Credit crunch grip weakening

ALTHOUGH access to finance remains a serious problem for many businesses, the rate of deterioration in credit conditions slowed further over the three months to May 2009, and conditions are expected to stabilize in the months ahead, according to the Confederation of British Industry (CBI).

Responding to the CBI’s latest Access to Finance Survey, businesses said they were less negative than they were in March about the supply of new and existing credit.

SMEs with up to 249 employees said that the rate of deterioration in credit availability had eased over the past three months, and they did not expect any further decline in the supply of new credit over the coming three months.

Companies with over 5,000 employees also reported a significant slowing in the rate of decline of new credit and saw no further decline in the availability of existing credit in the three months to May. They predicted a slight improvement in existing credit over the coming three months.

According to the CBI, the easing of conditions for new credit supply is expected to continue, with only 7% of firms expecting to see a further fall in new credit supply over the next three months.

Ian McCafferty, the CBI’s chief economic adviser, said that while the credit crunch continued to hit business activities in the three months to May, its impact was less severe than in previous surveys.

‘Credit availability is still a concern, but the severity of the situation is easing compared with a few months ago,’ he commented. ‘Big companies who were encountering serious problems getting credit at the start of the year are still finding it difficult, but they expect the supply of existing credit to get slightly easier over the next few months.’