Donie's news Ireland Blog Tuesday

Ireland’s manufacturing sector for June 2012 showing big jobs increase 

  

According to the NCB research, new orders and new production in June rose at the fastest pace for more than a year. 

Manufacturing is turning out jobs at the highest rate recorded since 1999, the NCB purchasing managers’ index has claimed. The PMI found the rate of job creation accelerated to the fastest in 12-and-a-half years.

Analysing the findings of the index, NCB economists found a rise in production was responsible for the jobs boost.

“Irish manufacturers took on extra staff at a marked pace that was the sharpest since Dec 1999. Reports suggested that job creation was mainly linked to rising production,” the PMI said.

According to the NCB research, new orders and new production in June rose at the fastest pace for more than a year.

The PMI reported new products were the main drivers of new business, leading to increased demand and subsequently more jobs.

The rise in manufacturing activity came on the back of almost nine months of contractions.

February and May were the only months in the last nine to show an increase in growth. In May, the PMI hit a positive 51.2 before increasing to 53.1 in June. Any figure over 50 indicates that the sector grew.

The news was greeted as further positive news on the back of the “major game changer” in the form of the European agreement on banks. Ensuring growth is considered key to an easing of the terms of its bank bailout to eat into a debt pile set to peak at 120% of GDP next year.

Ireland’s PMI readings have consistently out-performed the rest of the eurozone, but Finance Minister Michael Noonan warned that efforts to match last year’s GDP growth rate of 0.7% are dependent on the performance of its trading partners in Europe.

The Ulster Bank is to call in independent experts for Investigation’s & publish a report

   

Stephen Hester the CEO of RBS

The Ulster Bank has said independent experts will oversee an investigation into the technical problems that have lasted for two weeks.

The bank has pledged to publish “the relevant findings” arising from the inquiry, which it said would begin once the problems have been overcome.

How long this will take became less clear yesterday with the bank saying it required “further time”.

“The pace of progress is improving though of course has been slower than we or our customers would have liked,” Ulster Bank said in a statement.

Estimates for the return of normal services have been revised a number of times since the problems arose.

Customers “should see their balances updating during the coming week”, Ulster Bank said yesterday, but it warned there may be other “bumps along the road”.

Sir Philip Hampton, the chairman of Royal Bank of Scotland Group, which owns Ulster Bank, yesterday visited Parliament Buildings in Belfast to discuss the ongoing issue with the North’s Minister for Finance Sammy Wilson. “We deeply regret the inconvenience that these technology problems have caused Ulster Bank’s customers and are working hard to ensure that this complex issue is resolved as quickly as possible,” he said.

Mr Wilson said he told Sir Philip of his disappointment and said that the problems were not only denying people access to their money but causing “real hardship” and impacting on businesses.

“This has been a communications disaster by Ulster Bank leading to the widely held view that Northern Ireland customers have been treated as second class within the RBS Group,” he said.

The issues also affected Ulster Bank’s customers at RBS and British lender NatWest but it is now a week since RBS Group said the vast majority of NatWest and RBS accounts had been free from disruption for two days.

Mr Brown last week denied that repairing the issues at Ulster Bank had been less of a priority for the group. “There is a sequencing in terms of how the systems are structured and how the processes actually run. It hasn’t been a case of prioritising one business over the other,” he said.

Representatives from Ulster Bank have been summoned to appear before the Oireachtas finance committee on Thursday. The situation is also expected to be raised when representatives of the Central Bank appear before the same committee tomorrow.

Committee member and Fianna Fáil finance spokesman Michael McGrath said that both Ulster Bank and the Central Bank now had questions to answer.

In a statement last night the Central Bank said it had been in dialogue with Ulster Bank and the RBS through the weekend.

Deputy governor Matthew Elderfield met with the CEOs of RBS and Ulster Bank yesterday to emphasise the importance of RBS addressing the continuing delays in resolving the technical issues”.

The Department of Social Protection said about 41,000 child benefit and 7,000 housing benefit payments would be affected today by the problems at Ulster Bank.

New Health insurer Glo-Health to battle Irish rivals on price

   

A battle for customers is looming in the private health insurance market following the arrival of a fourth insurance provider.

