German and UK firms face payment problems |
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| Wednesday, 22 April 2009 16:02 | |||||
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According to the latest research from London-based working capital solutions provider Demica, firms in the supply chain are unable to sustain further stretching of payment terms. The study confirms popular demand for the state guarantee scheme to underpin vital supply-chain insurance announced by Chancellor Alistair Darling in the Budget. The new report from Demica, which surveyed over 1000 firms with over 50 employees in the UK and Germany, showed that whilst the initiative will certainly help a proportion of these firms, it will remain a short-term solution. It remains that many buyer firms at the end of the supply chain are still keen to extend payment terms with their suppliers. Current pressures on cash flow, along with a scarcity of traditional credit, are making this impossible.The report’s findings raise critical concerns for supply chains where essential suppliers are hard to replace. The much awaited supply chain insurance plan would provide a temporary solution for the hundreds of supply chains that are threatened by the recession-fuelled reduction in credit insurance, and would be a lifeline for small to medium-sized businesses struggling to cope with the recession.The results of Demica’s latest research report into Supply Chain Finance reveal, however, that although restoring availability through a state-backed scheme will certainly be a great help to UK businesses, a more permanent solution is required as 88% of UK firms, (compared to 55% of German companies) have identified that key suppliers are unable to sustain further lengthening of payment periods. Once the UK and German economies come out of the other side of the current downturn, it would appear that SCF will have matured into a mainstream financing technique. 83% of UK companies and 55% of German firms believe that banks’ relationships with their business customers have been irrevocably altered and restructured during the last 18 months.
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