Policy measures aimed at assisting troubled but viable businesses as pandemic supports wind down and debts fall due need to be targeted, scalable and equitable, new research from the Central Bank suggests.
A new Central Bank paper finds such measures must be targeted to ensure firms with viable economic futures can restructure rather than be forced into liquidation.
"The continued provision of support to unviable firms is a costly exercise for the exchequer where public funds are utilised, while the assets and labour tied up in unviable firms could be better utilised elsewhere in the economy," the paper states.
"Public perception of a poor allocation of scarce resources, whether that is providing support to businesses with no reasonable prospect of recovery or to those which no longer require assistance, is also undesirable," it says.
They must also be capable of dealing with potentially large numbers of firms without the need for lengthy consideration or primary legislation, it adds.
Authors Fergal McCann and Niall McGeever also outline that any policy actions must not leave firms that have been meeting their liabilities throughout the pandemic at a relative disadvantage.
"For example, the forgiveness of deferred tax liabilities may be considered objectionable by those who paid tax throughout the pandemic, and by many in the public at large, if it leaves those companies who paid their taxes on time at a relative disadvantage," the study claims.
Previous Central Bank research found that around 4% of Irish businesses or 10,000 firms may have remained financially distressed coming into this year because of the impact of the Covid-19 pandemic.
"However, the unwinding of pandemic supports and the onset of inflationary