Negative credit rating affecting supplier financial terms

27 July 2012

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29 July 2012 | Kamalpreet Badasha

More than half of UK businesses have a negative credit rating that is affecting their ability to negotiate favourable financial terms with suppliers.

A survey of 2.5 million UK firms by credit referencing agency Graydon found that 69 per cent of the businesses had a ‘high risk’ or ‘above high risk’ rating meaning they were more likely to default on trade payments or were liable to get into financial difficulty. Three years ago in a similar survey the figure stood at 60 per cent.

The firm said the 9 per cent increase over the last three years has been a results of businesses running down their capital reserves because of continued economic pressure.

Additionally the credit agency feels that the government needs to improve financial reporting to increase financial transparency.

Only 5 per cent of businesses were rated as ‘low risk’ compared with 13 per cent in the same survey three years ago. The survey also found that negative ratings were even higher for unincorporated businesses with 85 per cent being rated as ‘high risk’ or ‘above normal risk’.

Gordon Skaljak, marketing director at Graydon, said: “All business owners need to recognise sharing current financial information holds the key to seizing more control over the credit recommendation they receive and the finance they can access to help them run their business.”

The credit agency also said the government needs to introduce measures to make companies financial reporting more transparent.

 


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