Business Irish

Friday 24 November 2017

Bleak Central Bank figures show 5pc fall in lending to small business

Peter Flanagan

Peter Flanagan

Lending by Irish banks to small business fell 5pc last year, despite lenders' repeated claims they are "open for business".

New statistics from the Central Bank paint a bleak picture of credit in the SME sector.

During 2012 the banks doled out credit worth €25.7bn to non-financial, non-property related small and medium enterprises. That was down 5pc year on year, and the rate of decline continued through the end of last year.

During the fourth quarter alone lending fell €431m compared to the same period in 2011, a slide of 1.6pc.

Overall, gross new lending to non-financial small firms topped €677m during the final three months of 2012 – the highest level since 2010. There was just over €59bn in credit outstanding in the non-financial SME sector at the end of last year.

In a sign of the long-term issues in the SME sector though, the majority of that €59bn is locked into the property related areas of construction and real estate. During the boom, many firms indulged in property plays which are now blighting businesses that are otherwise in healthy condition.

The banking lobby expressed dismay at the results and highlighted the fact that overall lending was now at its highest level in more than two years.

"The report appears to be a bit more negative than we expected, and we are flummoxed by that," said a spokesman for the Irish Banking Federation.

"The overall lending figure is the highest it's been in a number of years since 2010.

"The reason the overall stock is down is businesses are still repaying more than they're borrowing and the economic environment is still very challenging – that's the bottom line.

"There are positive signs and that has been seen with the new lending figure being up, and that has been bolstered by various business sentiment surveys which have been on the up in recent weeks. There remains, however, a lot of problems both in the SME sector and the wider economy," he added.

But the acting head of the Small Firms Association said the declines were indicative of the problems facing the sector.

"This reflects what is happening on the ground regarding SME lending. The banks are still repairing their balance sheets and while this is happening lending will suffer," said Avine McNally.

Meanwhile, AIB has been accused of hiking up fees on business current accounts by as much as 165pc.

According to the retail trade group RGDATA, AIB has informed many of its business customers that from June 1 the bank intends to scrap 17c and 25c transaction rates for lodging cash and charge a standard fee of 45c per €100 lodged.

This is a 165pc increase in fees for many RGDATA members who bank with AIB, the group claim.

"Our members are extremely angry at this news. It is incomprehensible that AIB is taking this action at a time when family owned shops are fighting for survival with turnover in 2012 down on 2011," said the group's director general Tara Buckley.

"Independent shops have taken every step to reduce their costs and manage their businesses more efficiently. Margins in the trade have been squeezed and many shops are barely breaking even."

AIB said the change came "following a review of negotiated fee arrangements on certain business current accounts".

Irish Independent

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