Thursday, August 29, 2013

29/8/2013: Credit to SMEs in Ireland: Q2 2013

Earlier today, I debunked the myth that we are experiencing any sort of significant uptick in private sector enterprise investment on the foot of poor credit supply figures for Irish private sector enterprise. You can read my analysis on this here: However, let us recall that the current Government came into the office rattling sabres on the high goals of setting banks straight on SMEs credit.

How are we doing on this front?

Here's a handy summary for Q2 2013 changes in credit outstanding to the SMEs (green bold marks sectors where there has been any improvement - either quarterly or annual):

Spotting any significant improvements in access to credit? Me neither.

What about longer trends? Here are the charts:

Total credit is down.

Manufacturing credit is up and off the bottom levels, but the overall levels are tiny, minuscule, irrelevant to the aggregate economy. Primary sectors credit is down over longer time range and flat since ca Q2 2011.

No love from the banks for property, construction, and now less love for financial intermediaries too.

No need to describe what's going on in wholesale, retail and hospitality sectors.

Education faring better, but at insignificant levels of activity to start with. Health is at the bottom of the empty swimming pool and not even flapping arms...

Even the 'white knights in shining armour' that are exports drivers and generators and the darlings of our development agencies: business services and ICT are starving of credit.

So run by me again: what are the banks doing to respond to the Government loud calls to do their bit for the economy, to support recovery etc? Oh, here's a table showing what happened in SME credit per sector since Q2 2011 (in bold red - sectors that saw decline in credit, in bold green - those where there was an increase in credit):

Truth be told, neither this nor any other Government can stop the deleveraging in the Irish private sector economy and this deleveraging will have more adverse impact on SMEs than on larger enterprises. But, truth be told, the Irish Government is not exactly keen on this truth and is insisting that it can 'unlock' credit flows... Two years in, we are still waiting...

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