Businesses urged to understand “customers’ customers” in light of Eurozone problems

North West companies are being urged to gain a better understanding of how the economic problems affecting Eurozone countries could impact on their business.

The warning comes amid fears that financial worries gripping countries such as Greece, Spain and Portugal could tip the UK back into recession because the EU is Britain’s main trading partner.

Damian Walmsley, partner at Moore and Smalley Chartered Accountants and Business Advisors, believes the knock-on effects on UK firms will not just be limited to those that trade internationally.

He says businesses need to have a deep understanding of their customer base, and the factors in the supply chain that might affect them in turn, to plan effectively for any sudden drop in orders.

Damian said: “We were recently working with a company that had seen its sales decline rapidly over a three month period. While they did not deal directly with overseas companies, they found that some of their customers’ customers higher up the supply chain had been impacted by the Eurozone problems. This had resulted in a reduction in orders that led to a domino effect on the companies lower down.

“Sometimes it’s those customers two or three times removed from a business that could be critical to its success. Of course, there’s not much that individual business owners can do about the problems in the Eurozone, but at least by understanding how they may be affected, they can plan effectively to deal with that eventuality.”

Damian says companies can be better prepared by limiting their exposure to ‘at risk’ sectors and developing new products and services to broaden their customer base.

The current Eurozone crisis started in 2010 when Greece required a financial bailout from the European Central Bank (ECB) and International Monetary Fund (IMF) after years of over-borrowing and overspending.

The aim of the original Greece bailout was to contain the crisis and stop it spreading to other countries, but both Portugal and the Irish Republic needed a bailout too because of their own debts.
European government’s then agreed a second bailout plan for Greece, but this was delayed until the country implemented a cross-party unity government.

Bond yields have continued to rise on Spanish and Italian debt – leading to fears that their huge economies will need to be bailed out too. Eurozone countries, led by Germany and France, are still debating a new EU treaty in a bid to restore confidence in the Euro.