Barclays banker Brian Delahunty says large firms will benefit most from the two-speed economy

“In my opinion, like 2009, the big boys will come through better than they went in. It creates M&A opportunities for them – and they have the firepower to do it.”

Barclays’ Dublin office – the bank’s European headquarters – conducted a review of 900 large corporate clients showing they are weathering the economic storm. But he’s worried about smaller companies as they’re running out of bankable sources.

“We did a full review of our book from a credit perspective there two weeks ago. We’ve picked maybe 10 that we think we just need to watch a little more, but that’s because they’re in retail or real estate, for example. But are we really nervous? Not really.”

But while Barclays is focused on large companies in Ireland, Delahunty has concerns about smaller companies.

“It’s when you’re moving down the food chain – they may not have the capacity to deal with all of these challenges.

“These companies may not have cash, they may have supply problems, labor shortages, labor inflation. It’s all cost, cost, cost – and they don’t have the margin to consume that cost. What do you do?”

The salvation for many of these companies, he says, has been continued strength in consumer spending — despite economic headwinds.

“If our employment rates stay okay and consumer spending stays okay, that’ll move a lot of things forward.”

In recent weeks, major tech companies in Ireland have entered a period of cost and job cuts.

“We obviously have a lot of the big tech banks here, and they’re very good companies,” he says. “But they grew very quickly. We lost employees to tech last year and the salary inflation has been incredible. People doubled their salaries to move.

“But when there’s no growth, they look at their biggest expense — which is mostly labor. And they’ve grown so quickly that they don’t necessarily have all the infrastructure you’d expect from a company of this size. I think they’re going to spend next time making sure they fix that.”

Still, Delahunty says he still sees an influx of US business into Ireland. Barclays has seen a doubling of clients associated with supporting US companies here in recent years, most recently around the Regional Financial Center (RTC) model to serve multinationals.

“We are very positive about the prospects for 2023 in this regard as we are in active dialogue with a number of US RTCs looking to add more staff to their teams in Ireland and do more business here.”

According to Delahunty, Brexit is still influencing companies to come here and set up European hubs. In fact, Barclays itself has done so.

“It wasn’t just a pure Brexit decision,” he says. “We’ve always thought about having a European headquarters in Dublin or Paris or something like that – because we felt the opportunity was in Europe, where Barclays wasn’t as active as we’d like. But Brexit probably accelerated that.”

The bank’s presence in Ireland shifted from a team of 70 or 80 staff on Hatch Street to its new office of 350 staff serving clients in nine European markets.

“We effectively look after the business of all the large companies in Ireland, all the large public companies and many large US companies. We’re looking at companies with sales over €100m, but if you have €75m and are growing fast, we’re interested.

“Ultimately, we want clients who need help with mergers and acquisitions, capital markets, debt underwriting and private placements.

“We don’t do business with smaller companies, mainly for risk reasons. Because the reality is, the further down the food chain you go, the riskier it becomes. Touch Wood, we have survived all the crises of the last 15 years very well – Brexit, Covid, even the real estate shock.

“You will miss offers because you are prudent. But in times like these you don’t have that nervousness and you can just keep concentrating on customers and growth instead of cleaning up the mess.

“We’re pretty comfortable with large companies in Ireland. In 2008, large Irish companies were mainly banking with just three or four Irish banks. Since then they’ve grown from four or five to maybe 20 or 30 banks – but they also then turn to the capital markets for the fixed longer-term funding that keeps them safe and sound in tough times.

“But as you go down the food chain, access to capital becomes more difficult. This may be where the challenge for Ireland lies – at this SME level.”

Delahunty says the departures of Ulster Bank and KBC are worrying in that regard.

“We ourselves and other international banks will close the gap from a corporate perspective – but not at this level. It’s high risk and very low return. I think there will be a challenge in the next five to ten years.

“They are the next generation of businesses in Ireland – but who will support them on their journey?”