The reluctant revolutionaries
Business failure in a small town affects more than just lifestyle: it reaches into every crevice of life. Citizens in Athy, Co Kildare, have had their fill of recession and have enlisted outside help to get their town back on track, writes KATHY SHERIDAN
FORTY-FIVE MIDDLE-AGED men file into a function room, silent, awkward and watchful under the Christmas-garlanded ceiling of an Athy hotel. As they settle into the little red and gold chairs the room seems to darken with tension. That they have turned up at all is an admission that they can’t go it alone any more. This is no small psychological journey in a small rural town. They include publicans, auctioneers, car dealers, shop owners, farmers, a solicitor, a jeweller, a kitchen manufacturer, a window manufacturer, a quantity surveyor, a grounds-maintenance contractor, a developer and a creche owner.
Also at the meeting are the three founders of New Beginning, a movement set up a year ago primarily to provide legal advice to people at risk of losing their homes.
“It was almost like an AA meeting,” Vivien Cummins, a local architect, remarked afterwards. “You felt that sense of inertia, that absolute feeling of hopelessness.”
Not all are in debt hell. Cummins, for example, says he has no personal debt – but he has no work either. “No job too big or too small,” he says wryly. One of his two architectural technicians has retrained as a care assistant; the other is bound for Australia.
Like New Beginning, he is here because he believes the only way forward is through restoring confidence in this hollow-eyed attendance.
A business failure in a small town means more than a drop in lifestyle. These are people who grew up together, celebrated milestones together and did business together. Now some are reduced to suing old friends for unpaid bills or uncompleted transactions. The squeeze has a domino effect, reaching into every crevice of town life. In a tight-knit society where paths cross many times a week – on the street, at the school gate, at children’s training at the local rugby club – the power of debt to isolate and destroy men, women (of whom there are just five at the meeting), families and communities is felt at its most profound. Among the stories are references to regular dead-of-night calls to the presbytery for groceries.
At the meeting, senior counsel Ross Maguire, a co-founder of New Beginning, toys with the word “petrified”. He tells the audience that the Greek word for stone is “petros”, hence “petrified”, meaning paralysed by fear. It’s the only explanation he can think of for people’s timidity in the face of the banks. “Are we afraid or are we being overly cautious?” he asks. “My belief is that we are afraid.”
When we talked a week earlier, he had no idea what to expect from the Athy meeting. It’s a first for New Beginning. Since he founded the organisation a year ago with the barrister Vincent P Martin and the businessman David Hall, the focus has been on providing free legal representation to families whose homes are at risk. Victories have been won, judgments stayed and troubles shared. “But the law,” he says, “will always swing back towards the banks. The inexorable move will be against the borrowers.”
Time and again, the trio witness the human fallout of debt and pressure. “That’s what happens when banks are placed first and businesses second. Small and medium businesses are being starved of what they need to grow. But recovery can happen only if they’re allowed to grow,” says Maguire.
This week, a survey by the Irish Small and Medium Enterprises association (Isme) revealed that more than half of the Irish SMEs that applied for bank funding in the past three months were refused. More than a third saw their bank charges increase, and nearly a quarter faced higher interest rates. The findings concurred with an ECB survey on access to finance in the euro area, which found that SMEs in Ireland were second only to those in Greece at being refused bank loans.
The banks claim otherwise. But a common feeling among the people attending the Athy meeting is the suspicion that figures are being massaged. “They’ll claim, for example, that 200 loans were approved, but what I’m hearing is that they’re just converting overdrafts into term loans and calling them loans,” says Adrian Conlan, one of the Athy businessmen who invited New Beginning to the town.
The nub of the issue now is banks’ insistence on dealing with borrowers on a case-by-case basis, says Maguire. “The banks don’t want overall solutions. When the Taoiseach, the Tánaiste, the [Minister for Finance and the Minister for Public Expenditure and Reform] brought the banks in to talk about rate cuts, the fellows who had been bailed out by the taxpayer just said no. Just. No. [AIB relented shortly afterwards.] That shows the power the banks have. And from what we’re hearing, they’re getting more and more aggressive. They’re out to deleverage, to get back what they so recklessly lent . . . So their attitude to us is: you guys go away and mind your own business, we’ll deal with the borrower in the privacy of our offices . . . That’s where the battle line is now being drawn.”
And so the invitation to New Beginning from Conlan, a shop owner and oil distributor, and PJ Lalor, a builder, to speak at a public meeting suggested a logical next step: from law to a popular movement.
THE PAST YEAR has taught New Beginning that fear, pride and shame have a stultifying effect, says Hall. In Ireland, merely showing up at such a public meeting implies an admission of distress. “When we set up New Beginning, we considered hiring a big room and calling a meeting – and then we realised that no one would turn up,” says Maguire. “But we get a sense that all that is changing now . . . If you’ve got numbers, you’ve got strength.”
