The Economic Advisory Group today published its detailed analysis into the issues affecting Northern Irelands SME businesses accessing finance in the current economic climate.

The Group presented its report and recommendations for action to the Enterprise Minister Arlene Foster. The EAG Chair Kate Barker stated, “The Group was asked by Minister Foster to examine the issues impacting SME businesses accessing finance in Northern Ireland.”

“We have delivered a detailed report, containing 13 recommendations to be implemented by banks, business and government. We believe, if implemented appropriately, these will improve the finance environment for SME businesses now and when firms start to plan for an economic upturn.”

“Our analysis is informed by a detailed survey of small and mediumsized enterprises; extensive stakeholder engagement with banks, businesses and government; and builds upon the significant work that has been conducted in this area by others.”

Ms Barker continued, “There is clearly a significant degree of frustration within the local business community over what is perceived by many businesses to be an unwillingness of banks to lend, or to lend at reasonable rates. However, the EAG research shows that the market for finance is complex and that issues exist on both the demand and supply side.”

The EAG research shows that this is a challenging time for Northern Ireland businesses. The combined impact of declining domestic demand, increasing input costs, and cost of servicing existing debt is putting considerable strain on SMEs. The majority state that they are in either ‘survival’ or ‘stabilising’ mode and this influences their appetite for further debt and/or the types of financial products they seek.

The Group’s research also shows that in 2012 demand for bank loan finance in NI was relatively low at 8% of SMEs. This is similar to levels of demand reported in both the UK and RoI, reflecting economic conditions. The success rate of bank loan applications was 66%, again broadly in line the most recent survey results in the UK and RoI. While the Group reports that data on the supply of bank finance is more difficult to produce, there is strong evidence that the level of lending is significantly reduced.

Ms Barker stated, “Clearly both businesses and banks are having to adapt to a new lending environment and this is causing significant challenges locally and nationally. However, more can be done to improve the situation and our recommendations are focussed on achieving this aim.”

Highlighting the direction of some of the Group’s recommendations Ms Barker added, “Government initiatives in place at a national level are not working as effectively as they should be in Northern Ireland; the level of expertise in banks does not seem sufficient to deal with the wide range of businesses in Northern Ireland; more should be done to communicate to business the options they have to appeal the lending decisions of banks; and of course the issue of sound trading businesses with debilitating property debt needs to be explored more fully in order to move towards an effective solution. Importantly, the EAG recommends the creation of an independent panel, to ensure implementation of the recommendations in our report.”

The EAG’s access to finance report is due to be discussed by the Executive Sub-Committee on the Economy, chaired by Enterprise Minister Arlene Foster, on Tuesday 19th March 2013.