Welcome to December's issue of Credit Management News Digest. This issue is sponsored by SCHUMANN.
UK Economy & Brexit
CBI predicts modest economic growth if the UK exits the EU by 31 January 2020 with the prospect of an ambitious trade deal. According to the CBI’s latest economic forecast, GDP growth during the next two years looks set to remain modest at 1.3% in 2019 and 1.2% in 2020. However, the CBI notes that these predictions are predicated on the assumption that the UK exits the EU by 31 January 2020 and has a "clear line of sight to an ambitious trade deal". According to the CBI, the main risk to the outlook is continuing Brexit uncertainty - particularly the potential threat of a No Deal Brexit. Further escalation in US-China trade tensions would also impact world growth and trade, with a knock-on effect on the UK economy. To read the CBI's news release go to https://www.cbi.org.uk/media-centre/articles/imperative-to-protect-uk-growth-beyond-brexit-cbi-economic-forecast/.
UK growth to remain modest in 2019-2020. PwC’s latest UK Economic Outlook projects that UK economic growth is likely to remain subdued, growing by around 1.2% in 2019 and 1% in 2020 - significantly below its long term average rate of around 2%. According to the report, economic growth has slowed over the past two years primarily due to a dampening of business investment, resulting from both a lack of clarity over Brexit and heightened global trade tensions. John Hawksworth, Chief Economist at PwC, commented: “UK economic growth is likely to remain choppy throughout the rest of this year and in early 2020. However, there could be a modest bounce in business investment later in 2020 if the UK achieves an orderly Brexit." To read PwC's news release go to https://www.pwc.co.uk/press-room/press-releases/ukeo-economic-prospects-release.html.  
UK growth rallies in Q3 2019 - but is still half of what it was a year earlier. Latest data from the OECD has shown that GDP growth in Q3 2019 picked-up in the UK to 0.3% following a contraction of -0.2% in Q2. Although this is good news, the OECD data also notes that the UK's annual growth of 1% between Q3 2018 and Q3 2019 is 0.3% less the European Union as a whole, 0.6% less than the OECD, and 0.6% less than UK's figures for the same period a year earlier (i.e., Q3 2017 - Q3 2018). Q3's growth is also half of the 0.6% recorded for the UK in Q3 2018 and Q1 2019. To read the OECD's news release go to http://www.oecd.org/sdd/na/gdp-growth-third-quarter-2019-oecd.htm.
The UK is one of the weakest economies in the OECD. New analysis published by the TUC has revealed that the UK has had one of the slowest growing economies in the OECD since the general election in 2017. The TUC notes that growth has been dragged down by lack of investment (-0.2% between Q2 2017 and Q2 2019. compared to +3.4% across the rest of the OECD) and a fall in exports (-2.6% between Q2 2017 and Q2 2019 compared to the OECD average of +3.4%), with nearly all other OECD nations outperforming the UK on both. Furthermore, the TUC finds that over the past two years, the UK economy has slowed to less than half the long-term growth rate experienced before the financial crisis (2.8%). To read the TUC's news release go to https://www.tuc.org.uk/news/uk-economy-has-fallen-relegation-zone-oecd-2017-election-tuc-analysis.
Weak GDP growth forecast for 2020. According to the latest economic forecast from British Chambers of Commerce (BCC) GDP growth is forecast to slow from 1.3% for this year to 1.0% in 2020 - the weakest outturn since 2009. Although this is a slight upgrade on BCC’s previous forecast of 0.8%, it indicates that by the end of 2020 the UK economy will have experienced its second weakest decade of average annual GDP growth on record. In addition, the BCC cautions that downside risks to the UK’s economic outlook remain concerningly high due to Brexit, uncertainty in the aftermath of the General Election and a weakening world economy. To read the BCC news release go to https://www.britishchambers.org.uk/news/2019/12/weak-gdp-growth-forecast-for-2020-as-business-investment-falls.
UK Trade Sectors & Business Demography
UK manufacturing grinds to a standstill in the face of an economic and political storm. According to a new survey released by Make UK and BDO, Britain’s manufacturers have ended the year at a standstill as the toll of ongoing political uncertainty and downturn in major global markets shows little sign of ending anytime soon. The Q4 Manufacturing Outlook survey comes on the back of a raft of weak PMI and official data across Europe in recent months. Domestic orders remain weak and in negative territory at -5% (-6% in Q3). The one positive light in the survey is that export orders have picked up slightly from +6% to +10%, although Make UK stresses current uncertainties and weak world markets may mean that this positive picture can not be sustained. To read BDO's news release go to https://www.bdo.co.uk/en-gb/news/2019/industry-grinds-to-a-standstill-in-the-face-of-economic-and-political-storm.
