Research from Trinity College outlines cost of not supporting firms in danger of closure

April 07, 2020

Ibec, the group that represents Irish business, has said that the failure to safeguard vulnerable firms at risk of closure from the ongoing COVID-19 crisis only stands to deepen the long-term economic challenges the country faces. 

Research undertaken by Professor Andrew Burke, Dean of Trinity Business School, and peers last year highlighted the long-lasting detrimental impacts that a shock that causes the permanent exit of a firm from a market can have on the long-term performance of that industry. 

Professor Burke detailed: “Our research in disaster management shows that if a firm formally exits a market, as opposed to a temporary closure of its door to business, this causes a long-term permanent decrease in the number of firms and industry profits. From this, it will take 5 years to get back to approximately 80% of industry performance.  We can see that an exit bears significant and lasting economic and social costs and therefore any measure to prevent widespread closures of businesses in the midst of a crisis ought to factor in the enormous cost of not supporting firms in danger of closure.” 

Ibec CEO Danny McCoy said: “Without the implementation of support measures for vulnerable businesses, the road to recovery from the crisis will be longer and more expensive. While the Wage Subsidy Scheme is a welcome and a critical component to ensure the sustainability of our business model during the crisis, our reboot and recovery phase requires more.   

“Last week Ibec called for a new programme of guarantees, loans, and other supports that would help ensure €26.4 billion of liquidity to the economy, at a net Exchequer cost of €3.9 billion.  Although these are significant sums, there are no cheap alternatives.”