Isn’t that rather radical for a pinstriped senior denizen of the Law Library? “Well, yes, it is a bit of a movement. It is a standing-up . . . You could say it’s about a rebalancing. Just as there was a rebalancing of the relationship between workers and employers at the beginning of the 20th century, which led to workers being unionised, we are looking for a rebalancing of the relationship now between the lenders and the borrowers.”
In Athy on an icy Thursday night, there are already signs of a gathering confidence. In the planning stages, Conlan and Lalor had thought of arranging the event while remaining vaguely anonymous. But tonight they are emboldened to step up, Conlan to take the chair and Lalor to circulate the microphone.
“We are not looking to turn this into a bank-bashing exercise,” Conlan tells the audience. “We want to learn from each other.”
He tells his own, familiar story: how he borrowed €2 million to build a new shop – being careful to add that “none of it was spent on foreign properties or holiday apartments in Rosslare” – and how turnover dropped by 40 per cent as the economy crashed, leaving his 23 employees depending on him “to make the right decisions”.
The meeting is a slow burner. George Mordaunt, a car dealer and author of a book about his €17 million bust, draws some empathetic nods when he talks about his own “greed”, “stupidity” and descent into dysfunctionality and inertia. He loses many, however, when he embarks on a paean of praise for his “hugely proactive” bank. “Engage. Engage,” he urges, as though nobody at the meeting has tried to offload property or to be proactive, while dropping repeated plugs for his book, his website and the negotiating powers of some unnamed men who have accompanied him.
His exultant message of renewed energy and optimism, though valuable, might be too much too soon for this audience. It’s a fair bet that few of them have amassed debts of that magnitude or encountered a “hugely proactive” bank, except in the negative sense. “Seventeen mill? Sure of course they engaged with him; they’d have to,” says a wry participant afterwards, trapped in a €380,000 debt for a site now worth a quarter of that, with no work coming in and the bank unwilling to offer any terms.
Maguire, with all the heft of a senior counsel, tells them straight that “the law is fully weighted on the side of the lender. Entirely. And so the banks – unless they’ve made a stupid mistake – will almost always win.” But the very gathering itself, he says, will lead to a rebalancing. “Banks don’t want to deal with groups or New Beginning. They want to deal with you, case by case. The problem with that is that you can have no sense of the bank’s policy, so the bank will always win.”
Conlan calls for questions. There is silence. He gets a bit exasperated. “Look. What [New Beginning] want to know is – is Athy interested in making a mark?”
Suddenly, a man speaks up: “I think we all are . . . But the Budget took everything [and] gave nothing back in the form of new regulations for banks.”
And the dam breaks.
“What leverage do you see us being able to use with the banks?” “How far can we collectively shove the banks?” “If the banks didn’t yield to Government, how will they yield to New Beginning?” “I think we have to become a force and deal with the banks, not have the banks dealing with us”. And a plea repeated by several: “All people want is leadership.” One man who takes the microphone chokes up and stops to compose himself. Up front, Conlan, his voice breaking, goes for broke: “I just don’t give a s**t any more . . . I feel so emotional, because the banks and the inaction of the Government have nearly driven me to distraction. People might say I’ve lost the plot, but I am fully coherent . . . So many people here haven’t been given the space to breathe.”
He tells them about his tipping point: being forced to dip into his children’s savings.
It’s getting on for 10pm when he wraps it up, all fear gone by now. “I’m urging you to go home and think about this. Don’t think about it for a week or two weeks, but maybe the week after that, think about it. Then give this idea some damned serious thought. We can sit and do nothing or we can decide to do something . . . I’m with you,” he says, his voice cracking.
THE NEXT MORNING I meet Conlan, Cummins and Lalor over coffee in Conlan’s forecourt shop. He explains that he has been a customer of the same bank since 1986, and has “never missed a single payment, ever”. But the noose had been tightening inexorably. Recently, after a frantic scramble to assemble a €50,000 lodgment, he fell €2,000 short. “The bank woman said that, without the €2,000, something was going back [being bounced] that day. I said, ‘Return nothing.’ She said, ‘Well, where are you going to get the €2,000 if you can’t give it to me now?’ I said the children had a savings account of about €3,000 that was in my wife’s and my name and I’d use some of that. She then sent a text.” It’s still on his phone. “That e2k must be in by 3.45 so make sure you hand to cashier and ask to input straight away,” she wrote.
