Nearly two thirds of UK small firms are carrying a credit rating which may negatively affect their ability to obtain credit finance and favourable credit terms from suppliers, according to new research from Graydon UK, a leading credit risk management agency.

Using Graydon UK’s credit scoring system, their recent study reveals that 60 per cent of the three million SME businesses analysed were assessed by the agency as being ‘High Risk’ or ‘Above Normal Risk’, in terms of defaulting on trade payments or getting into financial difficulties. Just 13 per cent of the companies reviewed were awarded ‘Low Risk’ ratings by Graydon UK.

Martin Williams says: “While the recession has unquestionably had an adverse impact on the creditworthiness of small firms in the UK, just as much damage has been inflicted by the sheer absence of relevant information on their financial performance. This lack of data is known to damage companies’ credit scores, just as it does with personal credit scoring.

“This long standing problem results in part from the lack of a central registry in the UK for unincorporated firms to lodge even the most basic details about their existence. Successive governments have also chosen to pass legislation reducing the amount of financial information incorporated companies must file at Companies House.

“Politicians will claim that they’re supporting business by reducing the red tape burden associated with filing company accounts. However, all the current system serves to achieve is to strangle the flow of credit so desperately needed by UK businesses in order to rejuvenate the economy.”