Confidential financial information may have to be disclosed by small and medium sized companies if they want to avoid lending decisions being based on accounts compiled during the recession.

An economic upturn is expected in 2010 but credit decisions for small to medium enterprises, the bedrock of the UK economy, may be based on statutory accounts two years old, a credit ratings expert and the UK’s largest trade credit insurer have warned.

Fabrice Desnos, chief executive of Euler Hermes UK, the trade credit insurer which provides businesses cover guarding against their clients going insolvent, said: ‘It will make more companies willing to share more timely information and we are starting to see evidence of this. It will be seen as being more in their interest to do so, because it will give them a chance of better credit terms.’

Desnos said Euler were already analysing ‘benign’ 2007 accounts which were effectively the ‘counterpoint of where we are now’. He said: ‘They do not give an accurate reflection of how a company is doing. When we get to 2010/11, the statutory accounts simply won’t reflect how well the company may be doing because they are based on the worst of the financial crisis.’

Difficulty in securing lending has been a major driver of insolvencies Martin Williams, MD of credit ratings agency Graydon warned and added that the recovery of the UK economy could be stunted. ‘In 2010 and 2011 credit checkers may be basing their decisions on statutory accounts at Companies House from the recessionary years of 2008 and 2009,’ he said.

‘Can SMES and their accountants afford to let that happen? Can the country afford to see this happen? It will just hold the economy back from recovery.

‘I fear for SMEs ability to trade freely in future unless accountants advise their clients about the potential consequences of not embracing the notion of financial transparency,’ Williams added.