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17 Jul 2008
As far as UK businesses are concerned, the worst of the global credit crisis is yet to come, according to a recent report by Atradius, which questioned more than 2,500 businesses in North America, Europe and Australia.
The fears are supported by the finding that UK companies are the most pessimistic of all the countries surveyed with 95 per cent expecting an economic slowdown and believing there will be a downturn in the national and global economies.
The impact of the crisis is being felt more by the UK for a number of reasons. First, the UK has been reliant on the financial and property sectors for much of its growth and these industries have been particularly badly affected. Second, the US is a key export partner the findings show that companies in the US have been the worst affected so far and expect to be hit harder than those in other global regions over the next 12 months.
The report also revealed that UK firms are among the most likely to secure their receivables. This adds further potential exposure to the credit crisis because of fewer buyers, plummeting valuations for secured debt and poor financing terms.
To add to the bleak outlook, over half of UK companies have experienced tightening in the availability of financing and believe this is likely to restrict growth. Many fear an increase in payment defaults by customers, while potential reductions in the ability to increase sales, extend credit and raise outside capital as well as increases in the cost of capital remain concerns.
Atradius started seeing the ripple effects of the credit crisis on global economies at the end of last year. Since then, suppliers have been extending credit terms in an effort to maintain sales momentum.
We have seen claims that the UK market for the first three months of this year increased by up to 25 per cent compared with the same period last year. If the level of unpaid invoices continues to increase, businesses are likely to become far more restrictive in the terms they offer.
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