With the UK economy expected to show a downturn during 2007 and 2008, and the credit crunch still effecting the UK financial sector, many businesses are begin to wonder if their banks will be there if they need short term support.  While banks have been generally supportive of small, medium and larger businesses during the good times, the indications are that the support may well be ebbing away.

Many analysts are forecasting multi-billion pound write-offs and write-downs over the next 12 months, as the effects of the credit crunch are played out for all to see.  There is currently much activity behind the scenes, with many of the major institutions desperate to salvage what they can from some of their disasterous investments.  While we are not looking at a Barings style fiasco, it seems that many of these financial institutions may have entered into agreements which they did not fully understand – derivatives, cut and splice policy elements and large gearing seem to be the underlying problems.

Even though the world wide economy is expected to slow over the coming months, normally there would be a degree of support from banks to ensure that solid, profitable businesses are able to trade their way through any slow down.  

However, with the banks all reigning in their investments at the moment there has been a collapse in the internal money market.  While this will not last forever, and will slowly return as confidence picks up, it may leave some businesses short of additional capital in the short term.