GloHealth — a company established by three former Aviva insurance executives — is targeting young families by offering major savings through lower premiums and additional benefits in a move that could spark a major price battle with existing providers.

Although GloHealth refused to reveal its target number of customers, it hopes to attract many of the 158,000 people who have dropped their health insurance cover over the past three years.

GloHealth will offer three basic plans — Good, Better, and Best — as well as two premium products, but will allow customers to personalise their cover with a choice of up to three free extras from eight specialised packages. They include free cover for children under three years on some policies, free travel insurance, free flu vaccine, enhanced maternity cover, and complementary therapies.

GloHealth is also the first mainstream health insurer in Ireland to offer hospital cash plans whereby expenses are paid out to patients to cover any stay in hospital.

The company said it would create 150 jobs within the next four years with 45 positions already filled as it formally opened for business yesterday.

Cash-strapped consumers who have faced rising health insurance costs on an annual basis in recent years are likely to benefit from any price battle which may break out as a result of GloHealth’s entry to the Irish market.

While the other three existing health insurance firms — VHI, Laya, and Aviva — have no immediate plans to react to GloHealth’s launch, they maintained yesterday that their pricing policies were kept under review.

Several insurance experts predicted that GloHealth’s arrival would be welcome news for consumers as it would intensify competition.

Health insurance expert Dermot Goode said the new entrant would force existing health insurance providers to review their own products and pricing to retain business. “GloHealth’s policies will be particularly attractive to those with young families or those who want flexibility in the structure of the cover,” said Mr Goode, a spokesman for Healthinsurancesavings.ie.

Speaking at the launch, GloHealth chief executive Jim Dowdall said: “Health insurance customers are crying out for a new approach and hard-pressed families are looking for better value, better cover, and better choice.”

He claimed a family of two adults and two children could save up to €465 by switching from VHI’s One+ Plan to GloHealth’s Better policy.

Although Mr Dowdall rejected claims that GloHealth was targeting young, more profitable customers, the company’s advertising is aimed at such age groups, while it is promoting the biggest savings on policies usually taken out by younger families.

GloHealth is 49% owned by insurance firm Irish Life, while its policies are underwritten by reinsurance giant, Munich Re.

New Silicon Valley bank meant to assist Ireland’s tech firms to prosper & develop

   

The arrival of Silicon Valley Bank in Ireland will benefit tech companies scaling up, rather than start-ups

In the current economic climate it is good news that a new bank is to enter the Irish market is bound to make the headlines. Earlier this month Silicon Valley Bank (SVB) announced that it is to lend an estimated $100 million (€80 million) to technology companies in Ireland.

The announcement is part of a collaboration with the National Treasury Management Agency (NTMA) which will see Ireland’s debt management agency invest $50 million into funds managed by Silicon Valley.

For those in the know, the news that SVB was dipping its toe into the Irish banking scene was not a big surprise. Ireland has been on SVB’s radar for some time. Due to the international nature of the tech industry, the bank already deals with a number of Irish technology companies, and has contact with a lot of players in the venture capital industry.

The California-based bank’s roots stretch back 30 years, evolving in parallel to the nascent technology sector. The Nasdaq-quoted company, which is a niche lender to the tech sector, now has 27 US offices and seven international operations in China, India, Israel and the UK.

SVB, which aims to lend $100 million to the Irish tech sector, will target fast-growing businesses in the fields of technology, life science, cleantech, and private equity and venture capital businesses.

Its entry into the market, comes as the Government announced details of its long-promised microenterprise loan initiative, which will offer €90 million in new lending to 5,500 micro-enterprises. The initiative is the latest addition to a suite of finance measures aimed at small businesses offered by the Government, such as Innovation Fund Ireland.

But will the entry into the market of a private bank specifically targeted at the tech sector make a difference to the funding landscape for tech companies?

