UK businesses believe that the credit crunch is going to get
worse, with accessing finance to become even more difficult in the
next quarter, according to a survey of companies’ borrowing
published today (February 9).
The survey, conducted by the Confederation of British Industry
(CBI), found that 59 per cent of respondents believed that the
availability of finance will deteriorate over the next three
months, with a direct impact on capital investment activity.
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The uncertainty of the economic situation is leaving companies
with little option but to continue to scale back, according to Ian
McCafferty, chief economic advisor of the CBI, and the motor
industry, in particular, is seeing the effects:
“Motor manufacturers are facing difficulties, especially with
the demand for cars likely to remain flat this year. But part of
what’s happening is a massive stock liquidation, with companies
selling stock to get operations more aligned with demand.”
Despite three-month Libor having fallen by 395 basis points in
the three months prior to the survey, only one in five companies
saw the cost of finance reduce. Coupled with a majority of
companies seeing an increase in arrangement fees and the cost of
finance, this has led to 60 per cent of businesses reporting
reduced capital investment.
In the last quarter, 63 per cent of firms had already seen
availability of finance deteriorate, with three in ten
businesses reporting that existing credit lines were reduced
or removed.
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