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Worsening credit crunch threatens large waste and recycling companies - UPDATE

Large waste and recycling companies could be at risk if the Government does not intervene to ensure access to new credit over the next three months. Business lobby group, the CBI, warned that a worsening credit crunch could hit companies following research into businesses access to financial credit, published today.

The CBI Access to Finance Survey found that 63 per cent of firms who sought new finance said its availability had worsened in the last three months. A similar proportion (59 per cent) said it will deteriorate even further over the next three months.

Nearly two in five (37 per cent) firms said they have cut staff numbers over the past three months because of credit-related issues. This rises to almost half when it comes to large firms, 40 per cent of which have also cut back on production.

CBI director general Richard Lambert said: "We have urged the Government to move as quickly as possible to set out when the various support packages to tackle the credit crunch will come into effect, and to implement them quickly. Day by day, constrained credit is damaging our economy. A lack of clarity creates a 'fear the worst' mentality and could be costing people their jobs."

Waste sector finance expert Ernst and Young Renewable Energy and Waste Team director Steve Hazelton confirmed that the sector had not escaped the effects of the credit crunch despite predicted growth.

He said: [The issue lies in] new funding structures proposed by the banks, lending over a shorter period, alongside [banks] being less willing to lend. A lack of liquidity is the real problem. In an environment where banks are unwilling to lend, larger companies could be in danger. But we have seen no sign of that yet. The quality of corporate credit is the issue there. The banks are resistant to taking risk now. Corporates have been hit, and this affects everyone.

The CBI is calling on the government to put forward a clear timetable showing when different measures aimed at repairing credit flows will come into effect. It said this would increase business and consumer confidence, and help companies plan for the future.

ESA chief executive Dirk Hazell commented: ESA's members have managed to place materials onto recycling markets despite unprecedented price volatility. We expect this to continue. We would like to see domestic markets for recycled materials strengthened by acceleration of green public procurement and we hope the budget will give a clear signal to investors in recycling and recovery infrastructure on long term levels for the landfill tax."

 

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