UK Manufacturing exporters report a stark drop in sales and orders. The Quarterly International Trade Outlook for Q3 2019, released by British Chambers of Commerce (BCC) and DHL, has revealed that indicators for exporting manufacturers in Q3 2019 have undergone substantial declines, with several key indicators for orders and cashflow now in negative territory. The percentage balance of exporting manufacturers reporting an increase in export orders fell to –1%, down from +9% in the previous quarter. Similarly, the balance of those reporting increased domestic orders fell to -4% in Q3, down from +8% in Q2. The exporting services sector also saw indicators well below historical levels, with a balance of 0% reporting an increase in export orders - down from +5%. To read the BCC's news release go to https://www.britishchambers.org.uk/news/2019/11/bcc-quarterly-international-trade-outlook-for-q3-manufacturing-exporters-report-stark-drop-in-sales-and-orders.
UK retail sales halt their decline in November. According to the latest quarterly CBI Distributive Trends survey, UK retailers reported broadly unchanged sales volumes in the year to November after six consecutive months of declining annual sales. Retailers now expect growth to return in the year to December, with their strongest expectations in seven months. Grocers made the greatest positive contribution to the headline figure this month. Anna Leach, CBI Deputy Chief Economist, said: “growth has been volatile during 2019, as activity has shifted in response to moving Brexit deadlines, and underlying momentum has slowed. We expect the economy to continue to grow modestly in the event of a 'smooth' transition to a new Brexit deal, with a no-deal Brexit likely to hit output and financial markets significantly." To read the CBI's news release go to https://www.cbi.org.uk/media-centre/articles/retail-sales-cease-their-decline-in-november/.
1 in 5 of the top 150 UK motor retailers made a loss in 2019 - twice as many as the previous year. According to BDO's Motor 150 Report for 2019, return on sales at the UK’s top 150 motor retailers has fallen to its lowest level since the financial crisis. Also, despite a 1.4% increase in turnover over the last year, profit before tax is at its lowest level since 2012. Brexit and economic uncertainty, rapid technological change and changing customer attitudes have all contributed to a 6.8% fall in new vehicle registrations and a fall of 2.1% in used car registrations. Overall, 1 in 5 companies in the group made a loss - twice as many as the previous year. To read BDO's news release go to https://www.bdo.co.uk/en-gb/news/2019/motor-150-report-2019.
26% of small UK firms report that market uncertainty is holding them back. According to a new study from Hitachi Capital Business Finance, in just six months there has been a 26% rise in the number of small businesses saying that market uncertainty is holding their business back from growing. Small businesses in the accounting (48%) and manufacturing (45%) sectors are most likely to blame market uncertainty as a barrier to growth. Although in the agricultural sector this has traditionally been a more moderate issue, this quarter has seen the sharpest rise in concerns over market uncertainty – a relative 48% rise in just six months. To read Hitachi Business Finance's news release go to https://www.hitachicapital.co.uk/news-media/26-rise-in-small-firms-being-held-back-by-market-uncertainty/.
New data indicates that banks are unwilling to lend to small UK retailers, although lending to large retailers has risen. Moore has reported that bank lending to small and medium-sized retailers in the UK has fallen by 6%, from £15.6 billion to £14.7 billion, since the Brexit vote in 2016. In contrast, large retailers have benefitted from a sharp rise of 20% (from £31.5 billion to £37.8 billion) in bank lending. Moore notes banks will have limits over what percentage of their loan book they will concentrate in the retail sector, and with big retailers increasing their borrowing so aggressively this inevitably means less finance for smaller retailers. To read Moore's news release go to https://www.moore.co.uk/news-views/december-2019/current-challenges-in-the-retail-industry-make-ban.
The number of UK business births has dropped for the first time since 2010. Latest data from the Office for National Statistics (ONS) has revealed that the number of UK business births has decreased for the first time since 2010, from 414,000 to 382,000 between 2016 and 2017 - a birth rate of 13.1% compared with 14.6% in 2016. The highest percentage of business births occurred in transport and storage (including postal) at 18.5%, where there was a marked increase (from 52% in 2012 to 63% in 2017) in the number of single employee limited companies. To read the ONS' news release go to https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/bulletins/businessdemography/2017.
The number of UK business deaths has increased for the first time since 2010. Latest data from the ONS has revealed that the number of UK business deaths increased from 288,000 to 357,000 between 2016 and 2017 - a death rate of 12.2% compared with a rate of 10.2% in 2016. The highest percentage of business deaths was in the education sector at 18.8%. The data also revealed that the five-year survival rate for UK businesses born in 2012 and still active in 2017 was 43.2%. The lowest five-year survival rate was in accommodation and food services at 34.2%. To read the ONS' news release go to https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/bulletins/businessdemography/2017.
