The CBI has recently published its latest 'Access to Finance' survey, the full text of which can be found online at www.cbi.org.uk 131 respondents representing all sizes of business reported on the effects of credit conditions over the last three months and their expectations of the next quarter. The survey covers finance availability and the direct and indirect costs of obtaining credit, together with the impact this is having on CBI members. The results highlight the worsening availability of credit and a sharp increase in the cost of obtaining it together with the resultant impact on investment and employment.
A sizeable proportion of respondents reported the removal or reduction of existing credit and the majority of those who had sought new credit found that availability had deteriorated. Increases in the cost of credit were a concern, with a noticeable shift to LIBOR linked pricing and an increase in arrangement fees. A minority of participants' expectations are that credit availability will worsen during the next quarter, so perhaps there is some encouragement in that.
Whilst bank loans were relevant to the vast majority of respondents and almost half reported a reduction in loan availability, far fewer of those who used overdrafts or invoice discounting facilities had noticed a fall in their availability.
The survey suggests that the impact of such conditions is manifesting itself mainly in reductions in capital investment and M&A activity, however 40% of respondents reported having cut back their workforces.