Bank support questioned after market troubles

The debate over the level of support that the industry is receiving from banks looks set to be reopened after the latest high profile insolvency cases to engulf the catering equipment market.

News that Hansens and Valera were both forced into administration last week has promoted some commentators to question whether more could be done to help businesses work through their problems, especially given the cyclical and project-led nature of the market.

Keith Warren, director of CESA, said that while he wasn’t in a position to comment directly on specific companies, there is a wider issue of whether the whole UK engineering supply chain is adequately supported by the banking sector.

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“Cash flow is often the issue and the models that banks base their decisions on can often be seen to be short-sighted at best and against the interest of providing and supporting a strong supply chain for industry,” he said.

“There can be no doubt that pressure on margins, combined with a fluctuating market, causes unexpected difficulties for all businesses in all sectors. Businesses often need external support to be able to cope with these fiscal stresses and sending in the administrators may not be in the best interest of the banks themselves.”

Warren said there was evidence to suggest that businesses are relying less on external cash support. For SMEs this usually means banks, and it is this support which acts as both an enabler and accelerator of investment.

He suggests that improvements could be made if banks had a greater understanding of specific sectors, such as catering equipment, rather than appearing to apply generic formula when passing judgement on businesses.

“Banks have tiers of staff who make decisions to close businesses without necessarily knowing the businesses or their management teams” said Warren. “CESA works with other trade associations to represent these problems to bank organisations and government. What we need is for them to listen, take note and support business for the long term.”

HAVE YOUR SAY: How well do you think banks are supporting catering equipment suppliers? What improvements would you like to see? And which banks do a great job of understanding the industry?

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