Perceived shortage of choice across the water

Adam Tyler, CEO, at NACFB examines a lack of lending opportunities in Northern Ireland

I was recently at a broker event with 23 lenders. The host asked for a show of hands: “Who is lending right now in Northern Ireland? Actually, honestly, really lending?” No hands went up.

In context, that was a lighthearted moment, and a rueful acknowledgement that what people want to hear, and the truth, aren’t always close cousins. Of course there’s a serious issue here, because the host was a broker who has a presence in Northern Ireland organising leasing and asset finance, so they know first-hand the difficulties faced by small businesses there, primarily a severe shortage of choice.

I was writing about this absence of funding two, three, four years ago. There’s a lot that hasn’t changed in that time; for one thing, as a national association we do cross a few borders and one body of water that hasn’t dried up. The rate at which we’ve been melting the glaciers, that body of water is probably an inch wider, if anything. Assuming our brokers are a representative sample of where commercial finance demand is, what does that tell us? Just under 90% of our membership is based in England, with 3.5% in Scotland, 5.6% in Wales and 1% in Northern Ireland.

Now we know these figures are distorted by the presence of Birmingham, Manchester and London and so on, but even so, the truth is we have far more lenders willing to work with Cornwall that with Coleraine. The NACFB is very proud to work with 140 lenders, yet it’s a boast that sounds pretty hollow if you are trying to shop around for finance in Fivemiletown or Feeny.

Events

And from time to time we do rustle up some lenders who are active in Northern Ireland. We put on events in Belfast and hear how the Northern Irish economy has climbed back to 2009 levels, from a low point in quarter three of 2011. What we’ve noticed from official figures is that, although the Northern Irish economy peaked at more or less the same time as the rest of the UK (in this case, quarter two in 2007), the decline, the low point, and the subsequent growth, all show a delay of about two years compared to mainland Britain.

It may come as a surprise that the Republic of Ireland followed the expansion and contraction of the UK economy fairly
faithfully. Last year’s figures show 24% of small businesses believed they were still in recession, and only 3% considered themselves out of recession. This has implications for supply going forward, with one-fifth of small businesses believing the supply of finance from lenders is actually decreasing. It isn’t, but if you’re not going to the right people, it might feel that way.

In the light of that (mis)perception, you could forgive Northern Irish businesses for looking further afield for their financing, Belfast International Airport says that the pre-election shutdown announcement of a new £4m fund to support air route development in Northern Ireland over a three-year period is a “basis upon which to build”. Belfast International is a hub with regular links to Nice, Salzburg, Lyon, and Paris, even before the arrival of some imminent new Euro routes from Ryanair.

Our findSMEfinance site shows a pent-up demand for asset finance in the BT postcode area. This doesn’t come as a surprise, just a reminder that lenders who are prepared to cross the Irish Sea are liable to find both the water and the welcome are warmer than they look.