The continuous battle and political theater over the debt ceiling is seen by members of the Association for Financial Professionals as damaging to business, and they warn that the failure to raise the debt ceiling and consequentially triggering a default will not be good.
AFP surveyed corporate treasury and finance departments, receiving 964 responses.
Those surveyed already believe uncertainty over a possible default is dampening consumer demand and in turn dampening corporate investment in capital expenditures, and can either lessen hiring plans or lead to lay-offs.
The survey found that in the near term, finance executives believe political wrangling in Washington will lead to reduced demand for goods and services and that a failure to raise the debt ceiling in time will result in reduced capital expenditures and reduced hiring or layoffs at many companies. 40% are holding back on long-term investments due to continuing uncertainty on how events will play out in the US.
“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, AFP’s president and CEO. “Companies are already expecting lower demand for their goods and services as a result of the budget and debt ceiling impasse.”
41% expect that prospects for sales of their own products will be damaged, and 35% say their own purchases from other companies will also head in a negative direction.
A default would cause about 17% of the companies surveyed to dispense with any US Treasury securities and 36% would keep what they have but avoid any further investment in the future.
Finally, 50% expect access to capital to be diminished in the event of a default, with the price of capital rising.