SME Banking (Industrial Report) - Ireland - April 2009
Small to medium-sized enterprises play a key role in the economies of both NI and RoI; representing over 99% of businesses in NI and 97% in ROI.
Following a period in which both economies enjoyed significant growth, the RoI economy entered its first recession in more than two decades in 2008. The global credit crunch that began in 2007, following the American sub-prime mortgage fiasco, has resulted in banks significantly tightening lending and bringing an end to the era of abundant credit. This has created severe difficulties for SMEs, many of whom are reliant on credit from their financial services provider for the day-to-day running of business.
The Irish banking system is facing a crisis of liquidity and confidence which has created an extremely difficult lending environment.
While access to credit has tightened significantly, the recession creates an increased necessity for finance than existed previously as businesses struggle with the effects of decreased demand, particularly for SMEs which are unlikely to have the same financial leverage of larger businesses.
To what extent will the recapitalisation of Irish banks and the UK Enterprise Finance Guarantee Scheme help SMEs to access finance?
While there have been some measures taken to increase competition in business banking, charges in NI remain disproportionately high.
Company liquidations in RoI increased by 104% during 2008. This will make accessing finance particularly difficult in sectors which have seen high levels of insolvency such as the construction and hospitality sectors.
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