Lending woes to persist say accountants
BUSINESSES will continue to struggle to arrange debt facilities with their banks well into next year.
That’s the message from the region’s accountants who say the banks, desperate to reduce balance sheet liabilities, will continue to shy away from large scale lending.
Robert Jackson, chief executive of Manchester-based Montpelier Chartered Accountants, said funding would be rare, and will carry heavy conditions.
“For many businesses, the banks’ books will remain closed in the New Year, as a means to counter the issues of the past. For those lucky enough to access funding, it will be under extremely tight and conventional terms.”
He added: “I have no doubt it will be worse in the new year, with fundamentally sound businesses failing because of a lack of available funding. The current recession differs from those that preceded it in that this time the banks do not have the necessary funds to see sound businesses through difficult times. We are entering uncharted territory.”
Philip Griffiths, a partner at Liverpool-based Mitchell Charlesworth Chartered Accountants, said the banks were just paying lip service to the government’s demands for them to return to 2007 lending levels.
“They say they are open for business and ready to lend but given that they still have limited funds available the reality is that they are very choosey in what or who they will lend money to – and if it is even remotely marginal they won’t touch it.”
John Green, chief executive of Pierce, the Blackburn-based accountancy and business advisory group, said: “The banking year end is December 31 and I anticipate they will be working hard on their capital ratios
before announcing results in February and March.
“I think it will be spring before we see the banks moving back into lending mode and the start of recovery which will continue thereafter, albeit slowly.”
But Helen Ridge, senior North West partner at Pinsents, said this environment will create opportunities for cash rich buyers to acquire distressed firms unable to refinance their debts.
“Many companies have financing deals coming to an end in 2009 and will require refinancing,” said Ms Ridge. This may prove difficult for some companies if existing market conditions persist.”
