IRISH BUSINESSES continued to experience a contraction in lending in the final quarter of 2009, with lending to businesses in the non-property and non-financial sectors falling by 4.2 per cent in the final quarter of 2009, new data from the Central Bank shows.

Credit outstanding to these sectors – which include any business not in construction or real-estate activity or financial intermediation – declined by 11.3 per cent in 2009 as a whole.

The 4.2 per cent quarterly decline comes after a surprising rise in lending recorded in the third quarter, when lending to the non-property, non-financial business sectors increased by €215 million, or 0.4 per cent, following three successive quarter-on-quarter declines.

The sharp decline in credit advanced to the sector in the final three months of last year was mainly due to falls in manufacturing, non-real estate business services and wholesale/retail trade sectors, according to the Central Bank.

Credit to these sectors fell by €413 million, €431 million and €374 million respectively.

Yearly comparisons show that the manufacturing sector experienced a 20 per cent decline in lending in 2009.

Lending to the wholesale and retail trade sector has fallen 12 per cent from its peak in the third quarter of 2008, while credit to hotels and restaurants has declined by 10.9 per cent since its 2008 second-quarter peak.

Lending to property-related business sectors continued to decline in the last quarter of 2009, falling by almost €3.3 billion during the period.

Overall, private-sector credit (PSC) declined by 6 per cent during 2009. According to the Central Bank, two-thirds of this decline was due to write-downs of existing credit arrangements and increased provisions for bad and doubtful debts.