Government fund too late for many

£1.3bn rescue package won't help stuggling channel firms for at least six months, expert warns

Insolvency Service building

A £1.3bn government rescue package for UK SMEs will not help channel firms teetering on the brink this quarter, experts have warned.

Credit reference firm Graydon is predicting a “downward spiral” of channel insolvencies in the first quarter of 2009, after its latest figures revealed Q4 2008 had performed slightly better than the same quarter in 2007 (Channelweb, 14 January).

However, despite Gordon Brown last week pledging a £1.3bn bail-out fund to help smaller firms, Mark Ancell, head of intelligence at Graydon, painted a bleak picture for the first half of the year.

“A lot of firms are worried about 2009. Banks are still unwilling to lend to businesses,” he said. “Government intervention may make a difference, but I cannot see it having an effect for at least the first six months of the year, if not longer.”

Nitin Joshi, founder of ChannelMoney, agreed. “Credit managers within distribution are the heroes because they are keeping cash flowing in the channel, despite banks not lending,” he said.

“The government fund is good, but it will be up to a year before SMEs can get loans, so it will not save firms already struggling.”