‘Worse to come’ forecast
Jul 15 2008 by Peter McCusker, The Journal
TWO-thirds of financial chiefs among the UK’s top 350 companies believe the worst impact of the credit crunch is yet to come.
The gloomy forecast was made in professional services firm Deloitte’s second-quarter survey of 83 chief financial officers, representing companies worth a combined £260bn.
It showed 66% disagreeing with US Treasury Secretary Henry Paulson’s May statement that the worst of the crunch “is likely to be behind us”.
The latest downbeat findings come after a week when business leaders at the British Chambers of Commerce warned of a “serious risk” of recession as the UK’s economic gloom mounts. Corporate cashflow is coming under increased pressure as the squeeze makes credit harder to come by and more expensive, the survey found. More than three quarters (77%) of chief financial officers said credit is hard to obtain, up from 63% in March and 48% in September last year, Deloitte said.
Partner and vice-chairman Margaret Ewing said: “The squeeze on liquidity is increasingly transmitting itself to the corporate sector through a reduced supply and rising cost of credit.
“Tighter credit conditions have triggered a major change in corporates’ attitude to debt. Enthusiasm for raising borrowing – or gearing – has fallen sharply.”
Despite the recent falls of the FTSE 100 Index into “bear market” territory – defined by a fall of 20% or more from the peak – financial bosses are bullish about prospects for takeover activity this year with 49% believing shares look cheap.
