Since the previous survey six months ago, FDs reveal that lending from banks has continued to dry up and lack of liquidity has become even more business critical. Average debtor days have worsened and a growing number of companies are perceived as being at risk of failure.

• More than one-third (35%) of FDs surveyed consider lack of bank credit as a significant problem. This compares to 23% of respondents in the last survey;
• One-fifth of businesses said the withdrawal of credit insurance had created their biggest cash management concern;
• Late payment remains a problem for 19% of respondents;
• More than one in 10 (11%) of respondents believed 6 of their top 20 consumers and suppliers were at risk of insolvency in the next year.

“A lot of mid-tier businesses have been experiencing increased problems in the last year, because it has traditionally been these businesses that the banks – who of course are experiencing their own problems - have lent most of their reserves to. However, on the positive side, the fact that most companies are maintaining or increasing investment in capital and staff is a positive indicator for the future. Figures show that 58 per cent of companies have maintained or increased staff numbers in the last 12 months and 54 per cent expect to increase or maintain capital expenditure over the next 12 months.”
Geoff Carton-Kelly, Partner and Head of Restructuring and Recovery, Baker Tilly

In the absence of available bank facilities companies are looking to suppliers to fund liquidity and 16% are looking to raise funding through the issue of equity.

  View our pie chart: How do businesses expect to fund their liquidity? (PDF - 36.8kb)

“Liquidity and the management of working capital are now key concerns for many businesses. The problem is exacerbated by the withdrawal of credit insurance facilities, increasing the risk of exposure to the failure of key customers. Good cash management and forecasting are key, as is an open and honest relationship with bankers, creditors and customers.”
Paul Newman Audit Partner, Baker Tilly