National Bank of Denmark finds energy price shocks reduced lending growth to energy-intensive manufacturers by 8.75 percentage points

The National Bank of Denmark published a working paper analysing how the post-invasion surge in energy prices affected Danish credit institutions’ lending to manufacturing firms, concluding that energy-intensive firms drew less on existing credit as energy prices rose. The research warns that future episodes of sharp, prolonged energy price increases could translate into materially lower lending to energy-intensive industries. Using quarterly firm-level data for 2019–2023 that link manufacturing firms’ energy consumption with their borrowing from Danish credit institutions, the paper finds lending growth to energy-intensive firms fell by 8.75 percentage points relative to comparable non-intensive firms during the energy price shock. The decline is attributed mainly to lower utilisation of credit cards, overdrafts and other existing facilities, with the effect especially pronounced among firms banks classify as less risky. While energy price increases had no statistically significant effect on new lending volumes, banks increased interest rates on new loans to energy-intensive firms assessed as relatively risky, which the authors interpret as a tightening in loan supply offset by higher demand for new loans. The paper also argues the lending effects could be larger in other European countries that face similar energy market dynamics but have more energy-intensive manufacturing sectors and a larger manufacturing share of the economy.