Hurrah and huzzah. The Bank of England's dramatic 1.5% cut in interest rates this week is a shot in the arm after a series of snips that seemed not to grasp the severity of the situation. If nothing else, the cut will lower mortgage payments further, offsetting price increases for food and fuel. And, as we report on p4, the price of food is also coming down, according to the GPI.
The acid test for this cut, however, is credit. And with small suppliers often bearing the brunt, you may have seen Peter Mandelson generously volunteer to make supermarkets cough up on the same new 10-day terms as his Government. At a one-off cost of £5.5bn to the big four, this is never going to happen. (And, if you thought Mandelson was looking out for small businesses, how does he explain the Government's pursuit of a ban on tobacco displays, which will hit CTNs and convenience stores far harder than the multiples?)
One also has to wonder why Mandelson doesn't ask big suppliers like Nestlé and P&G and Imperial Tobacco to be a little nicer to its wholesale customers. As we report in this week's issue, smaller wholesalers are being forced to pay suppliers up front for deliveries because their trade credit insurance limits have been reduced or removed.
A lack of credit has already led to a dramatic consolidation among wholesalers, with onerous guarantees required by tobacco manufacturers playing a large part, surely, in the sale of WH & HM Young and T&A Symonds to P&H in the last year.
In the absence of a credible banking system right now, the market is hugely reliant therefore on suppliers to provide credit, as indeed several are. As we report, P&H has taken on a lot of debt in the past year, while trade creditors total £592m. Concurrently, Makro's trade creditors rose from £202m to £219m. Don't expect supermarkets to follow suit, however. Unless they get paid interest, of course.
The acid test for this cut, however, is credit. And with small suppliers often bearing the brunt, you may have seen Peter Mandelson generously volunteer to make supermarkets cough up on the same new 10-day terms as his Government. At a one-off cost of £5.5bn to the big four, this is never going to happen. (And, if you thought Mandelson was looking out for small businesses, how does he explain the Government's pursuit of a ban on tobacco displays, which will hit CTNs and convenience stores far harder than the multiples?)
One also has to wonder why Mandelson doesn't ask big suppliers like Nestlé and P&G and Imperial Tobacco to be a little nicer to its wholesale customers. As we report in this week's issue, smaller wholesalers are being forced to pay suppliers up front for deliveries because their trade credit insurance limits have been reduced or removed.
A lack of credit has already led to a dramatic consolidation among wholesalers, with onerous guarantees required by tobacco manufacturers playing a large part, surely, in the sale of WH & HM Young and T&A Symonds to P&H in the last year.
In the absence of a credible banking system right now, the market is hugely reliant therefore on suppliers to provide credit, as indeed several are. As we report, P&H has taken on a lot of debt in the past year, while trade creditors total £592m. Concurrently, Makro's trade creditors rose from £202m to £219m. Don't expect supermarkets to follow suit, however. Unless they get paid interest, of course.
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