Banks’ bad press has scared off Irish firms
Only one in six firms in Ireland have applied for credit from their banks in the past six months, according to research into firms north and south.
Cross border body InterTrade Ireland said the barrage of negative publicity about the availability of bank finance had contributed to the low demand for credit among companies.
Their business monitor survey, which focused on bank finance, showed businesses were applying |for loans and overdrafts in falling numbers.
Just 16% of 1,000 companies in Ireland who were surveyed by InterTrade Ireland had sought new credit in the past six months. In Northern Ireland, just over 12% had asked for credit, compared to 18% in the Republic.
But of those who had applied for credit, nearly three quarters were successful, according to InterTrade Ireland. Its findings come at the close of a year in which banks’ lending practices in Northern Ireland have come under close scrutiny.
In June, church leaders in Northern Ireland formed an unprecedented coalition to accuse banks of “holding back recovery and putting businesses and their employees at risk” by not lending to businesses.
At an Assembly hearing in September, Rev Donald Kerr of the Methodist Church claimed clergy had heard first hand of cases where restrictive lending practices had driven business owners to suicide.
“The claim that someone has taken their own life in part because of the way in which they were treated by the banks we recognise is a very large claim, and we do not recount it lightly,” he said.
Nearly two thirds of the businesses questioned north and south said they felt the terms of bank credit would be unattractive, and just half thought applications for loans or overdrafts would be successful.
Aidan Gough, director of strategy and policy in InterTradeIreland said: “There is evidence of a decline in both demand and supply. Problems in the wider economy have reduced business confidence and hit investment decisions. In addition, the need for some banks to restore balance sheets is likely to increase the dangers of higher risk premia for business customers.
“The banks, like the economy, are not a homogenous grouping and some have been more active than others in lending activity. Given this, we would encourage businesses to shop around, particularly if they believe that terms are unattractive.”
Overall, InterTrade Ireland’s survey suggests big manufacturing and exporting companies are doing better than small firms which are not in the export market.
In a directors report last month Northern Ireland property company PBN claimed its banks were ‘in disarray’ leading it to shelve most of its plans.
However a spokesman for Northern Bank said it had the capital to lend: “While demand for borrowing remains subdued, we are still lending and have been actively seeking to develop new to bank relationships with strong trading businesses.
“We have maintained strong credit approval rates of well over 90% and about half of all lending has been new business.”