30 Jun 2020 | 02.02 pm
Varadkar Seeks €480m Extra For Enterprise Budget
His lockdown costs come home to roost
30 Jun 2020 | 02.02 pm
New enterprise minister Leo Varadkar has outlined the increased funding required by his department due to the pandemic and lockdown impact on the economy.
The Minister for Enterprise, Trade and Employment is seeking Dáil approval for the department’s Revised Estimate for 2020.
The projected gross expenditure for the department in the original Estimate was €970m. The Revised Estimate seeks significant additional capital funding for various Covid enterprise initiatives and supports.
The total capital ceiling now being sought is €1,115m, which represents an increase of 76% on the amount budgeted for last year.
Varadkar (pictured) said €480m extra is needed from the Exchequer to fund:
• €180m for the Sustaining Enterprise Fund
• €12m for further recapitalisation of the Microenterprise Loan Fund
• €40 million to fund a €450m increase in Strategic Banking Corporation of Ireland Covid lending, including through the €250m expansion of the Covid Working Capital Scheme, and the €200m expansion in the Future Growth Loan Scheme
• €250m for the Restart Grant.
The Parliamentary Budget Office commented that it is regrettable that output targets have not been updated to reflect new or expanded schemes aimed at responding to the impact of the pandemic on enterprise.
The PBO stated: “Without such indicators, the performance of the additional spending may be difficult to assess. It is assumed that the spend will however be closely tracked and monitored by the department and that all the standard value for money principles will apply.
“The department should consider providing updated performance metrics to the relevant Dáil sectoral committee in order to facilitate its scrutiny of the additional money being spent. This would assist the Dáil in fulfilling its role in relation to scrutiny of Voted spending. This will be especially important if a Supplementary Estimate is sought later in 2020.”
The PBO also noted that over 80% of the additional funding will be directed towards Enterprise Ireland and its clients.
The minister stated that extra funding for the Sustaining Enterprise Fund will enable Enterprise Ireland to increase overall funding under its Financial Grant Planning scheme by €2.5 million. Over 540 businesses have received grant aid approval under this scheme.
The Sustaining Enterprise funding will also enable EI to increase the funding available under its Retail Online Scheme by €6m and provide an additional €12m to its Hubs and Incubation Centres.
The SEF will also enable EI to fund its new Sustaining Enterprise Scheme. The €124m scheme is directed at SMEs in the manufacturing and internationally traded services sectors and is available to enterprises with more than 10 employees which have applied for funding from a financial institution. This includes SMEs that have applied to the SBCI for the COVID-19 Working Capital Loan Scheme.
Under the scheme, eligible companies can apply for a minimum of €100,000 up to a maximum of €800,000 per undertaking in a number of forms. Funding under the scheme must be approved by Enterprise Ireland by 31 December 2020.
“While the volume of applications under the scheme have been relatively modest, we expect that applications will increase significantly as businesses resume trading,” said Varadkar.
“It also means we can increase the funding available under the Local Enterprise Offices’ Business Continuity and Trading Online Voucher schemes by €27m and €6m respectively. Over 10,600 Continuity Vouchers and more than 3,200 Trading Online Vouchers have been approved to date.
“The Sustaining Enterprise Fund is also providing €2.5m for Intertrade Ireland’s E-Merge and Emergency Services Business Solutions to help businesses deal with challenges in areas such as online sales, emergency cashflow, and loan applications.”
Varadkar noted that the additional capital funding being sought will also fund the Restart Grant. This grant is targeted at micro and small businesses which have suffered a dramatic loss of turnover due to the Covid restrictions and who require assistance reopening.
Grants of between €2,000 and €10,000 are available to businesses which commit to reopening and to reemploying their staff.
“We believe that up to 100,000 small and micro businesses will apply,” said Varadkar. “Businesses can apply online and payments will be made directly to businesses by electronic funds transfer. It will be a straightforward and efficient application and assessment to make things as easy as possible for businesses to reopen, restock and reemploy staff. Over 15,000 businesses applied for the new grant scheme in the first week.”
The minister explained that additional Exchequer funding will provide the necessary funding for significant access-to-finance, including an increase of €450m in the lending available through SBCI.
This will be achieved by an expansion of €250m in the Covid Working Capital Scheme and an expansion of €200m in the Future Growth Loan Scheme.
According to Varadkar: “The Working Capital Scheme was originally launched as part of our Budget 2018 response to Brexit and was redesigned in light of the challenges posed by the pandemic.
“The revised Covid Scheme, a joint scheme with the Department of Agriculture, Food and the Marine, is administered by the Strategic Banking Corporation of Ireland and was an immediate first step in meeting the liquidity needs of SMEs.”
The additional funding of €250 million will help SMEs and small mid-caps negatively impacted by COVID-19, to access finance for their working capital needs. The scheme provides loans from €25,000 up to €1.5m, with the first €500,000 unsecured, and a maximum interest rate of 4%.
As with the Working Capital Scheme, the Future Growth Loan Scheme has been repurposed to assist enterprises in responding to Covid-19.
Loans under the expanded scheme will range from €25,000 to €3m per eligible business, with loans of up to €500,000 available unsecured. Loan periods of 7 to 10 years will be made available for investment loans and 5 to 10 years for financing debt management, and competitive interest rates will be applied. Loans to the value of €140m have been approved under the scheme.
“It is obvious that more needs to be done, so the department is developing a further set of interventions,” the former Taoiseach added. “Some measures, such as the discrete Covid Credit Guarantee Scheme, further expansions of the Microfinance Loan Fund and the Future Growth Loan Scheme, require primary legislation and this is currently being drafted.
“Apart from the additional Covid funding, the Revised Estimate of €1,450m also includes the funding required to operate the normal programmes in Jobs and Enterprise Development, Innovation, and Regulation.”