What the €7.4bn stimulus package means for SMEs, start-ups and more

23 Jul 2020621 Views

Share on FacebookTweet about this on TwitterShare on LinkedInPin on PinterestShare on RedditEmail this to someone

Image: © loreanto/Stock.adobe.com

Share on FacebookTweet about this on TwitterShare on LinkedInPin on PinterestShare on RedditEmail this to someone

The Government has announced its €7.4bn July jobs stimulus package, which includes an extension of the Temporary Wage Subsidy Scheme.

The Government has revealed its long-awaited July stimulus package today (23 July), with plans to keep employers and employees afloat following the economic impact of Covid-19. Taoiseach Micheál Martin, TD, said that the package will be worth €7.4bn and will comprise 50 new measures.

From a consumer perspective, the most notable change is a 2pc reduction in the standard rate of VAT from 23pc to 21pc for the next six months. Also, in a bid to encourage more ‘staycations’, the Government will offer a tax rebate of €125 when people spend more than €625 in the tourism sector between October and next April on accommodation, restaurants and non-alcoholic drinks.

In terms of employment, Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar, TD, said the stimulus package will “protect existing jobs while creating new and sustainable employment options in the months and years ahead”.

“These measures will support small and medium businesses, give young people greater opportunities in training and education, support workers who have lost their jobs because of the pandemic and rejuvenate communities worst affected by the economic impact of the virus,” he said.

So what has changed and what will it mean for SMEs, start-ups and the hundreds of thousands receiving financial assistance from the State?

Temporary Wage Subsidy Scheme

Approximately 415,000 people are currently on the Covid-19 Temporary Wage Subsidy Scheme (TWSS), which was launched in March to allow employers keep staff on the payroll while a significant portion of their salary is paid for by the State. The scheme was set to expire on 31 August, but a new Employment Wage Support Scheme will now replace TWSS and will run until April 2021.

Employers that have seen turnover fall by at least 30pc will receive a flat-rate subsidy of up to €203 per week per employee, including seasonal staff and new employees. New firms operating in impacted sectors will also be eligible.

The new scheme is expected to support around 350,000 jobs into the beginning of 2021.

Pandemic Unemployment Payment

The Pandemic Unemployment Payment (PUP), which was also due to end in August, will now be extended until April 2021. Between now and April, there will be a gradual reduction in payment level, linked to previous incomes, bringing payments in line with existing social welfare levels over time.

The scheme will close to new claimants on 17 September and from 1 April 2021, remaining PUP claimants will need to apply for Jobseeker’s Allowance.

Those who earned more than €300 per week pre-pandemic will now be put on the highest PUP rate of €300 per week. Those who earned between €200 and €300 previously will see their weekly payment fall to €250.

Support Silicon Republic

There will be a €200m investment in training and education, skills development, work placement schemes, recruitment subsidies, and job search and assistance measures to help those who have lost jobs.

This includes making an extra 10,000 places available on a variety of back-to-work schemes for jobseekers unemployed for more than six months, and recruitment subsidies for up to 8,000 additional people. These will be introduced gradually as PUP is phased out.

There will be 12,500 additional places funded through the Training Support Grant for short-term skills training, and 35,000 additional places in further and higher education. A total of 3,000 additional places will be funded on State employment schemes, and the Apprenticeship Incentivisation Scheme will provide a €2,000 payment to support employers taking on new apprentices this year.

Business supports

A €250m Restart Grant has been included in a €450m business support package. SME grants will rise from a maximum of €4,000 to €25,000. The Government also confirmed that the threshold for the number of employees an eligible company can have will increase from 50 to 250, with a turnover of no more than €25m.

The waiver on commercial rates has been extended until the end of September at a cost of €600m. There was also the confirmation of a €2bn Covid-19 Credit Guarantee Scheme for a wide range of credit products from €10,000 to €1m, up to a maximum term of six years. This is in addition to plans to allow businesses to hold on to part of their PAYE and VAT payments without penalty for a period of time.

Furthermore, the Future Growth Loan Scheme is being expanded from €200m to €500m with the European Investment Bank Group, so businesses with up to 499 employees can invest for the longer-term at competitive rates.

Brexit remains on the cards, with a €20m fund created to help SMEs to prepare for new customs arrangements.

FDI and life sciences

In efforts to secure the economy’s future, €25m will be invested in Ireland’s lucrative life sciences sector along with additional supports for IDA Ireland promotional and marketing initiatives to target jobs. €10m will be provided under a new Green Enterprise Fund and there will be an increase in seed and venture capital for innovation-driven companies.

The July stimulus received the green light after the EU on Tuesday (21 July) agreed a €750bn Covid-19 recovery package to aid European economies hit by Covid-19. The decision was reached at a summit event lasting almost five days, despite initial opposition from the so-called frugal nations of the Netherlands, Austria, Sweden and Denmark.

The €750bn package proposes that the EU will pay out €390bn in grants and €360bn in loans to countries hit by the pandemic. Speaking earlier in the week, Martin described it as a “very substantial and significant” package of measures, which will go “a long way to reboot and re-engineer economic recovery” in the EU.

Updated, 6pm, 23 July 2020: A previous version of this article stated that Temporary Wage Subsidy Scheme (TWSS) payments will be reduced between now and next April. This was updated to clarify that this payment reduction relates to the Pandemic Unemployment Payment and not TWSS.

Colm Gorey is a senior journalist with Siliconrepublic.com

editorial@siliconrepublic.com