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Tariffs

SMEs in Ireland Hold Back on Borrowing Despite Economic Improvement

Strategic Insights

— 2 min read

Small and medium-sized enterprises (SMEs) in Ireland have made significant debt repayments, with €5.4 billion in gross repayments in the 12 months to the end of June, the highest level since 2020. However, this increased repayment activity has not been accompanied by an increase in new lending, indicating a reluctance to invest in productivity and future growth. The outstanding stock of SME credit on banks' balance sheets stood at €17 billion at the end of June, the lowest amount since 2015, when the Central Bank began recording this data.

Key Takeaways:

  • SMEs in Ireland have paid down their debts to the lowest level in a decade, with €17 billion in outstanding stock as of June 2025.
  • Gross repayments for the 12 months to the end of June reached €5.4 billion, a 30% increase from the previous year and the highest level since 2020.
  • New lending has not yet recovered to pre-Covid levels, despite a 30% decrease in average interest rates in the 12 months to the end of June.
  • Diarmaid Sheridan, senior director of equity research at Davy, attributes the lack of borrowing among SMEs to economic uncertainty, particularly the potential impact of tariffs.
  • John McCarthy, chief economist of the Department of Finance, has warned that subdued investment is the "weak link in the chain" that could leave Ireland vulnerable to economic shocks.
  • The Economic and Social Research Institute has highlighted the decline in investment in machinery, equipment, and software since 2019 as a particular concern.
  • SME sources have identified various factors limiting a healthy flow of credit into the sector, including slow processing times for loan applications, risk aversion, and an environment of rising costs.
  • The banks also bear some responsibility, having prioritized growth in their mortgage books instead of small business lending.
  • One banking analyst expressed optimism that the outperformance of Ireland's economy could lead to a rebound in borrowing, particularly in light of the US-EU trade deal.

Statistics:

  • €17 billion: outstanding stock of SME credit on banks' balance sheets as of June 2025
  • €5.4 billion: gross repayments for the 12 months to the end of June 2025
  • 30%: increase in gross repayments from the previous year
  • 30%: decrease in average interest rates in the 12 months to the end of June 2025
  • 2020: the last time gross repayments reached €5.4 billion
  • €1 billion: the lowest outstanding stock of SME credit on banks' balance sheets since 2015
  • 10 years: the longest period since 2015 that SME credit has remained below €17 billion

Sources:

  • Central Bank of Ireland
  • Davy
  • Department of Finance
  • Economic and Social Research Institute
  • Goodbody
  • Irish Times
  • Reuters

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