Newsmakers : Firms Hoard Cash As Crisis Deepens

 

 

As the credit crunch continues to wreak havoc in the corporate and financial worlds and shows clear signs of seeping into the real economy, companies are hoarding cash and paying bills more slowly, according to the results of a survey conducted by Global Finance. Of those who responded to the study, conducted in November, approximately 41% said they had tightened their policies on customer credit, up from 37.9% in the October survey. However, only 29% of European companies had tightened the screws on credit.

 

Since September Global Finance has conducted four surveys of its global readership to gauge readers’ views on the impact of the ongoing crisis. Over the course of the surveys, corporate sentiment has shifted significantly, particularly in those markets outside the United States, which have felt the fall-out from the credit crunch much later than companies in the US. In the November survey Europeans were among the most pessimistic about their companies’ futures, with 34.2% saying their prospects were worse or much worse than six months ago, as opposed to 28% for the overall sample. But the biggest pessimists were companies from South America, with 40% of respondents saying their prospects were worse or much worse than six months ago.

 

Asian companies were more upbeat about their prospects, with more than a quarter saying they were much better off than six months ago. However, 52% of companies in Asia said they had tightened credit, compared to 40.9% for all respondents. Asian companies are also paying their bills more slowly than companies from other countries, with 36.7% in Asia holding back on payments, compared with 29.9% overall.

 

Companies’ attitudes toward taking steps to build liquidity without relying on bank borrowing also demonstrated regional differences, with 38% of US-based companies indicating that they were “aggressively” building liquidity, compared to 27.5% for all survey respondents.