Business pessimism reflected by survey

Date: 21st October 2009

UK firms are likely to focus on debt reduction over the months ahead, latest analysis from Deloitte suggests.

The firm's CFO Survey revealed that 73 per cent of businesses questioned expected economic growth to be sluggish into 2010, while 81 per cent do not expect an improvement in bank lending until the middle of next year.

A similar number (70 per cent) also thought that the ongoing economic downturn has led more firms to focus on holding more ready cash on their balance sheets, in order to provide a cushion of capital in times of financial crisis.

Reducing existing debts and cutting exposure to borrowing were also identified as priorities.

Commenting on the Deloitte survey, Michael Baxter, economics analyst at Investment and Business News, said that the continued reluctance of banks to lend to businesses remained a problem.

"If you want to have a stable economy; lending to business comes first," he said.

"It's a return to the same attitude that put us in the crisis in the first place ... Companies have no choice but to restructure their balance sheets, but I'm not convinced it's a good thing that it is necessary for them to do that.