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Businesses are starting the new year facing huge difficulty in getting credit to keep working as the economy falters, according to a survey published today.
The latest quarterly survey of chief financial officers by consultants Deloitte shows that an overwhelming 99% say credit is difficult to obtain, up from 55% a year ago.
The figures come in spite of the Bank of England's huge cuts in interest rates in the past three months to 2%, their lowest level for 58 years. The Bank is expected to make another cut this week to an all-time low of 1% or 1.5%.
Deloitte's survey also reveals that 95% of finance bosses said credit was expensive, up from 64% a year earlier.
Deloitte partner and vice chairman Margaret Ewing said: "Faced with an unprecedented speed of economic downturn in recent months, a further deterioration in credit conditions and exceptional uncertainties, chief financial officers have become significantly more risk averse and many are simply focused on survival for their companies."
The survey comes days after the Bank of England's latest credit conditions survey predicted a further reduction in lending to businesses and households during the first three months of this year.
More than half of those surveyed by Deloitte, 56%, planned to reduce debt during the coming year; 11% were intending to increase it.
Deloitte economist Ian Stewart said: "Tighter credit conditions have brought about a dramatic shift in corporates' attitudes to debt.
"A year ago the balance of opinion among CFOs was that the UK sector was under-geared. Today, the view is that corporates have too much debt."
Nearly a quarter of CFOs expect to cut dividends to shareholders, to save cash. But firms also see opportunities. Three-quarters of those surveyed said they could seek to boost their market share and buy companies or other assets cheaply.
More than a third, 38%, plan to profit from weaker labour markets by taking on more skilled staff, Deloitte said.
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