For in-depth analysis on wider issues surrounding business credit risk look no further than Graydon’s In Credit blog.

Personal debt set to cause further woes

18 October 2012

Businesses reliant on consumer spending could face further hardship. New debt statistics show that outstanding personal debt stood at £1.412 trillion at the end of August 2012. This is up from £1.407 trillion when compared to the previous year.

The average household debt in the UK, excluding mortgages, was £5,949 in August. The statistics were supplied by Credit Action. The Office for Budget Responsibility predicts that total household debt will reach £2.044 trillion in Q1 2017.   

Already strained businesses could see profits fall further as consumers reduce their non-essential spending. Many sectors are already suffering as a result of the double dip recession.

Consumer spending can cause a knock on effect to other sectors.   When a business becomes insolvent or makes late payments it places a considerable amount of strain on its creditors.   Using credit reports to check businesses before entering any agreements can stop weaknesses in a supply chain.

Non-food retail in particular is struggling. The number of high-profile failures in the sector this year highlights the difficulty of the current market. Clinton Cards, Game and JJB Sports are just a few of the well-known names to have failed recently.

With margins squeezed and revenues in a downward spiral, reducing cost is one of the few options available that businesses can take to ensure survival. 

 

This entry was written by Ranjna, posted on 18 October 2012 Bookmark the permalink. Follow any comments here with the RSS feed for this post. You can post a comment.

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