Steve Parks

CBI Recession Update

The Confederation of British Industry (CBI) has released the results of its latest Access to Finance Survey.

The survey monitors the impact of the credit crunch, and the recession, on UK businesses of all sizes - and their attitude to the future.

The CBI say:

Fewer firms said in March that the availability of credit had got worse for them in the past three months than did so in February or January. The view that the pace of deterioration is easing correlates with what businesses are starting to tell us on the ground.

Firms are not saying that credit conditions are getting better, but the severity of the disruption is no longer worsening as sharply as it was three months ago. And the combination of easier monetary policy and the government's measures to support the banking sector may be starting to have an impact.

Here are some of the other key findings:

• Nearly half of firms (46%) say they have cut staff numbers over the past three months as a result of the credit crunch, a slight increase on February's figure (40%). Staff hours have stabilised, even though output is still coming down, and firms are cutting back on training budgets and capital investment.
• For the third month running, the very largest firms, employing over 5000 staff, were most widely affected. Most of the companies in this size bracket (86%) that had sought new finance said its availability had got worse in the last three months. This was the case for just 15% of large businesses and 54% of SMEs.
• In the next three months, just under a third of the very largest firms (29%) expect access to new credit will get worse, which is the case for just over a third of large firms (36%) and SMEs (38%).
• The cost of existing finance has become more of a concern in March. Just over a third of firms said the cost of existing finance had risen in the past three months compared with just over a quarter in February.
• Problems with the availability of trade credit insurance have intensified. Nearly half (48%) of firms surveyed said they use the insurance to cover the supply of goods to customers. Of these, nearly three-quarters (72%) said its availability had worsened in the past three months, hindering their ability to secure contracts.

So overall, the survey is pretty gloomy - but with a hint that the bottom of the curve may be in sight.

What we don't know is how long it'll be before there is some sign of recovery. With the level of job losses starting to come through the system, I think this could be a very long time.

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