What’s the trend for insolvency – and should we be concerned?
While we’re seeing a real appetite for business growth along our clients, the national trend for business insolvency is up – with the UK facing the highest rate in Western Europe. This is putting pressure on supply chains – and customers that already have weak-performing businesses are proportionately more likely to go bust. We’re seeing an increase in claims that reflects the rise in insolvencies of nearly 9% in the first half of this year.
A number of factors have combined to exacerbate the UK’s problems, including the second extension of Article 50 that not only created trading uncertainty but has impacted upon inflation and exchange rates. The continuing indecision around 31 October has led insurers such as Atradius to forecast an additional 10% rise in insolvencies in 2019. And the forecast for insolvencies through 2020 is also as bleak.
Atradius say: “2020 will be another difficult year for UK businesses with a more modest 5% increase expected. This forecast is based on a meagre 1.4% expansion of the economy under the scenario that an extension of Article 50 in October leads to a smooth transition in H1 of 2020.
“It is just as likely that an extension leads to a general election, which would extend the period of uncertainty and put upward pressure on the number of business failures.” Of course some sectors are higher risk than others, and we’re helping our clients to manage their risk exposure whatever business they’re in. And those businesses are set to prosper.