As it stands, it appears that Silicon Valley Bank will be offering debt finance, or traditional lending to tech businesses. Because it will only operate as a lending back, and will not be taking deposits, the bank is not obliged to obtain a banking licence, though it is worth noting that it has recently opened a fully-serviced bank in the UK, and has not ruled out developing its presence further in Ireland in the future

Brian Caulfied, partner in DFJ Esprit and non-executive director of the Irish Times Ltd, says the arrival of the American bank in Ireland is “hugely positive” for the tech industry here. “They are a very specialist bank; they understand the needs of technology companies much better than more traditional lenders do. Their entry will be hugely beneficial,” he said.

He points out that their main benefit will be for companies scaling up, rather than start-ups.

“Typically, a lot of companies which are targeted by banks such as Silicon Valley Bank are already backed by a venture capital investor, which is making good progress in growing their revenues, and need additional finance to continue rapid growth. By definition, you need cash flow to finance debt.”

One Irish tech company which is a long-standing Silicon Valley Bank customer is Openet, the software company which won the 2011 Ernst Young Entrepreneur of the Year competition. Chief executive Niall Norton is hugely positive about the bank, with which it has had a significant relationship for about eight years.

According to Norton, banks such as Silicon Valley Bank have an instinctive understanding of the needs of tech companies. “I often tell the story of how in 2007 we started ringing around Irish banks when things were really getting going. We were told ‘we will lend you money to buy your building, but not to build your business’,” he recalls.

Openet has working capital facilities of about $10 million with the bank. Together with SVB, it also works closely in conjunction with Kreos Capital which provides venture debt to Openet.

By offering loans directly targeted at tech businesses, Silicon Valley Bank can be seen to be filling something of a hole in the tech financing landscape.

In an industry that is driven by the venture capital sector, the issue of bank finance specifically for tech companies tends to be overlooked. (The Irish Software Association is currently embarked on a study to evaluate the banking finance needs of tech companies.)

As Darren Daly, partner and head of the ICT group at law firm Byrne Wallace explains, early stage companies in particular, by definition, are often excluded from traditional debt finance. “Normally the bulk of funding for tech companies up to mid-range of their life cycle is equity funding because they don’t have any assets to back up lending.”

It is this conundrum that the new microfinance fund launched by the Minister for Enterprise earlier this month seeks to address. The €90 million in new funding is to provide loans for commercially viable proposals that do not meet the conventional risk criteria applied by banks, due to factors such as the absence of collateral.

As Darren Daly points out, the most efficient way for any company to operate is to utilise a range of funding methods. “Ideally they should have a combination of debt and equity capital. What tends to happen is that tech companies utilise the equity capital they initially raise at too fast a rate, to fund day-to-day requirements.”

One of the obvious attractions of traditional loans, or debt financing for tech companies, is that it is a lot less dilutive than venture capital funding, which takes the risk, but also takes a significant chunk of equity if the company performs well.

In reality, the line between debt financing and venture capital in larger scale companies can be blurred. For example, in some cases, Silicon Valley Bank provides high interest loans and also puts warrants on those loans that give the bank an option to buy shares at a future point.

Brian Caulfield says the new access to debt financing that will be made available through the arrival of players such as Silicon Valley Bank into the market will also encourage companies not to sell out too soon.

“One of the challenges is, when companies get to a certain stage there is a temptation to exit relatively early rather than take the significant dilution involved in venture capital.” He argues that the availability of more traditional bank loans will encourage entrepreneurs to stay on and build the company further.

Darren Daly also highlights another advantage of private sector involvement in the tech finance space. He points out that many of the structures and formal processes through which state-backed funding for tech companies is administered is too complex. “It would be very welcome if they could put in place simplified, appropriate structures that would enable early stage companies to get access to funds.”

Overall, most see the arrival of Silicon Valley Bank into the Irish banking sector as a huge endorsement of Ireland’s tech industries, as well as a wake-up call to some of the more traditional banks. After all, the bank’s decision to locate in Ireland is ultimately based on commercial interests.

“The tech landscape in Ireland is very vibrant, more vibrant than I’ve seen in a long time,” says Darren Daly, who works with a number of tech companies. “The commercialisation opportunities coming out of universities are much more sophisticated: on a social level people are much more entrepreneurially minded. We’re also bound to see more spin-outs coming out of some of the bigger, more established companies that have set up here over the next few years. That bodes well for the future.”