The Covid-19 health crisis will dwarf the 2008 recession
PJ LYNCH PAINTS A GRIM PICTURE OF THE POST-CORONA VIRUS BUSINESS CRISIS THAT IRELAND IS HEADING INTO
An eerie feeling is widely evident, where people are gripped by fear as economic activity slowly grinds to a halt. Twelve years have passed since the onset of the last recession, when people realised that their lives would be changed dramatically.
Now, people are realising that not only do we have a health crisis, which in itself is significant, but the financial effects of the pandemic will destroy their businesses together with their personal prosperity.
Unlike the 2008 crash, the pending financial hit caused by the Covid-19 health crisis will dwarf the 2008 recession and could leave our society permanently damaged for many years to come.
One could compare the Covid-19 pandemic to the Tuberculosis (TB) epidemic that became widespread in Ireland in the late 1940s and early 1950s, as it too created a silent fear together with an era of many uncertainties.
The Irish economy at that time was much weaker than it is today. However, the TB outbreak made a then weak economy even weaker still, with a virtually non-existent social welfare net.
This resulted in many people with active TB knowingly trying to hide the symptoms in order to sustain their income and avoid poverty. Consequently, thousands of people died due to lack of control in tackling community transmission.
We are heading into a scary and uncertain future, as companies lurch more and more into insolvency — of which some will be unable to trade out of. I recently spoke with the proprietors of two cafes who explained that they had closed and would probably never reopen again.
Moreover, unlike the 2008 recession, the Covid-19 pandemic’s effects will be widespread and sustained. Among these effects:
- It will send massive shockwaves throughout our economy, as unemployment already exceeds the 500,000 mark, which is way ahead of the 2008 crisis;
- It will cause a very severe drop in economic activity, resulting in cashflow difficulties and many businesses becoming insolvent, especially in catering, travel and tourism;
- People unable to go to work because of lockdown and/or out of fear will result in a breakdown of value chains in the retail sector. This will create a major blow to high street shopping but will increase the online platform.
- The effect on the global economy will have a knock-on effect in Ireland, where growth is already getting weaker by the day.
From my own perspective, the recession we are about to head into will obviously have an impact on my client base.
However, I am the eternal optimist and I will survive. As I often say, when recession hits, my practice does extremely well and when recession rescinds my practice does okay.
By introducing the Covid-19 subsidy scheme, the Revenue Commissioners have thrown a lifeline to companies and sole traders alike, which will help them greatly while the ongoing crisis continues.
In addition, Revenue is prepared to consider a period of forbearance as regards payments once the returns are kept up to date under all relevant tax heads. The fast action of the Revenue Commissioners is to be commended.
Finally, in my opinion, as we emerge from the current crisis, even though the price pressure will be extremely high, we will be more united. As they say in a time of recession, the requirement is for cooperation, not isolation.
PJ Lynch Company
• PJ Lynch, a licensed Insolvency Practitioner, is principal at PJ Lynch & Company at Westland Square in Dublin 2.
Tel (01) 707 9662 or email email@example.com
More News Articles
Involuntary Strike-Offs Can Have Consequences26FEBRUARY, 2020THERE CAN BE SERIOUS CONSEQUENCES FOR ALLOWING THE CRO TO STRIKE-OFF YOUR COMPANY, SAYS PJ LYNCH OF PJ LYNCH & CO.These days as you thumb through the newspapers and when you eventually come to the legal...
New Register of Beneficial Owners of companies19FEBRUARY, 2018Company directors and shareholders should be aware that an additional responsibility is about to be placed on their shoulders as the Companies Registration Office is set to launch a Register of people with...
TALKING TAX MATTERS10NOVEMBER, 2016Rent-A-Room-ReliefIf an individual rents a room in his/her Private Dwelling House (PDH) and the gross income including monies for food, laundry or similar goods and services etc. , does not exceed €14,000, then this income will be...
THE WHY AND THE WHAT OF LIQUIDATION 01 NOVEMBER, 2016 In our ever growing economy why is it that there are still companies being wound up and going into liquidation…? There are many reasons which are summarized below: Members’ Voluntary Winding Up If a company has no...
WINDING UP EXPLAINED31OCTOBER, 2016PJ LYNCH of PJ Lynch & Co explains what’s involved when directors decide to terminate their business venture. Published in Business Plus Magazine March 2015There are many reasons why companies are wound up and go into...
ADVISE FOR COMPANY DIRECTORS31OCTOBER, 2016Advice For Company Directors:Published in The Phoenix November 2013Advice For Company Directors: PJ Lynch is a man that doesn’t take his responsibilities lightly as an insolvency practitioner and taxation consultant , but he...