ISSUE 68: Credit Insurance News Digest

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Business Information

Downside risks to UK economy have increased. According to the Warwick Business Forecasting System (WBSFS), although economic growth in the UK is likely to continue through 2016 and 2017 at the same rate as in 2015, the downside risks to economic growth in 2016 have increased relative to a quarter ago. The WBSFS now believes there to be a 10% chance of growth of less than 1% in 2016 (compared to a 6% chance a quarter ago), and a 45% chance of growth of less than 2% (relative to a 28% chance a quarter ago). Commenting on the latest Warwick Business School forecasts, timed to coincide with publication of the latest GDP data from the ONS that confirmed economic growth of 2.2% in 2015, Professor Ana Galvao, commented: “The downside risks to GDP growth in 2016 have increased relative to a quarter ago. While the most likely outcome is still that growth continues through 2016 at the same sort of pace as in 2015, the WBSFS now forecasts there to be a 35% chance of 'low growth' between 1% and 2%. Last quarter we forecast only a 21% chance of 'low growth." To read Warwick Business School's new release go to http://www.wbs.ac.uk/news/downside-risks-to-uk-economy-have-increased/.

UK SMEs are owed more than half a trillion pounds in outstanding invoices. MarketInvoice has published a new report, 'The state of late payment 2016', which finds that Britain’s SMEs – which make up 99% of all UK businesses – bear the brunt of the late payment problem. The report estimates that UK SMEs are owed more than half a trillion pounds in outstanding invoices and 59.6% of all UK small business invoices were paid late in 2015, with high-street retail stores the worst offenders. The report also found that late payment is very much a UK problem, and other European countries such as Germany, Switzerland, the Netherlands and Belgium have a significantly better payment record. To download a copy of the report go to http://info.marketinvoice.com/late-payment-report.

Construction industry tops most searched companies in 2015. New analysis by Creditsafe reveals that eight of the ten most searched for UK companies on the Creditsafe system in 2015 operate in the construction industry or are specialist suppliers to the sector. Five of these firms directly work in property construction and development, while three are specialist retailers servicing the industry. Creditsafe advises that in terms of growth the construction sector has experienced a dramatic upturn in 2015. On average, 1,840 new construction companies open per month in the UK, compared to 862 in France and 230 in Belgium. In contrast, in Germany the number of construction companies fell by an average of 25 per month. To read Creditsafe's news release go to http://www2.creditsafeuk.com/resources/latest-news/its-booming-and-busting-construction-industry-tops-most-searched-companies-in-2015/.

Asset based finance supports 15% of all UK company turnover. New research from the Asset Based Finance Association (ABFA) shows that asset based finance supports businesses representing 15% of the UK’s economy, ahead of an average of 10% of the economy across Europe. Furthermore, despite relatively strong growth amongst businesses using asset based finance in France and Germany, both lag behind the UK in both the proportion of the economy supported by asset based finance. Aside from the UK, the top three European countries in terms of proportion of the economy supported by asset based finance are: Belgium – 14.5% of economy (€29.3 billion); Republic of Ireland – 13% of economy (€12.7 billion); Portugal – 12% of economy (€10.4 billion). To read ABFA's news release go to http://www.abfa.org.uk/news/108/UK-businesses-lead-Europe-in-use-of-asset-based-finance.

Export growth slows in the face of global headwinds. BCC and DHL's latest Quarterly International Trade Outlook report shows that UK export growth continued to slow at the end of 2015, with significant falls in export sales and orders across both manufacturing and services sectors. Among manufacturers, the balance of firms reporting improvements in export sales over the previous three months fell from +10% in Q3 to just +1% - the lowest level since Q3 2009 – while export orders dropped from +10% to +1%. Export growth also dipped in the services sector, where the sales balance fell three points to +15%, and export orders fell to +9% from +16% - the lowest level since Q4 2011. To read BCC's news release go to http://www.britishchambers.org.uk/press-office/press-releases/bcc-export-growth-slows-in-the-face-of-global-headwinds.html.

