More than half of British firms have seen a decline in the ease of access to capital since the onset of the credit crunch, a survey said yesterday.
The survey, published by the Confederation of British Industry (CBI), was initially carried out last month when it found 52 percent of businesses questioned had experienced a deterioration in the availability of capital.
By this month three-quarters of businesses said they had either experienced, or expected to experience, more stringent borrowing conditions imposed by the lender — up from 66 percent in the last month’s survey.
A total of 43 percent of respondents this month said existing lines of credit had been or would be reduced or withdrawn.
Thirty percent had been, or expected to be, refused new credit, the poll, released on the day of the CBI’s annual conference, found.
“This survey presents a disturbing picture of how the turbulence in our financial system has spread to the whole economy,” said Richard Lambert, CBI director general.
British Prime Minister Gordon Brown’s government was to announce plans yesterday to inject billions of pounds into economy to stave off a deep recession.
Yesterday’s pre-budget report will include measures to support small businesses whose access to bank lending has been restricted by the financial crisis, the government has said.
The CBI found business sentiment for next year also continued to suffer as the crisis took hold. This month 78 percent of those questioned expected business conditions to be worse next year, up from 74 percent a month earlier.
“The impact of what’s happened on business and consumer confidence has been dramatic,” Lambert said.
“These figures illustrate how business confidence has fallen in recent weeks and how uncertainty has affected sentiment.”
Of those who thought business conditions would get worse next year, 67 percent in the poll last month expected to make some redundancies in the coming months, although this fell to 59 percent this month.
Last week the CBI forecast Britain would suffer its sharpest economic contraction in almost two decades next year, with the number of people out of work rising to nearly 3 million by the middle of 2010.
Last month’s survey, conducted by Ipsos MORI, covered 204 businesses of all sizes and in all sectors. It was repeated a month later with 120 of the same respondants.
Before yesterday’s pre-budget report, Lambert called on the government to take more steps to unblock the financial markets and improve the flow of capital to business.
“The biggest threat hanging over business is cash flow. If they cannot get their hands on the cash and credit they need to go about their day-to-day business, there is a real risk we could see healthy firms going under,” he said.
Meanwhile, UK construction companies may cut more than 300,000 jobs unless the government brings forward planned infrastructure projects to boost the flagging economy, according to the Royal Institution of Chartered Surveyors.
“As the UK enters a recession it is essential that skills are not lost to the construction sector as people leave and retrain to take up other jobs,” chief economist Simon Rubinsohn said in the report. “The chancellor [of the exchequer] must use the pre-budget Report to announce additional funding for major projects to help retain skilled workers in the construction industry.”
The number of people working in the construction industry shrank by 17,000, or 1 percent, between June last year and this June, RICS said in an e-mailed statement yesterday. Employment in the industry will fall 14 percent without action, it said.
Chancellor of the Exchequer Alistair Darling was scheduled to release his pre-budget report yesterday.
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