Corporate UK ill prepared for downturn

Gordon Brown has said on a number of occasions in the last few months that the UK was well prepared to cope with the recession. Today, when it finally became official that we ARE in recession, my company’s recent analysis of the state of the corporate nation leading up to the downturn makes worrying reading. More than 60% of incorporated companies on Graydon’s credit information database had high or above normal risk profiles coming into the recession. Far too many companies, it would appear, had high gearing and working capital deficiencies coming into the credit squeeze- no wonder they’re struggling, now that easy credit has dried up. Like many consumers in this country, indebtedness was something businesses learned to feel comfortable with during benign economic conditions, and perhaps too many bad habits crept into corporate life during the good times.
Some people have asked me lately whether credit reports can assess the likely creditworthiness of companies in these difficult and fast moving times. i’ve answered that companies all have histories, and therefore were in various states of health when entering the downturn.Is all this history irrelevant when it comes to chances of survival?
I’ll draw an analagy: a plane crashes in the jungle. there are three survivors facing a crisis- a three year old toddler, a 30 stone, 40 cigs a day man, and a 28 year old rugby player. Have they all got the same chances of survival?….. It’s the same with companies.

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