John Rice, managing director of RAMP, has spoken out urging packagers to make some hard decisions over the next few weeks in order to ensure their businesses will withstand falling business levels.
With applications to packagers down by 35 per cent in September, it is staffing levels which are bearing the brunt of the criticism – with Rice warning that action needs to come sooner rather than later to leave them in better shape when the market begins to pick up again.
“At the moment there seems to be no easing of the pressure on funding,” said Rice. “Packager business has seen significant falls since the credit squeeze started and we are now looking at a situation where we are unlikely to see any upturn before the start of next year at the earliest. Packagers, who have only previously seen growth in their business year on year, are going to have the hardest decisions to make.
“I expect to see redundancies in the order of 20 to 30 per cent in the weeks to come from firms planning far enough ahead to be in a position to both weather this crisis and take advantage of the upturn when it comes.
“On current projections, packager income could fall by up to 60 per cent by Christmas and those companies that will come through are those who see that prudent action needs to be taken now to ensure survival.”
Rice also believes that the crisis has not been helped by the behaviour of many lenders. “Conversion rates have been badly affected by the panicked way in which products have been pulled, totally impractical deadlines have been arbitrarily set which in turn have not been helped by the deliberate use of inflexible and unreasonable underwriting to ensure intermediaries and packagers had no chance of getting business in to meet those deadlines. And don’t get me started on lenders who simply exited the market and left clients and intermediaries high and dry.
“Lenders who until recently have been so desperate to court intermediaries and packagers when they wanted to sell their products, have shown in many cases that their relationship with packagers and intermediaries is really only skin deep. When the market recovers, it will be interesting to see how intermediaries will respond to these lenders when they decide they want to do business again.”
“It is perhaps ironic that intermediaries now more than ever need to use a packager, given the confusion and uncertainty in the market with sourcing systems struggling to cope with criteria and pricing changes. Without packagers the challenge to brokers to find the best solution must be nigh on impossible.”
