Businesses are worried about what it will mean for their businesses.
Credit: Debt ceiling image via Shutterstock
U.S. businesses are growing increasingly worried about the consequences of the continued wrangling in Washington, a new study finds.
Research from the Association for Financial Professionals revealed that executives feel in the near term that the standoff over the government shutdown and debt ceiling will lead to a decline in capital expenditures, a drop in hiring and increased layoffs at many companies.
More than 20 percent of those surveyed said they would have to cut their capital spending should Congress and the White House fail to reach an agreement on raising the debt ceiling, while 16 percent said they would consider hiring freezes and 10 percent would have to start thinking about potential layoffs.
The damage goes beyond just short-term consequences. The study shows that 40 percent of organizations are holding back on making growth-oriented investments in the U.S. due to the recurring battles over budgets and debt limits.
"Companies are issuing a warning: a default will lead to lower capital investment and job losses, and slowing business activity amid an already-tepid recovery," said Jim Kaitz, president and CEO of the Association for Financial Professionals. "Companies are already expecting lower demand for their goods and services as a result of the budget and debt ceiling impasse."
The research found that 41 percent of executives are expecting a negative impact on their own products and services, while 35 percent are expecting their companies to have a diminished demand for products and services from other organizations.
In addition, more than half of those surveyed said a government default, which will occur should a deal on the debt ceiling not be reached by Oct. 17, would harm their companies' access to capital. An increase in the cost of bank credit and a higher cost of debt financing are other concerns executives have should the debt ceiling not raised.
The study was based on surveys of nearly 1,000 financial executives in corporate treasury and finance departments at a broad range of U.S. companies across many industries.
Originally published on BusinessNewsDaily.