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Lending to small firms healthier than politicians claim

By Richard Houliston

Published 19/05/2015

Richard Houliston
Richard Houliston

The Northern Ireland Affairs Committee recently published the Northern Ireland: Banking On Recovery report. Unfortunately the main emphasis was on the negative aspects raised. While there are some issues that lenders need to address, with closer scrutiny there are some potentially positive messages too. 

Lending volumes to SMEs in Northern Ireland

It's interesting to look at the lending volumes of the Northern Irish banks. A key criticism raised by ministers was the apparent lack of credit being made available by Northern Irish banks for SME businesses in Northern Ireland.

The ministers acknowledged that recent statistics indicated a "slight improvement in borrowing by SMEs during 2014" but went on to say: "We believe the more conservative lending criteria dissuaded many businesses from pursuing opportunities that would require bank funding."

The "slight" increase in lending levels is a reference to recent lending information published by the British Banking Association (BBA) in respect of bank lending to Northern Irish SMEs. But as is often the case, the devil is in the detail and closer inspection of lending volumes over a longer period can establish some patterns.

The actual numbers

If the aggregate lending information from the BBA for Q3 and Q4 in 2013 of £714m can be compared to the same quarters in 2014 of £794m, it's clear there has been an increase of £80m of lending to Northern Irish SMEs over the period. Indeed, looking at lending information from the BBA in Q4s going back to 2012, we are presented with the following:

Q4 2014: £387m

Q4 2013: £360m

Q4 2012: £225m 

So comparing lending volumes in Q4 2012 and Q4 2014, shows a lending increase by Northern Irish banks of £162m (a 72% increase). This is not a "slight improvement", but a marked improvement - although the 2012 figures are undoubtedly coming off a low base.

Across the water

It can be difficult to get a handle on the volume of lending activity unless Northern Ireland is compared with other countries or regional UK centres. 

The BBA also releases SME lending data for England, Wales and Scotland.

The most recent lending information from the BBA across the water shows that for borrowing facilities approved, Northern Ireland is slightly ahead of Wales, the North East and on a par with the East Midlands. This is despite Wales, the North East and the East Midlands each having a substantially larger population size than Northern Ireland. 

It is arguable, based on actual lending volumes, that Northern Irish banks provide a higher and growing lending volume to SME businesses than other larger geographical regions in the UK. 

The Pendulum

Tory Tewkesbury MP Laurence Robertson chairs the committee and commented in the context of the apparent retrenching of lending levels that "the pendulum appears to have swung too far back in the opposite direction". Based on the official BBA lending data it is likely that a little bit of political hot air is pushing that pendulum along.


It's important that reports such as this are produced to hold the banks accountable for a lack of activity but it is also important that the report remains a fair reflection of the activity taking place across the reviewed time period.

Based on leading information from the BBA, it doesn't.

If you look at Northern Ireland lending volumes going back to 2011 and 2012 there has been an overall marked increase in bank lending to SMEs in Northern Ireland. That is great for the economy and a good news story lost in the numbers.

Richard Houliston is a partner specialising in finance at TLT Solicitors, Belfast office.

Belfast Telegraph

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