Worst of crunch still to come

Nearly half of UK companies (46%) have already been affected by the credit crisis, but 62% believe that they will be more greatly impacted in the future according to a survey by Atradius, a UK trade credit insurer.

The 14 country survey questioned over 2500 businesses in North America, Europe and Australia, on various aspects of the credit crunch. Fears that the worst is yet to come are supported by the finding that UK companies have the highest expectations of an economic slowdown, with 95% believing there will be a slowdown in the national and / or global economies - more than every other country surveyed.

To add to the bleak outlook, over half (53%) of UK companies have experienced tightening in the availability of financing and one third believe this is likely to restrict growth. In this new economic environment, 73% of UK companies believe an increase in payment defaults by customers will have the most significant impact on them while the ability to increase sales, extend credit to customers, raise outside capital and an increase in the cost of capital remain significant concerns.

Shaun Purrington, Atradius, regional director, commercial UK and Ireland, commented: ‘The UK has been reliant on the financial and property sectors for much of its growth, which have been particularly badly affected by the credit crunch. As these industries slow, we would need a significant pickup in other sectors to bolster the economy and the belief that this will not happen is fuelling the UK business community’s pessimistic outlook.

He added: ‘Atradius started seeing the ripple effects of the credit crisis on global economies in the fourth quarter of 2007. Since then, suppliers have been extending credit terms in an effort to maintain sales momentum. However, recently we have seen an increase in claims for bad debt and as the level of unpaid invoices grow, businesses are likely to become far more restrictive in the terms they offer.’

‘The credit crisis is affecting growth and profitability of companies across a range of industries globally. Rising costs of capital, more stringent financing requirements and increased customer payment defaults can be catastrophic for businesses and awareness of the potential risks is essential to maintaining a healthy balance sheet as we operate in this higher risk environment.’