The cost of borrowing for lrish SMEs is more than two and a half times the euro area average, according to new interest rate data published by the Central Bank.

Small businesses in Ireland were paying an average interest rate of 5.03pc in August on borrowings up to €250,000. However, the equivalent euro area rate was just 1.90pc.

That gap is far wider than the much publicised difference between the cost of Irish mortgages and the cost of mortgages in most other euro area countries.

Irish mortgages are still among the most expensive, with the average interest rate at 2.83pc in August versus 1.35pc for the average in the euro area in August. That puts Ireland third out of 19 countries that use the euro.

The borrowing costs look especially rich when compared to the funding costs for banks – which are at near-zero for lending facilities at the European Central Bank – and the tiny amounts offered for cash deposits.

The average interest rate available to Irish households in August was just 0.02pc, while the euro average was only somewhat higher at just 0.23pc. Businesses are paying negative rates on deposits, with the average rate on offer to an Irish SME at -0.16pc. That means an Irish business is paying 16c per annum on every €100 it keeps on deposit.

Corporate loans of more than €1m – which made up 76pc of Irish business loans in Ireland – were comparatively far cheaper than typical small business loans, with an average interest rate of 2.39pc. The average corporate loan in the euro area was even cheaper, however, at 1.27pc.

Irish Independent, 7th October 2020