Treasurers Warn of 'Significant Threat' of Double-dip Recession

The economic recovery continues, but a ‘double-dip recession’ is regarded as a ‘very significant’ threat to business, say corporate treasurers from around the world according to the latest EuroFinance Quarterly Global Business Confidence Survey.

A number of indicators are moving in the right direction, with almost one-third (32%) of treasurers saying that the financial crisis is now over, and almost two-thirds (63%) being ‘bullish’ with regard to 2010 as a whole.

But the state of the economy is still the biggest ‘top three’ concern for treasurers, followed by counterparty risk. Almost half (48%) say that the availability/cost of credit is a concern.

There are still funding problems around the world, however. The global picture shows that around one-third (35%) of treasurers say that banks are still not delivering acceptable lending terms to healthy companies and a similar proportion say that funding constraints are preventing their company from capitalising on good opportunities.

Andrew Sawers, editorial director of EuroFinance, said: “Some of these survey findings are stubbornly continuing to show that the financial environment is still difficult for a significant minority of companies.”

He added: “If the recovery were solidly in place, we might have some confidence that these problems would gradually fade away. But treasurers and cash managers have a front row seat on the economy. They are obviously very concerned that a second downturn may unwind what little economic progress we’ve made so far.”

The picture varies significantly around the world, however. For the first time, the EuroFinance Quarterly Global Business Confidence Survey reveals regional variations in outlook:

• In most regions, treasurers say that, on balance, banks are delivering acceptable lending terms to healthy companies, but in North America less than a third of treasurers (29%) believe this to be true; in fact, a majority (54%) say that it isn’t.
• The Middle East is the most bullish region, and yet is most likely to say that banks are pricing risk too conservatively, ‘spare cash’ is in decline, and more bad news is expected out of the financial crisis.
• The eurozone is somewhat more pessimist than the global average as to whether the financial crisis is over, but Europeans outside of the EU/EFTA are most certain than others that the financial crisis is at an end.
• The availability /cost of credit is a ‘top three’ concern for treasurers in the eurozone, Asia-Pacific, Middle East, and North and South America, but doesn’t feature outside the eurozone or in Africa.
• Government debt is the biggest threat to business, generally, in North America, followed by the threat of tax increases.

As the ‘euro’ crisis rumbles on, our other findings include the fact that a significant minority of treasurers, fully 42%, think that even the UK might lose its AAA rating. And almost 70% say that the Chinese renminbi (RMB) should revalue against the US dollar.

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