The Effect of Credit on Consumers That Impact on Firms

The effect of credit on consumers that impact on firms

Fundamentals of Business

The effect of credit on consumers that impact on firms

Firms will not exist without the presence of a consumer, they depend on consumers, so when a consumer is affected by some changes, the same applies to firms. Example of extracts below illustrate.

Example 1

Extract from bbc.co.uk, Monday, 30 June 2008 Credit crunch hits NI motor market First it was the housing market, but now motorists are also feeling the pain of the credit crunch as well as rising fuel prices and hikes in car tax. On Belfast's Boucher Road, no-one wants to hear any talk about recession. Consumer confidence is seen as being low enough without further media comment on the downturn. And yet here in the heart of the city's motor industry, falling sales and redundancies are the reality. It's not just that there are fewer buyers around, tighter credit controls are also hitting sales. A sales director at a major dealership confirmed that growing numbers of potential car buyers are being turned down for finance deals. Just as in the mortgage market, the finance houses are looking to limit their exposure to bad debt and to increase margins. The net result is that fewer people are now completing the process which starts with them walking through the salesroom door and finishes with their signing a credit agreement. The result is that the forecourts are filling up with unsold vehicles.

Example 2

Extract from FT·com Taylor Wimpey plans £660m write-down By Sylvia Pfeifer, June 30 2008 08:16 Taylor Wimpey, Britain's largest house-builder, has confirmed it is in talks with major investors to shore up its balance sheet through an emergency share issue while announcing £660m of planned write-downs of its land holdings. The rescue plan, which also includes a re-negotiation of its banking covenants, is in response to what the house-builder described as a "significant downturn" in the UK housing market. The announcement...