000 companies who have availed the Welfare payouts a fighting chance. Especially with the unemployment rate standing at 22%, a sharp increase since February this year. 

Covid-19 unemployment payments to cost Exchequer over €5bn for three months.

The Economic and Social Research Institute says that the government will have to pay out 5 Billion Euros over the next three months. It warns that the cap on higher earners within the wage subsidy scheme may encourage firms to lay off these employees instead of retaining them. The ESRI estimates that some 600,000 jobs may be lost due to Covid-19 pandemic.

IMF provides debt relief to 25 poor countries

The International Monetary Fund has said that it will provide debt relief to some of the poorer countries affected by Covid-19. This is a bid to help free up some funds for the countries affected. The countries are nearly all in Africa but include, Afghanistan, Yemen, Nepal and Haiti as some of the other countries that will benefit. 

Many jobs have been lost due to Covid-19 pandemic. Although the governments have done everything they can to help taper the loss of jobs and income. There are still risks involved until the pandemic has subsided and the economy is restarted to full capacity. We might see more job losses and more reliance on the government in the near future.

Let us help you plan your business’s financial future during these uncertain times. Contact us today.

Coronavirus plunges Europe’s leading economies into historic recessions

The coronavirus pandemic has plunged Europe’s leading economies into historic recessions, figures published on Friday showed.

France and Spain both reported double-digit quarter-on-quarter falls in economic output in the three months to June.

The figures came after both the US and Germany on Thursday reported a loss of about a tenth of their gross domestic product in the second quarter.

Spain’s economy was worst hit, with its GDP declining 18.5 per cent, according to preliminary estimates by the National Statistics Institute.

The fall was worse than analysts had expected and followed a contraction of 5.2 per cent in the first quarter, wiping out seven years of growth since the country’s last recession and leaving output at levels last seen in 2002.

France suffered its largest contraction in output since the second world war. Its GDP was down 13.8 per cent quarter on quarter in the three months to June, although the fall was slightly smaller than analysts anticipated.

This marked the country’s third consecutive quarter of contraction, according to the official statistics agency Insee.

The decline was driven by a 25.5 per cent decline in exports and a 20 per cent drop in government investment. Insee also revised its figure for France’s first-quarter contraction down by 0.6 percentage points, to a contraction of 5.9 per cent.

Spanish fragility

The Spanish figures in particular have fuelled economists’ fears for one of Europe’s more fragile economies.

“It’s the kind of drop one would see in a war,” said José Ignacio Conde Ruiz, a professor of economics at Madrid’s Complutense University. “The only sector that grew was agriculture.”

Spain’s recovery is already under threat from a steep rise in new coronavirus infections that has led other countries to tighten their travel advice, threatening the prospects for its strategically important tourism sector. Tourism makes up about a seventh of Spain’s GDP. – Copyright The Financial Times Limited 2020.

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