UK businesses believe that the credit crunch is going to get
worse, with even more difficulty to access finance in the next
quarter, according to a survey of companies’ borrowing published
today (February 9).
The survey, conducted by the CBI (Confederation of British
Industry), found that 59 percent believed that the availability of
finance will deteriorate over the next three months, with a direct
impact on capital investment activity, including leasing.
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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, it has led to 60 percent of businesses reporting reduced
capital investment.
In the last quarter, 63 percent of firms had already seen
availability of finance deteriorate, with three in ten businesses
having seen existing credit lines reduced or removed.
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By GlobalData
