RSS feedsUK finance directors are considering drastic cost-cutting measures to shield themselves against the effects of the credit crunch.
Nearly half of the small companies that represent the bedrock of British business are also beefing up their risk management profiles, according to Baker Tilly.
The mid-tier firm canvassed the opinion of FDs at companies with turnovers between £20m and £250m and found that finance functions were preparing for a significant period of belt tightening.
The review found the number of companies looking at cutting costs has surged from 26% in February to 45% at the beginning of April.
One-third of FDs said the credit crunch was beginning to impact more on their business, with 60% saying they were experiencing a decrease in their profits. One-quarter were now finding it harder to secure financing as lenders were taking a more cautious approach.
Businesses also believe the likelihood of their suppliers collapsing had also increased. In the first survey, only 18% thought that 5% or more of their suppliers were in danger of going bankrupt, but this has shot up to almost 40% believing that.
Companies are now looking at tougher credit controls allied with other more drastic measures, Baker Tilly said.
While 15% were considering redundancies, one in 10 had mooted a change to their remuneration policies and one-quarter are thinking about scaling down the number of new recruits.
Mark Harwood, a partner at Baker Tilly specialising in advising companies, said: ‘Risk management is becoming ever more important as the effects of the credit crunch begin to impact on all areas of business. We are in a period of uncertainty and companies are focusing on internal controls and assessing external risks.’
