Wednesday 25 April 2018

Business wants a little more action and a little less talk on lending

SOMETIMES it can feel like there's a new report on SME lending out every week.

The European Commission report on the competitiveness of the 27 member states cannot be easily dismissed however.

The report, which concludes Ireland has the second worst conditions for SME lending in the EU, is the latest one from a disinterested party to lay out just how hard it is for a small firm to get a loan or overdraft.

It follows a Central Bank report which came to a similar conclusion. Crucially, the Commission's report measures just how far the environment for SMEs has collapsed in the last three years.

Lending conditions are now about two thirds worse than they were in 2009, according to the Commission. This gives the lie to the banks' claim that a lack of demand is the only reason why SME lending is down. Two years into the downturn in 2009, demand was already shrinking rapidly.

One thing that has happened in the three years since is that the banks have been desperately trying to shrink their balance sheet. Bank of Ireland, for example, is in the process of reducing its size by about a third from 2008.

That inevitably means handing out fewer loans. The SME debate has gone around in circles for years now, but what is becoming clear is that the sector needs action, not just talk. As the EU study suggests, implementing all the measures in the government's "action plan for jobs" would be a start.

Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business