On my journey around the UK over the last 10 days I have met potential new clients, existing clients, venture capital investors, suppliers and others. I have been to see good, viable, companies in Glasgow, London, Heathrow, Bath, Blackburn and many more online.
Without exception the common complaint is the financial markets are having an impact on their business. Banks are TIGHTENING credit lines, not reducing at this stage, just applying the terms of the facilities to the letter. Even small breaches of overdrafts lead to bounced cheques, rejected standing orders and rejected direct debit payments.
Yesterday, the Bank of England reported that lenders PLAN to reduce the amount of credit they extend to both businesses and consumers in the coming months. Worryingly this survey was taken BEFORE the recent spectacular crashing and burning of some lenders.
So if they were planning to tighten credit then, what is their likely plan now?
Tightening the screw on businesses? Whatever next, a sharp rise in insolvencies for businesses?
I do hope that common sense prevails, in the recession of 1991 many good, viable businesses went to the wall due to over zealous (or simply over-run by volume) risk managers knocking SMEs over.
Why should SME's be bashed because the bank's capital has been depleted by bad management and poor risk assessment?
Ok. we can complain all we like about the injustice, but we really listen to the message! The message published loud and clear by UK's banks is get a strong survival business plan drawn up, sharply cut costs, produce up to date management information/accounts and be ready for the time you pull on the tin hat.
Only the well prepared and determined will survive this major business crisis in 2008-2009.