UK Insolvency, Late Payment & Business Distress
UK SME bosses go without wages due to late payment abuse. Construction Enquirer has reported that new survey findings from engineering services trade bodies ECA and BESA reveal the devastating impact of unfair payment on construction. Three-quarters of the UK business owners surveyed said they had been forced to make sacrifices as a result of late payment, with 37% reducing their salary and 23% cancelling company training activity. Furthermore, over one in three said they have struggled to pay business taxes due to payment issues, while nearly one in ten employers had paid their staff late. Overall, 92% of survey respondents said their business had faced payment issues, with 65% reporting that they are paid late frequently or very frequently. To read Construction Enquirer's article go to http://www.constructionenquirer.com/2019/11/28/sme-bosses-go-without-wages-due-to-late-payment-abuse/.
UK SMEs face a debt burden on £23.4 billion. According to figures released by Bacs, UK SME late payment debt has risen to a staggering £23.4 billion - up £10.4 billion on the £13 billion owed in 2018. The research also shows that just to collect money they are owed, UK SMEs are now facing a total bill of £4.4 billion a year - with around a quarter (22%) spending more than £500 a month chasing payments. Overall, the number of businesses experiencing overdue payments has hit 54%, and the average late payment debt burden has also increased to £25,000 per company - up from just over £17,000 in 2018. The research notes that, on average, UK SMEs feel that a debt burden of £35,000 is sufficient to jeopardise their business. To read Bacs' news release go to https://www.bacs.co.uk/NewsCentre/PressReleases/Pages/UKSMEsFaceDebtBurden.aspx.
UK pub and bar company insolvencies jumped 13% over the last year. New research by UHY Hacker Young has shown that the number of insolvencies of UK pub and bar companies has increased by 13% to 530 in the last year (year-end September 30, 2019) up from 470 the previous year - the third successive year in which pub company failures have increased. Insolvencies are being driven by a sharp rise in pub costs, with weakness in sterling since the Brexit vote increasing the costs of imported drinks, combined with the gradual slowdown in consumer spending in the sector. To read UHY Hacker Young's news release go to https://www.uhy-uk.com/resources-publications/resources-by-service/turnaround-and-recovery/pub-and-bar-company-insolvencies-jump-13-to-530-in-the-last-year/.
Major contractors accused of ‘endemic late payment’. Construction Enquirer has reported that trade contractors have been highlighting “endemic” payment abuse among some tier one firms following a recent spate of specialist collapses. One leading specialist trade body told Construction Enquirer: “Our members feel that payment abuse is endemic with certain tier one contractors. . .  Rather than 60 days payment, six months free credit and unauthorised overdraft paints a truer picture of the construction industry in some sectors.” The article also highlights the growing use of Pay Less Notices, contra-charges and contract amendments to avoid and delay payment. To read Construction Enquirer's article go to http://www.constructionenquirer.com/2019/11/25/major-contractors-accused-of-endemic-late-payment/.
Ex-small business commissioner complains that his budget was too small to tackle late payment. Smallbusiness.co.uk has reported that Paul Uppal, the former small business commissioner/late payment tzar who stepped down in October over an alleged conflict of interest, recently advised The Times that the UK government ignored his office and noted that his budget was too small to tackle the “huge task” of getting big companies to pay small businesses on time. Chancellor Sajid Javid said last week that a successor to Mr Uppal would be found quickly and that the role would be given more teeth. To read smallbusiness.co.uk's article go to https://smallbusiness.co.uk/ex-small-business-commissioner-blames-whitehall-for-pushing-him-out-2548992/.
Credit Management News and Resources
New tool enables users to easily search Annual Reports filed as flat images at Companies House. Company Watch has announced that launch of a new tool SearCheD (Searchable Companies House Documents) which, using optical character recognition and indexing technology, has digitised the scanned flat Annual Report images for medium and large UK companies filed at Companies House since 2016. For more information and a video presentation  go to https://www.companywatch.net/searched-launch-info/.
Creditor Insolvency Guide. R3 has published a step-by-step guide designed to help creditors (particularly sole traders or small companies) navigate their way through an insolvency process. The guide explains the terms you might come across and the insolvency procedures you are likely to be involved in. Also included is advice on how to engage in the process including how to see misbehaving directors or debtors brought to justice, and how to agree a fair fee with an insolvency practitioner (a licensed independent specialist) for the work they will be doing. For more information go to http://www.creditorinsolvencyguide.co.uk/.
Brexit checklist (UK.gov). The UK government has published a resource that enables UK businesses to determine what actions they should take to prepare for the possibility that the current withdrawal agreement may not be approved and signed by both the UK and the EU by 31 January 2020, or at the end of a transition period and, consequently, the UK leaves the EU without a deal. For more information go to https://www.gov.uk/get-ready-brexit-check.
Brexit checklist (The British Chambers of Commerce). The BCC has advised that it believes all firms – not just those directly and immediately affected – should be undertaking a Brexit 'health check', and a broader test of existing business plans. It has prepared a checklist to help. For more information go to https://www.britishchambers.org.uk/page/business-brexit-checklist.
