Central Bank asleep at the switch, NAMA critic tells Ennis business

ECONOMIST and NAMA critic Dr Anthony Leddin, has told an Ennis business meeting that bank lending fuelled the housing bubble and that it was more extreme here than in any other EU country.
The head of the Department of Economics at the University of Limerick said the dependence of the banks on foreign borrowing was greater than in other countries, with the exception of Iceland. He criticised the Central Bank for failing to exert its authority, stating it was “asleep at the switch”.

He claimed there is no guarantee that banks will lend to the domestic market after NAMA, as they could find more favourable investment opportunities overseas. He added that NAMA bonds could push the national debt to €180bn in 2010 up from €80bn in 2008. “This could lead to households saving more and spending less as they anticipate higher future taxes to repay the increased national debt,” he added.
Dr Leddin was addressing a seminar in Ennis on business survival organised by solicitors Cahir & Co. The seminar, Keys to Business Survival in Challenging Times, was held at the Temple Gate Hotel.
Brian McEnery of Business Advisers & Accountants Horwath Bastow Charleton said that businesses should be “slow to hire and quick to fire” in the current environment. “To survive, businesses should only retain good people,” he said. 
Mr McEnery, who is also president of the Association of Chartered Certified Accountants Ireland, said he didn’t believe the recession had yet bottomed out nor would the economy stabilise until late 2010 or early 2011.
He told the audience to think strategically. “Businesses need to take an accurate snapshot of where they are now and produce a business plan for the next 12 to  24 months. This will inevitably involve cutting costs. Don’t spend unless it’s really necessary, review costs again and again and don’t rule out significant downsizing,” he said.
Organiser Sharon Cahir said that the seminar idea was born as a result of the increase in employment law advice, restructuring and refinancing of business she had seen first hand in the offices of Cahir & Co. 
“The main problem owners and directors face is that the banks are not lending. The vetting criteria are making it almost impossible for businesses to get cash. The lack of liquidity has brought about a new set of challenges for business and dramatically cutting overheads is  now the order of the day,” said Ms Cahir, who is also president the Clare Law Association.
She said that as staff costs are the largest overhead in any business, the human casualties in the form of redundancies and layoffs is going to continue.
“I would urge businesses to review and implement policies and procedures to minimise the impact and cost on the business and the employees. The rise in claims before the Employment Appeals Tribunal and the Equality Authority year on year is unprecedented,” she added.
David Fitzsimons, chief executive of retail, said the economy is starved of cash with the net effect that inherently good businesses are on the brink of failure. “While sales volume erode, business costs such as rent, rates, wages and utilities are not decreasing,” he said.
Mr Fitzsimons said he expected that the second December Budget will have a negative effect on the Christmas spend He added that there were 151 retail insolvencies from January to August 2009. “It is expected that there will be 200 more by the end of 2010,” he said.
William Cahir, solicitor at Cahir & Co, said the strength of business relationships is tested in difficult economic times and the importance of completing partnership agreements and shareholder agreements couldn’t be stressed enough.
“The current climate will encourage a lot of joint ventures, businesses sharing skillsets and goals but it is important to define the terms in advance and commit them to writing. Lack of clarity is leading an increasing number of business entities to the steps of the court,” he said.
Mr Cahir encouraged business owners to be pro-active. “Don’t stick your head in the sand. New challenges are arising daily that businesses hadn’t to deal with before. Take advice in time. Sometimes a problem shared is a problem halved,” he added.