BusinessCompany NewsWorrying noises in the engine of the economy

Worrying noises in the engine of the economy

The number is almost too big to fully comprehend

Almost two million companies in the UK have poor credit ratings ­ labelled
high risk or above normal risk, their low scores come about largely because they
do not makemanagement accounts available to third parties.

Even if no one else will say it, the number verges on a crisis. With such
poor credit ratings vast numbers of businesses will be unable to access funding,
arrange trade credit insurance or satisfy the inspection of potential business
partners.

As the companies involved mostly range up to the audit threshold of £5.6m in
size, we are talking about the engine room of the UK economy being badly
affected by what are procedural matters regardless of whether current trading
conditions are also causing damage.

What should be done? One way around this is for the companies with low
ratings to simply bite the bullet and start making management accounts
available. This will be an extra burden, but the burdens are not insurmountable.

Perhaps the biggest obstacle is not necessarily putting the accounts together
but the cultural issue of making information available to people who would not
otherwise see it. SMEs have always been shy about revealing their numbers. The
current Companies House demands for abbreviated accounts allows inhibitions to
be indulged.

It looks like companies will have to overcome their shyness. There was a time
when it could be argued that management accounts might not be so useful anyway.
But that argument is beginning to look weak in the face of a mounting crisis.
Besides the choices are stark. Keep your numbers under wraps or survive. Not
much choice in that.

comment@accountancyage.com

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