Unwillingness to share financial information may exacerbate credit crisis

The proportion of UK firms carrying a credit rating which may negatively affect their ability to obtain finance and favourable credit terms from suppliers has climbed further during the last three years, according to research from Graydon UK, and attitudes towards sharing financial information are making the situation worse than it needs to be.

Using Graydon UK’s credit scoring rules, a new study of approximately five million incorporated businesses in the UK reveals that 69 percent of those analysed were assessed by the agency as being ‘High Risk’ or ‘Above Normal Risk’, in terms of defaulting on trade payments or getting into financial difficulties. This compares with a figure of 60 percent when a similar survey was conducted in June 2009.

In contrast, however, just five per cent of the companies reviewed were awarded ‘Low Risk’ ratings by Graydon UK, compared with a figure of 13 percent three years ago, confirming a slight upsurge in the proportion adjudged to be ‘normal’ in their risk level.

The latest survey also reveals that the frequency of ‘High Risk’ or ‘Above Normal Risk’ ratings is still higher among unincorporated businesses (at a level of 85 percent), with the remainder of firms in this category (15 percent) rated as ‘Normal Risk’ and no companies with status in the ‘Low Risk’ band.

Gordon Skaljak, External Spokesperson, Graydon UK, says these figures underscore the importance to companies of making detailed financial performance information available at a time when credit remains scarce as the recession deepens once again: “Many businesses are being forced to look beyond banks to access alternative sources of finance.

“All business owners need to recognise that 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.”