The survey of business leaders, mostly CEOs and chairmen, and representing a UK workforce of almost 1 million and a global turnover of around £1 trillion, showed that over half (55%) said that they will now only tolerate a lower level of risk from gearing and, within that group, 70% said an economic recovery would not reverse their position. Two thirds (68%) expect no improvement in credit availability in 2010 and are reshaping their business financing: 50% said they would use less bank debt, 44% said they would rely more on equity finance, and 26% said they would make more use of bond issuance.
And when asked about supply chain fragility during the recovery, only 24% said that they are not concerned. Businesses were most worried about a unique, specialist supplier going bust; that the supplier's own supply chain would collapse; and that the supplier would be unable to obtain working capital.
Because of these ongoing threats, 68% of firms said they would be strengthening the level of partnerships with suppliers in the coming years. One in three (30%) said they would be increasing their number of suppliers. And around one in five said they would be offering finance to key suppliers, reducing dependency on 'just in time' processes, and shrinking geographic distances to suppliers.
CBI’s Richard Lambert said: "Firms looking to reduce risk and acknowledge their interdependence are seeking more collaborative ways of working through partnerships and joint ventures. Perhaps we will see a flourishing of supply chain finance – in which firms with the largest, most solid balance sheets help finance their smaller suppliers or customers.
"Businesses want to adapt to a harsher credit climate by finding new sources of funding. Why not encourage new forms of institutions to finance the growth of small and medium-sized enterprises through equity and debt? And why not make it easier for companies to raise money locally, perhaps through new regional banking and investment institutions, rather than having to rely on a few very big players in London and Edinburgh?"