UK growth remains subdued but firms are still positive. According to the latest CBI Growth Indicator, economic growth saw a small improvement on January’s weak performance in the three months to February, and expectations improved for the coming quarter. Growth in the consumer services sector held up well (+21%), as did growth in retail sales (+11%). However, activity in the business and professional services sector remained flat (+1%) for a second consecutive month in February - the weakest spell since early 2013, while manufacturing saw a levelling off in output (0%) following two months of declines. To read the CBI's news release go to http://news.cbi.org.uk/news/uk-growth-remains-subdued-but-firms-still-positive1/.

UK online alternative finance market grows to £3.2 billion in 2015. According to a report published by the Cambridge Centre for Alternative Finance, UK innovation foundation Nesta, in partnership with KPMG and with the support of CME Group Foundation, in 2015 the UK online alternative finance sector grew 84%. However, although this is a significant increase in volume, growth of the online alternative finance market is actually slowing down, with the annual growth in 2014/2015 being nearly half the 161% growth from 2013/14. The report also highlights the rapid expansion of donations-based crowdfunding, the perceived risk of fraud and malpractice by the industry, and increasing institutionalisation. To read KPMG's news release go to https://home.kpmg.com/uk/en/home/media/press-releases/2016/02/new-research-shows-uk-online-alternative-finance-market-grows.html.

UK High Street sales fall after a strong start to the year. BDO has reported that its monthly High Street Sales Tracker recorded a -1.7% fall in year-on-year sales for February – the first negative growth for the month of February since 2012 (when it was down -1.5%). The fall for February reflects a downward trend that has been building since the middle of January. While the overall picture for January was positive (up 1.4%), sales dropped off as soon as the January discounting season ended and retailers started to bring in full-price Spring lines. Sophie Michael, Head of Retail and Wholesale at BDO LLP, said: “After a strong start to the year, primarily driven by the sales period, retailers have returned to negative like-for-like revenue growth. The canny consumer continues to shop for bargains." To read BDO's news release go to http://www.bdo.co.uk/press/high-street-sales-fall-after-strong-start-to-the-year.

UK businesses of all sizes in favour of remaining in EU. New research from Grant Thornton suggests that UK businesses – large, small and mid-sized – are largely in favour of remaining in the EU, but few have considered the practical implications of a 'Brexit' and are unprepared for a potential vote to leave. A nationwide survey of over 200 senior executives suggests that 65% would vote to remain in the EU, and amongst London businesses this rises to 80% in favour of remaining. Outside of the capital, 59% of businesses would vote to remain in the EU. The survey finds a majority in favour of remaining in the EU amongst small businesses (60% in favour of remain), mid-sized businesses (61%) and large businesses (76%). To read Grant Thornton's news release go to http://www.grantthornton.co.uk/en/news-centre/uk-businesses-of-all-sizes-in-favour-of-remaining-in-eu-but-most-are-unprepared-for-a-possible-brexit/.

Business confidence rallied in Q4 2015, but is down for the year overall. The latest Q4 2015 of the Chartered Institute of Credit Management’s (CICM) UK Credit Managers Index (CMI) has reported that although the outlook for growth and nationwide levels of business confidence has rallied after a 7.1% drop in Q3 2015, worryingly, all three favourable factors – new applications for credit, sales and the order books – fell for the second consecutive quarter to end at 62.4, and none of the seven unfavourable factors, which include disputes, bad debt provision, and overdue debt, improved, finishing on an average of 56.2. Philip King, Chief Executive of the CICM, explains that these results are particularly ominous for the future: “With respondents reporting that overdue debt, insolvencies and disputes are on the rise, while new applications for credit are down we might expect to see a turbulent 2016". To read CICM's news release go to http://www.cicm.com/business-confidence-rallied-q4-2015-year-overall/.

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