Saturday, February 28, 2009

Nearly half of construction firms lose overdraft facilities

Banks have stripped overdraft facilities from almost half (44%) of the UK’s largest property and construction firms, according to new research.

The study by Roland Berger Strategy Consultants, which interviewed the finance managers at the UK's top 1000 companies by turnover, found that on average a third (34%) of unused credit lines have been withdrawn from affected property and construction firms.

It found that banks’ withdrawal of unused overdraft facilities had a negative impact on construction firms. Without access to these credit lines, 70% of firms have been plagued by poor liquidity and 30% have suffered downgraded credit ratings.
Nearly three quarters (72%) of construction firms earmarked unused credit lines as a safety buffer against a worsening economy. ADVERTISEMENT

Nearly half of construction firms lose overdraft facilities

Klaus Kremers, restructuring and turnaround partner at Roland Berger Strategy Consultants, commented: “The tightening credit situation within property and construction is well documented, but these findings reveal the severity of the shortage at the highest levels of the sector.
“Credit can be the vital lifeblood of a firm’s operations, but is being progressively eroded as the credit crisis persists.
“Construction companies are being deserted by banks on the one hand and by customers on the other. This is diverting the focus of many perfectly viable firms away from improving sales and profits, and onto avoiding insolvency.”