UK business faces new era of lower returns, less risk

Companies should adopt a more cautious approach to business even if it means accepting lower profits, Britain's biggest business group said as it published a poll showing the credit crunch had made firms more risk averse.

In a paper published on Monday setting out how it thinks business will evolve over the next 10 years, the Confederation of British Industry said the financial crisis had called into question the traditional Anglo-Saxon model of capitalism.

In future, businesses were likely to operate in a more collaborative and flexible way, relying less on debt, nurturing relations with suppliers and customers, and making greater efforts to operate more ethically, the CBI reckons.

"After the shock of the last two years, this report suggests that what we now need is a more balanced, less risky pathway to growth," CBI Director General Richard Lambert said in a briefing ahead of the lobby group's annual conference on Nov. 23.

"One in which the short term returns may be lower, but the long term rewards for management success will be a lot more sustainable and secure."

A poll conducted for the CBI by business consultants Deloitte showed more than half of UK firms reckon lending conditions will not improve next year and that the credit-crunch has made them less willing to take on debt to finance their operations.

Half of the 66 firms polled said the recession would result in a lasting decrease in the amount of bank debt they accrued to finance their business. However, a quarter of firms said they were more likely to raise cash by issuing bonds and 44 percent noted a greater willingness to issue equity.