Posted on Wednesday 17 October 2012 by Ulster Business

Adrian Doran

Businesses and private individuals will hold off investing their cash until there is a clear sign the economy is going to improve.

That's the assessment of Barclays head of Corporate Banking Adrian Doran, who believes that the long hangover Northern Ireland has suffered following the property crash will only be cured if confidence can be restored to the market.

"There is no doubt the market is flat, there is not a lot happening. Deals that are happening are taking longer to complete and a lot more equity is needed. The frustrating thing is there are people out there who want to do deals but can't," he said.

"It's now five years since the financial crisis began. If you've managed to wade through and you're fortunate enough to be sitting on cash, you're going to be very careful about spending it. There are businesses that are in good shape, that have capacity to expand or make acquisitions, but they are being very careful."

Like many other business leaders Doran is an advocate of Northern Ireland getting the power to lower corporate tax. With low wage costs, low property costs and a stable political environment, the tax incentive would make Northern Ireland more attractive to the international companies that are still investing heavily in the Republic.

"I actually think lowering corporation tax remains one of the best potential policies to stimulate local growth. I don't see anything else that could possibly have the same impact. It could be the jump start the economy needs to boost confidence and would be as good for SMEs as it would for large corporates," he said.

"If it does fall away, that will jolt confidence even more, because the business community has been holding out for this for a couple of years."

It's well documented that the property overhang here is worse that most other regions of the UK, with many good trading businesses still struggling after dabbling in the property market.

Doran thinks that the local banks around Donegall Square are in the better position than they were a couple of years ago in terms of raising capital and have dealt with many of their biggest exposures. But he acknowledges that access to finance remains a problem.

"If you go to the banks they say there's no real demand for credit, and I would certainly concur with that. On the other hand if you talk to business groups you hear stories of people still struggling to get access to finance. The truth is probably somewhere in the middle," he said.

While the recent LIBOR scandal may have dented Barclays' corporate image somewhat, at a local level Barclays missed out on the worst of the property problems. Doran says it is not immune to muted demand, but does view the current conditions as an opportunity for growth.

"We're in expansion mode, we have the capacity to grow. But you can't get away from the fact that the market is very flat. That's the only thing constraining us," he said.

"There are a lot of people who are dis-satisfied with their bank and there will come a time when they will want to move, but are quite nervous about moving at the minute. We're not one of the big four, we don't have the capacity here to be all things to all people, so we have to choose where we want to be in the market. Our focus has always been on the larger end of the market and that's where it will continue to be."

At a macro-economic level the Barclays executive thinks there is more the Government in Northern Ireland could be doing to raise finance from underutilised assets.

"There are lots of ideas out there about what the government could do," he said.

"Some of the suggestions aren't rocket science, they've been done elsewhere. It doesn't need us to reinvent the wheel. You look at some of the assets like NI Water, the NI Housing Executive, Belfast Port, etc and there are lots of things that could be done. Not necessarily privatisation.

"One of the things which will become a bigger issue shortly is the next Comprehensive Spending Review. The last CSR was very much around the capital budget. The revenue budget wasn't greatly affected. In the next CSR we might not get off just as lightly and that might force the politicians to start taking some tough decisions or at least start on some brave projects. There are signs of them being more creative, because come the next election people will start to ask, what have you done?"


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