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Firms say crisis will worsen

A whopping 97% of UK businesses predict credit conditions will worsen during the next six months.

The latest quarterly survey by the Confederation of British Industry and PricewaterhouseCoopers also reveals that up to 11,000 jobs in the financial services sector could be at risk thanks to prolonged market turbulence.

The survey shows that 90% of firms surveyed in Q1 believe the liquidity crisis will last longer than six months compared with 70% in Q4 2007.

Some 25% of respondents cut jobs in Q1 while 33% expect to make redundancies this year. And the survey reveals that the amount of lending to private individuals has reached the lowest level seen since March 1991.

At this point the UK entered its last major recession.

Ian McCafferty, chief economic adviser for the CBI, says: “The character of the liquidity crisis has changed. The lack of trust between banks is even worse than it was last autumn.”

He thinks this mistrust has spread from sub-prime mortgage-backed assets to other classes.

McCafferty says: “This is a serious crisis. There is a lot of uncertainty and a lack of transparency over complex financial products.

“It is clear that things have worsened over the first three months of the year. The interbank markets have become more gummed up with banks even more unwilling to lend to each other.”


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