Corporates learn to work with the chain
Buoyed by relatively healthy balance sheets, corporates have demonstrated a willingness to directly support the financial health of their supply chains since the start of the coronavirus pandemic.
Corporates have a vested interest in financially supporting their supply chains. It increases resilience and helps to minimize the risk of products and services being unavailable, or suppliers facing liquidity issues.
We are seeing a real sense of businesses ‘working with the chain’
This was graphically highlighted earlier this year when supply chains were hit by restricted movement and reduced demand for goods and services as a consequence of the coronavirus pandemic.
Orders were cancelled or delayed, impacting smaller suppliers who typically have less liquidity.
Many of these firms have struggled. The Bank of England’s agents’ summary for the second quarter of 2020 noted that many small companies are, however, reluctant to increase their borrowing, often because they already have high levels of debt.
They are concerned that they will struggle to repay loans, or are reluctant to encumber their assets.
The summary found that banks continued to offer flexibility on covenants, payment holidays and rolling over existing facilities. However, it also noted banks were reported to be wary of increasing their own exposure by extending new loans to companies in vulnerable sectors.