Economy may take years to recover from ‘havoc’ of Covid-19

Some sectors of the Irish economy could take years to emerge from the “havoc” and “prolonged disruption” inflicted by coronavirus, according to documents published by Department of Business, Enterprise and Innovation.

The "Focus on Sectors 2020" reports, which provide "initial indications" of the impact of the pandemic on 16 sectors of the economy, were launched today by Minister for Further and Higher Education, Research, Innovation and Science Simon Harris alongside Damien English, who is Minister of State for Business, Employment and Retail.

“The full extent of the impact of the pandemic on global and national economies continues to unfold and it is still too early to fully assess the medium- to long-term implications,” Mr Harris said.

The Minister said the Government would “continue to help businesses grow and become sustainable in this Covid world”, with supports targeted at the most heavily impacted sectors and businesses.

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Mr English described the impact of the virus on the economy as “severe” and said some sectors had been disproportionately affected.

“Tourism and hospitality sectors, aviation, and elements of the audiovisual sector remain in serious difficulty,” he said.

Retail

The “intensely competitive” retail sector, which employs more than 300,000 people, is suffering from reduced capacity and declines in efficiency as a result of social distancing requirements, according to the department’s analysis.

The impact of prolonged public health restrictions on independent and small-scale retailers carries “the risk of accelerated urban dereliction and vacancy”, it warns, adding that the sector’s recovery will be “sluggish”. Irish brands aimed at international visitors “could take three to four years to recover”.

Some retailers have incurred “significant” costs to meet public health restrictions and ensure staff and customers are safe, while there is also a need for ecommerce upskilling to reflect changing consumer habits.

“Fixed costs, such as commercial rates, commercial rents, insurance and other costs, continued to accumulate during coronavirus-related closures without corresponding revenues,” the department acknowledged.

Tourism

Tourism revenue is projected to fall by €5 billion this year due to the coronavirus crisis, with employment down between 190,000 and 200,000.

The Government’s report into tourism and the hospitality sector says there is little likelihood of a quick return in international tourism.

A worst-case scenario of no overseas visitors for the remainder of the year, in addition to a 20 per cent decline in domestic tourism, could lead to an overall loss to the economy of €2.3 billion, it said.

The study says that 75 per cent of the sector is “deeply dependent” on overseas visitors with only a proportion of this expected to be offset by a rise in domestic tourism.

It also notes that 87 per cent of employees in the sector were receiving coronavirus payments by mid-June.

Agrifood

The report into agrifood and beverages notes that coronavirus restrictions have had a limited impact on farm production. However, a total reduction in income across primary agriculture is projected of anywhere between €700 million to €1.6 billion.

Beef farming is projected to be the worst hit, although the report says the reduction in incomes is likely to hit dairy farms hardest. Prior to the pandemic, Irish dairy processors exported 92 per cent of all produce.

Seafood has also been significantly impacted due to the loss of export markets and a collapse in sales to restaurants.

Much of the agrifood sector has remained open and functioning during the pandemic but many businesses are reliant on the temporary wage subsidy scheme for survival, the report added.

Construction

Almost two in three building workers continued to rely on the State for their earnings weeks after construction restarted following the lockdown, the construction report stated.

More than 150 private building sites shut during the lockdown. That hit work on 23,800 homes, including 6,500 social houses.

At the restrictions’ peak, 86 per cent of construction workers depended on either the Pandemic Unemployment Payment or the Temporary Wage Support Scheme for a living.

Construction restarted in late May, but by mid-June, 59 per cent continued to receive a payment.

Coronavirus will leave house building trailing demand. The report notes that estimates of the number of dwellings likely to be completed in the Republic this year range from 13,800 to 15,000. Demand could be as high as 35,000 a year.

The report predicts house prices could fall by 5 per cent this year, but rebound by 3.5 per cent in 2021.

Aviation

Prolonged disruption of air travel could threaten the Republic’s ability to lure the multi-national investors key to creating jobs here, the report on aviation concedes.

The document confirms that Irish aviation was among the hardest hit in Europe by coronavirus travel bans, with traffic tumbling 83 per cent in May.

Prolonged disruption of the Republic’s air links with the rest of the world “could also threaten our competitiveness in the foreign direct investment sector,” the report warns.

Multinational investors employ almost 250,000 workers in the Republic. A further 150,000 jobs depend on these businesses indirectly.

Its admission of the threat to investment follows warnings from airlines, airports and other aviation industry players, that current travel restrictions could inflict long-term damage on the Republic’s links to the rest of the world.

The report calculates that before the virus, aviation supported 140,000 jobs, in airlines, airports, aircraft leasing, maintenance, and businesses serving these activities, but airports and airlines are preparing to cut workforces by 25 per cent.

Audiovisual

The arts and culture sector is “likely to be amongst the last to recover” when the coronavirus crisis is over, the document on the audiovisual industries notes, while attempts to resume film and television production will be complicated by social distancing requirements, an eventual bottleneck in demand for crew and services, plus the inability to secure vital insurance.

Screen Producers Ireland has highlighted the "insurmountable financial distress" its independent production company members would suffer by further pandemic disruption. The lack of insurance cover is stymieing a return to filming.