The Government recently published its Economic Recovery Plan 2021 (the ERP). It sets out a new phase of supports, investment and policies for economic recovery and renewal.
The four pillars of the plan are
Ensure public finances are sustainable
Help people back into work by extending supports
Rebuilding sustainable enterprises through targeted supports, and
A balanced and inclusive recovery through strategic investment in infrastructure and reform
Recurring themes and focus of the plan are on the dual areas of decarbonisation and digitalization transition and transformation which have the potential to significantly alter the future of our economy.
The plan outlines extensive areas of support across the economy and emphasizes the drive to increase competitiveness. Ireland is a small open economy. As such, the need to continually improve competitive performance remains a priority. Ireland was in the top 20% globally for competitiveness in 2020 Competitiveness Scorecard.
There are a number of areas identified in the plan to improve competitiveness which resonate with the business and legal communities. We look at some of the measures announced in the plan under Pillar 3 in the context of the drive towards improved competitiveness:
1) Insurance and legal costs
The ERP expresses the Governments concern about the slow pace of reform on some critical business costs, including in area of insurance and legal costs. The Government is now determined to reduce insurance costs and improve availability of cover. An Action Plan for Insurance Reform has been published which will drive insurance reform in three broad areas over the next 18 months:
(i) Tackling cost concerns and increasing transparency
(ii) Legal reform, and
(iii) Personal Injuries Assessment Board (PIAB) reform and increasing competition
The plan also contains an announcement that the Government will prioritise the recommendations contained in the report from the Review Group on the Administration of Civil Justice which issued in October 2020, to improve access to civil justice, promote early resolution of disputes, reduce the costs of litigation and create a more responsive and proportionate system to ensure better outcomes for court users. This announcement will be welcomed by the majority of legal practitioners.
2) SME access to finance
The ERP builds on Government progress in recent years in making affordable unsecured financing available to SMEs by enhancing the availability and diversity of finance for business, including via the Strategic Banking Corporation of Ireland, Venture Capital and Angel Funding.
Increasing the range of financing options outside the traditional banking system is beneficial to the economy in terms of access, competition, optionality and rates. There is a €2 billion COVID-19 Credit Guarantee Scheme currently available through commercial banks and a number of non-bank lenders and credit unions. This long-term policy goal of diversification is aimed at increasing competition to the market and allowing greater diversity and range of loan products and funding sources to SMEs.
3) Restructuring and SME viability
Improvements are also proposed to the examinership process which facilitates restructuring of creditor arrangements to enable companies to continue in business. The improvements are expected to reduce the cost and timeframe of restructuring and rescue for small companies, by setting up a dedicated new standalone process for small companies – the Small Companies Administrative Rescue Process (SCARP).
The process is expected to provide further options for viable small companies facing difficulties as the economy re-opens. This will be done through a range of measures including mirroring some elements of examinership in an administrative context, with proposed reduction in court oversight to create greater level of efficiency and lower comparable costs associated with insolvency practitioners and the process. The plan mentions the urgency of this issue and that work has proceeded at pace to develop proposals.
The Government will proceed with legislation for SCARP as quickly as possible with a view to enactment before the summer recess of this year.
The Government announcements are welcomed in areas of insurance, legal and restructuring procedure. We will continue to monitor their development particularly in view of the imminent timeline proposed for reform.
The ERP sets out new priorities and focus areas for the future. To enable the plan to succeed, it will be necessary for business to embrace digitalization and decarbonisation agenda by accessing the supports announced in a timely and efficient manner. Businesses should also embrace measures designed to improved inclusivity across our community. It is incumbent on all businesses to continue the drive in efficiency, innovation and change as we navigate into a post-pandemic economy.
The content of this article is provided for information purposes only and does not constitute legal or other advice.