More credit lines cut at retail as channel calls for help - PC Retail

More credit lines cut at retail as channel calls for help

Banks fingered as guilty culprits as trade bodies warn things must change
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Research from Roland Berger strategy consultants has found that banks are stripping away vital overdraft facilities from a third of the UK's largest retailers, threatening liquidity and jobs.

Of those firms that were surveyed, 55 per cent had been plagued by poor liquidity, while 45 per cent had seen their credit ratings reduced after credit was withdrawn by banks and insurers.

"IT companies will not be exempt from the impact of credit withdrawal," said Roland Berger's consumer goods and retail partner, Tim Manasseh. "They have already been hit by a collapse in consumer spend, and the credit issue means that they now need to take radical measures to find efficiencies in their operations, and address working capital."

It is potentially devastating for a high-cost low-margin market like the IT trade.

"This is a trend being set by many of the banks and is set to have serious effects on the IT channel," Wayne Cockerill, chairman of the National Buying Group warned.

"Without Government intervention into how the banks are conducting business, the industry will suffer in 2009, and any assistance provided needs to be channel wide and provide support for the indie reseller channel, too.

The PCA's Keith Warburton (pictured) argued that a new approach is needed: "Most resellers and their suppliers have relied upon credit to fund their transactions. The current credit crisis highlights the need to get back to basics, to not rely on credit, and to develop some new standards for trading in the channel."

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