BUSINESS OPINION:Exporters say 91,000 jobs will be lost in the sector due to a lack of significant support from the Government, writes JOHN McMANUS

IT’S MORE than a bit worrying that, having pumped €7 billion into AIB and Bank of Ireland as of last Wednesday “to get credit flowing”, there is no coherent Government policy for turning the fresh capital into actual lending to companies that need it and deserve it.

It’s not a case of simply getting the banks to lend more money. In fact, our problem has been that the banks have being lending too much.

And it makes no sense for the banks to now be expected to keep on pumping money into companies, sectors and individuals who, either through their own misjudgment or bad fortune, are now no longer economically viable.

It is not going to save either these businesses or individuals if the banks keep on lending them money. Such a course would also make the bank’s problems worse as they try to get their balance sheets back in order.

So if getting credit flowing is not all that, then what is it?

The first and, one would have thought obvious, thing for the Government to do is get the banks to admit there is a problem – not something they seem very good at doing.

Last week saw a survey from small business lobby group Isme, which followed on from a similar exercise by the Institute of Chartered Accountants the previous week.

The Isme survey found that three out of five loan applications from small businesses are being rejected.

Isme does not give too much detail about what sort of sectors these companies are in, but we can presume they are not all in areas such as construction.

“Contrary to public statements issued by the banks, there is clear evidence that they are making it as difficult as possible for business customers to access badly needed credit, with serious ramifications for those concerned,” according to Isme chief executive Mark Fielding.

The banks’ response, via the Irish Banking Federation, was to say that they are in fact lending, and that they will shortly have a survey of their own to prove it.

“In no way should people come away with the impression that banks are not there to lend,” responded Felix O’Regan, the IBF spokesman.

You really don’t want to think about how many businesses will close for lack of funds while Isme and the IBF compare the size of their surveys.

It’s time for the Government to bang heads together. Instead, the Minister for Enterprise, Trade and Employment announced last week that she is “proceeding immediately with the setting up of a Clearing Group to assess patterns of lending where the flow of credit to viable projects appears to be blocked, and to seek to identify credit supply solutions”.

Once again, activity takes the place of action. Rather than wait for yet another report before trying to come up with a response, the Minister might be better off reading the ESRI's latest missive, Recovery Scenarios for Ireland, also published last week.

A couple of points jump out. The first is that any recovery will probably be export-led, and there is now a fighting chance that the international economic revival which will enable this could start to gain momentum in 2011.

It would seem logical that the correct policy response is to try to keep as many export businesses alive as possible until this point. Credit has a pivotal role in this, as without it many viable indigenous exporting companies will, without a doubt, close between now and 2011.

The other point that leaps out from the ESRI report is that anything that is done at this stage to prevent people falling out of the workforce entirely and entering the ranks of the long-term unemployed will pay massive dividends in years to come.

Again, it’s clear that provision of credit to companies has a role in this, and could be linked to employment retention initiatives.

The Irish Exporters Association pointed out last week that some 91,000 jobs will be lost in the export sector because of a lack of any significant support from the Government.

The exporters also claim that any approach made to the Minister for help is met with the response that “there’s no money”, because what money there is has been earmarked for recapitalising the banks.

The fuller response might be: “There’s no money, and not much thinking going on either.”