To Conlan, none of it makes sense. “Mine is a cash business. I’m lodging money every single day, and we have major companies, such as Musgrave, supporting us. The truth is that it’s Musgrave that has saved Conlan’s, not the bank. Without it, we’d be gone. An Irish company has supported an Irish company. Not alone did they tolerate us when we bounced direct debits on them, they even gave us more credit. Yes, the bank has allowed us to go interest-only, but it could have put in a cash injection, helped us, worked with us . . . ”
Conlan doesn’t need any advice about engaging with the banks. “Communication is key. Basically you let them know when you last had something to eat . . . It’s up to you to provide information that’s correct, and a workable plan. But I firmly believe they need to do a lot more to instil confidence. They have to be more sympathetic, more constructive . . . They contributed so significantly to the problem, they have to play a more active part now.”
Lalor, once a hectic, busy, hands-on builder, describes how, at one point, four months passed without work. He talks feelingly about sleepless nights, panicky days and how even the words of a much-loved child can become a source of frustration. “I’ve a little fella who’d come in every morning and ask, ‘Daddy, where are you working today?’ And you’re feeling so hopeless and so desperate you’re nearly – God, you’re nearly wanting to hit him.”
He stops to clear his throat. “I realise now I put my family in jeopardy,” he says softly. “There was some of that [feeling] there last night at the meeting: What have I done to my family?”
Conlan nods. “The biggest problem is the stress being put on relationships . . . Men are extraordinarily secretive and strong-willed about anything affecting their lives. I know I’ll be perceived as being weak for being so emotional.”
This is precisely what underpins their determination to build on that first meeting and promote the movement. “For that age group, for that sex, for any Irishman to admit he has problems in business is really extraordinary,” says Cummins. “There was an energy that came out of that meeting, a sense that a lot of people are in the same boat and that you’re not going to get anywhere on your own. But the revolution isn’t going to happen overnight. It’s something that will build slowly.”
“We were fumbling our way through the dark last night,” says Conlan, who had expected a bigger attendance. “Is it that some people haven’t really been hit yet?”
It’s only a matter of time, says Lalor, who invited many of the participants to the meeting. “That was awkward at times. People don’t want you thinking they’re in trouble or that they’re being talked about.” But many people came to him afterwards and said they would return for another meeting and bring friends.
And there will be other meetings, by all accounts. New Beginning’s David Hall is a determined man. Similar town-hall events are planned for Cork, Waterford, Galway, Sligo, Kilkenny, Dundalk and the midlands, he says. “But we know we have a significant battle on our hands.”
Even the choice of venue is tricky, as certain hotels might shrink from annoying their own banks by hosting the group. He’s up for it. “You saw the effect of that meeting – how it was like the lifting of a pressure valve. Nobody was looking for freebies. All everyone was looking for was space. And fairness. Just fairness. That’s what it’s all about.”
'The problem is demand, not supply' What bankers say
“It is my absolute position that banks are lending to businesses that have a sustainable – and I underline sustainable – future,” says Pat Farrell, the chief executive of the Irish Banking Federation. “People with a sustainable plan are getting credit.”
The federation disputes the accuracy of this week’s Isme survey, which suggests that more than half of small and medium-sized enterprises (SMEs) were refused credit in the past three months, saying it is “not representative of marketplace activity”.
For support, Farrell points to an independent study which showed that 54 per cent of loan applications were approved, fully or partially, between April and September this year; a further 23 per cent of applications were pending at the time. The study, carried out by the financial services firm Mazars on behalf of the Department of Finance, found that 36 per cent of the 1,506 SMEs surveyed asked for credit in that period. Of those that did not request credit, only 7 per cent held back as they believed the banks were not lending. Where credit was being sought, it was largely for renewal or restructuring of existing facilities. So the problem, says Farrell, is with demand, not supply.
The federation also points to the comments made last month by the head of the Credit Review Office, John Trethowan, that Bank of Ireland and AIB are expected to lend “in or around” their €3 billion target to small businesses this year. Trethowan also reported that he had overturned nearly a third of 131 credit refusals by the two banks since 2010.
The federation, which represents more than 70 institutions, says it is working closely with business to create better mutual understanding. The revised code of conduct for lending to SMEs will be launched next month; the federation is about to launch a website with Chambers Ireland for SMEs “which will be a comprehensive source of information on small business finance”, and it is also collaborating with other business sectors to develop a business-plan template that would be adopted by borrowers and lenders.
Action stations: New Beginning
New Beginning is a group of businesspeople, lawyers and concerned citizens, formed a year ago by Vincent P Martin, David Hall and Ross Maguire, in an attempt to help people deal with social, economic, legal and political issues. The group is particularly geared towards people in danger of losing their homes and arranges free representation in legal cases brought against them by lending institutions. See newbeginning.ie.