JCB's 'main obstacle' is lack of customer credit

Access to credit is the biggest obstacle to plant sales, construction, and industry in general, according to Matthew Taylor, CEO at JCB.

Taylor said: “We know of people wanting to buy machines that have guaranteed work for those machines, but they still can’t secure finance.” 

He said many other construction projects are on hold because developers cannot secure finance and predicts that the next three months will be ‘brutal’, with increasing unemployment and business failures across the UK.

While Taylor agrees with many of the steps the government has taken, he wants it to relax the capital ratios imposed on banks as this will allow them to lend-on more of the money that has been put in from public finances. “Banks have to lend money otherwise they will go out of business,” he said.

He also highlights the withdrawal of many trade credit guarantees; the insurance taken out by a supplier in case the company it supplies goods to goes bust without paying for the items.

The lack of insurance leads suppliers to demand up-front payment which causes cash flow problems for the receiving company.

“This is probably the biggest cause of companies going bust,” he said, adding that in France the government has moved to bolster trade credit guarantees and feels that a similar move in the UK would ease problems considerably.

Taylor also likes the moves made in Germany where the government will make up some of the shortfall in pay if employees have to move to short-time working for a period. “In the UK we don’t have such support and this means we have no choice but to make more people redundant and that erodes our skills base,” he said.

However, in the medium to long term Taylor is optimistic saying that many of the measures are in place to facilitate a recovery and that JCB will be in a strong position to take advantages of the opportunities that it will bring.

But in the short term it has reduced production to about a quarter of the peak levels in order to keep stocks manageable and Taylor said inventory is lower than at this time last year.

“We cut early to keep costs aligned with what’s happening in the market,” said Taylor, adding: “At the time I thought some of the actions were too soon and too drastic, but as things have turned out they were right.”