Are buyers bearing the burden of the banking crash?

19 May 2011
Lindsay Clark, international news editor, Supply ManagementOne minute no one outside the City knew what credit default swaps were. The next, they were one cause of a global crisis which threatened to catapult Western economies back to the dark ages. More than two years after the credit crunch, bank lending is still an issue. Analysis by the British Bankers’ Association found that new term lending to small and medium-sized businesses in the UK was down by about 9 per cent in February compared with the same month last year. This will be a disappointment to the government, which had held off a draconian measure on bonuses in a gentlemen’s agreement that promised a boost to bank lending in return. It also hits buyers because even the most innovative and efficient suppliers find it more difficult to pitch for bigger contracts and to move into new markets without ready capital. Clearly banks’ willingness to underwrite suppliers’ risks in terms of capital investment in new equipment or capacity is still in doubt. Some buyers have stepped into this gap. Caterpillar, for example, has said it is willing to discuss supply chain finance with its key vendors to support growing volume in its booming market. But not all buyers will have these avenues open to them. The result could be a struggle to support innovation and development in the supply chain, holding back every link in it. Whether the government’s tough talk with the banks will achieve results, I sincerely doubt.
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