Commenting on today’s publication of the Bank of England’s second quarter ‘Credit Conditions’ report, Debbie Young, reorganisation services partner at Deloitte, said: “The latest survey shows that the credit squeeze is intensifying, with both the demand and availability of credit falling in the second quarter of 2008.  The corporate sector is coming under increased pressure, as evidenced by rising corporate loan defaults.  The banks are predicting defaults will continue to rise next quarter: a cruel summer indeed.  As a result, an increase in the demand for finance for balance sheet restructuring is expected; a tough challenge given the scarcity and expense of credit.

“Since the credit crunch took effect, we have seen the difficulties initially felt in financial services spread into real estate and some areas of retail.  So far, the more serious problems are contained to these sectors but businesses across the board will be reassessing their credit lines given the economic climate.  Companies should be looking to preserve the relationships they have with their existing lenders, ensuring they have an open and honest dialogue, until the squeeze eases.  Larger shareholders also become more important in times of poor liquidity, evidenced by rights issues in the construction industry.  There will still be banks with appetite to lend to the right business, but this will be decided on a case by case basis.  Where there are signs of distress, businesses will find accessing credit much more difficult; a harsh reality in an unforgiving economic climate.”

Ends

Notes for editors

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP, which is among the country's leading professional services firms.

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