European & World Economy
Global trade volume growth of goods and services is estimated to have slowed to its lowest rate since 2009. According to the OECD’s latest Economic Outlook, world GDP growth is expected to decrease from 3.5% in 2018 to 2.9% this year - its lowest annual rate since the financial crisis - and remain at 2.9%-3.0% in 2020 and 2021. Growth in the US is forecast to slow to 2% in 2020 and 2021. In the euro area and Japan, growth is expected at around 1% while the deceleration in China’s growth is predicted to slow to 5.5% in 2021, compared with 6.6% last year. The OECD also noted that global trade volume growth of goods and services is estimated to have slowed to 1% this year – its lowest rate since 2009. To read the OECD's news release and presentations go to http://www.oecd.org/economy/economic-outlook-weak-trade-and-investment-threaten-long-term-growth.htm.
Deloitte European CFO Survey: Pessimism rises as risk appetite tumbles further. Over a third (36%) of Europe’s CFOs feel more pessimistic about their companies’ financial prospects than they did three months ago, according to the tenth edition of the Deloitte European CFO Survey. This percentage has doubled since the first survey in spring 2015 when the figure stood at 18%. Fewer than one in five CFOs (18%) consider now to be a good time to take on risk, the lowest percentage on record with caution most noticeable in countries inside the euro area. To read Deloitte's news release go to https://www2.deloitte.com/uk/en/pages/press-releases/articles/deloitte-european-cfo-survey-autumn-2019.html.
Despite showing some signs of improvement, the global business operating environment remains fraught. Dun & Bradstreet's (D&B) latest Global Business Risk Report, which ranks the biggest threats to global businesses has indicated a second successive, slight quarterly improvement in the outlook for cross-border businesses. This comes after the score hit its worst-ever level in Q2. However, D&B cautions that the Q4 result, although better than both Q2 and Q3, is still at an elevated level, indicating that the global business operating environment remains fraught. Furthermore, the current score shows that there has been a significant worsening in business risk since Q1 2018 – when the best-ever score was recorded. To read D&B's report go to https://www.dnb.co.uk/perspectives/finance-credit-risk/quarterly-global-business-risk-report.html.
Events & Offers
Supply Chain Finance Summit, 30-31 January 2020. Amsterdam
The fifth annual Supply Chain Finance Summit is a great opportunity to learn about the latest trends, ideas and developments transforming working capital and supply chain management, as well as a chance to network with leaders in the industry.
This in-depth event tracks the transformation of supply chain finance (SCF); showcasing the latest innovations within the industry for both domestic and cross-border financing, examining the future of technology-enabled supply chain models, and driving the conversation on increasing access of SCF for SMEs and emerging markets.
As event partners, Credit Insurance News can offer their members a 10% discount on a delegate pass rate. To register please follow this link https://bcrpub.com/events/supply-chain-finance-summit-1.
The Credit Insurance News delegate discount code is CIN20– please utilise the code upon booking. Alternatively you can contact yongmei.he@bcrpub.com quoting your discount code for payment via invoice.
International Chamber of Commerce (ICC) Academy’s 9th Supply Chain Finance Summit, 4-5 March 2020. Singapore.
Now in its 9th edition, the ICC Academy, the educational arm of the International Chamber of Commerce (ICC), is set to host the next chapter of its annual Supply Chain Finance Summit. Marked by its year-on- year success, the event returns to Singapore on 4-5 March 2020, highlighting the island city-state’s standing as a pivotal trade and financial hub that continues to shape the development of Asia’s supply chain.
Blending a more global perspective with regional highlights, the 2020 agenda will focus on some of the most in-demand subjects in the supply chain process. Topics of discussion to include the evolving role of corporate treasurers; alternative finance as the mainstay of SCF; innovative SCF and financing the digitized supply chain; managing the cross-border supply chain, ‘Green Supply Chain’ and a debate on Banks vs Fintech.
This two-day flagship event will bring together over 300+ of the most influential global trade and supply chain finance experts, banking professionals, business leaders, lawyers and government officials from over 20 countries to debate the critical issues affecting the physical supply chain and supply chain finance industry.
The signature event will aim at providing a platform for global professionals, practitioners, and institutionalists to exchange insights and ideas on the latest developments and challenges in the supply chain industry. Participants will be able to gain valuable knowledge from in-depth panel discussions, examine key case studies and enjoy an array of dedicated networking opportunities. In addition to the formal sessions, this summit will also be a valuable platform for informal dialogue among the fellow delegates and experts to share ideas and experiences and enjoy a good networking. For more information about the summit, login to the official event website.
Get 20% off with our early bird offer using code scf2020-earlybird until 31 Dec! 
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