Thursday 23 March 2017

Irish figures contradict ECB report on bank lending to small firms

Colm Kelpie

Colm Kelpie

Figures released by the European Central Bank, above, report a rise in borrowing costs for SMEs – while the Department of Finance reports a fall
Figures released by the European Central Bank, above, report a rise in borrowing costs for SMEs – while the Department of Finance reports a fall

A quarter of small and mediumsized businesses in Ireland reported an increase in borrowing costs in the six months to the end of March, according to a survey from the European Central Bank (ECB).

However, a separate study commissioned by the Department of Finance for the same period concluded that fewer loans were being approved with conditions attached, but the interest rates for approved credit fell.

The ECB study said that between October and March, the income and debt situation of Eurozone businesses improved slightly on balance, compared with the previous six months.

But developments across company size and countries remained considerably diverse.

Wide divergences remain across Eurozone countries concerning problems faced by SMEs.

Some 34pc of the SMEs in Greece, 15pc in Ireland and 15pc in the Netherlands named access to finance as the most important problem, compared to only 7pc in Germany and Austria.

However in Ireland and other countries, it is becoming less of an issue.

The largest percentages of SMEs reporting that they did not apply for a loan owing to sufficient internal funds were recorded in Germany, Ireland, the Netherlands and Austria.

The net percentage of SMEs reporting a decline in bank lending rates was most pronounced in Belgium, Slovakia, the Netherlands and Portugal.

But by contrast, 25pc of SMEs in Ireland, 20pc in Greece, and 1pc in Finland reported, on balance, an increase in bank lending rates.

Meanwhile, the RED C credit demand survey published by the Department of Finance found that 84pc of SMEs reported an increase or stabilisation in trading conditions.

It said SMEs remain caution in approaching new business growth opportunities, and prefer to re-invest their own funds rather than demand credit from the banks.

"At the same time, fewer loans are being approved with conditions attached and the interest rates for approved credit are also declining. Both of these factor should encourage more businesses to avail of credit facilities offered by the banks," the Red C survey found.

Finance Minister Michael Noonan launched a public consultation yesterday to gauge whether the State's tax policies do enough to boost entrepreneurship. The consultation runs until July 14.

Irish Independent

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