ISSUE 70: Credit Insurance News Digest

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Global economy faltering from too slow growth for too long. The IMF’s latest World Economic Outlook (WEO) has warned that although global growth continues, its sluggish pace leaves the world economy more exposed to risks. The WEO forecasts global growth at 3.2% in 2016 and 3.5% in 2017, a downward revision of 0.2% and 0.1%, respectively, compared with the January 2016 Update. In a recent speech, IMF Managing Director Christine Lagarde warned that the recovery remains too slow, too fragile, with the risk that persistent low growth can have damaging effects on the social and political fabric of many countries. To read the IMF's news release with a link to the full report and video clip go to http://www.imf.org.

UK ranked seventh most competitive international location for business. A bi-annual study of business competitiveness around the world by KPMG, Competitive Alternatives 2016, examined ten countries – the G7 of Canada, France, Germany, Italy, Japan, UK, US – plus Australia, Mexico and the Netherlands and considered many aspects of the cost of doing business, such as costs for labour, facilities, utilities, transportation and taxes.The UK was ranked seventh in the 2016 report – falling 3 places from its fourth place ranking in the 2014 report as Italy and Australia move up in the rankings this year to fourth and fifth place. France’s ranking dropped from fifth in 2014 to sixth in 2016 and Mexico, Canada and the Netherlands were in first, second and third place respectively. To read KPMG's news release go to https://home.kpmg.com/uk/en/home/media/press-releases/2016/03/uk-ranked-seventh-most-competitive-international-location-for-bu.html.

UK business confidence rebounds from two year low. UK business confidence levels increased by 15 points to 43% in the past month, according to the latest Business Barometer from Lloyds Bank Commercial Banking. The net balance of firms reporting an improvement in economic prospects increased by 24 points from February, resulting in a three-month high of nearly 40%. Companies reporting an improvement in trading prospects also increased to over 45%. Firms all across all the regions reported sizable increases in business sentiment with the Midlands showing the largest improvement of 25 points to 36%, followed by the North (15 points to 50%) and the South (10 points to 43%). In all cases, these gains pushed their net balances to well above their respective historical averages. To read Lloyds's Bank's press release go to http://www.lloydsbankinggroup.com/Media/Press-Releases/2016-press-releases/lloyds-bank/business-barometer---march-2016/.

Tougher UK payment reporting laws delayed. Hilton Baird has reported that tougher payment reporting laws, as outlined in the Small Business, Enterprise and Employment Bill, which will legally require all large companies in the UK to report on their payment practices and policies have been put off until October. Under the new laws, announced by the then Business Minister Matthew Hancock in March last year, big businesses will be required to report on metrics such as: standard payment terms, average time taken to pay, proportion of invoices paid beyond agreed terms and the amount of late payment interest owed and paid. However, Anna Soubry, Minister for Small Business, who is now responsible for the plans, has said that the tougher reporting laws will now begin in October – six months later than originally planned. To read Hilton Baird's news release go to http://www.hiltonbaird.co.uk/Business-Finance-Blog/548/Disappointment-as-tougher-payment-reporting-laws-delayed/.

Almost half of UK SMEs expect sales to increase in the months ahead. UK SMEs have signalled a more bullish outlook in the first quarter of 2016, according to Bibby Financial Services’ (BFS) latest SME Confidence Tracker. The research shows that growth expectations rose by 12% in Q1 2016 when compared to Q4 2015, while the number of small businesses expecting sales to decline fell by over half from 17% in Q4 2015 to 8% in Q1. Almost half (48%) of businesses surveyed expect to see increasing sales over Q1 and Q2, compared to around two-fifths (36%) in Q4 2015, signifying an uptick in optimism. To read BFS' news release go to https://www.bibbyfinancialservices.com/press/news/2016/sme-growth-expectations-bounce-back-in-q1.

Economic growth slows, but UK firms remain upbeat. According to the latest CBI Growth Indicator, private sector growth in the UK slowed, coming to a near halt in the three months to March, but the outlook remains firmly positive. The CBI's survey showed the pace of growth fell to its slowest rate since May 2013, with a balance of +2% of UK firms reporting a rise in output - compared with +8% in February. However firms’ expectations point to a recovery in growth for the next three months. Rain Newton-Smith, CBI Director of Economics, said: “Looking ahead, we expect strong domestic demand to power growth forward. Firms will need to be vigilant in the face of significant risks on the radar though, from uncertainty ahead of the EU referendum to volatility in financial markets.” To read the CBI's news release go to http://news.cbi.org.uk/news/economic-growth-slows-but-firms-remain-upbeat/.

UK business confidence declines, but remains in positive territory. New research from Grant Thornton's International Business Report (IBR) reveals that UK business confidence fell to net 44%, representing the largest drop in confidence of any EU member state covered by Grant Thornton's quarterly global survey of 2,500 businesses in 36 economies. However, despite the significant drop, UK business confidence remains well above the global quarterly average of net 26% - itself representing a three-year low. Similarly, the UK remains one of Europe's most optimistic economies, with the EU average standing at net 34% (a 4% decline from the previous quarter). The IBR also reveals a similar slump in optimism in other geographic blocks, including the G7 (down 7% in Q1), North America (down 6%), Latin America (down 16%) and Asia Pacific (down 10%). To read Grant Thornton's news release go to http://www.grantthornton.co.uk/en/news-centre/uk-business-confidence-declines-but-remains-in-positive-territory/.

Brexit could spell disaster for struggling UK exporters and financial services firms. Begbies Traynor's latest Red Flag Alert research for Q1 2016 has revealed that 21,061 UK manufacturers, many of which rely heavily on exporting, ended the first quarter of 2016 in a state of ‘Significant’ financial distress - 20% higher than the equivalent period last year. The number of food & beverages production companies experiencing ‘Significant’ distress rose the fastest, at 29%. The research also showed that the UK’s financial services sector, is in a substantially weaker financial position compared to the same stage last year, with the number of businesses suffering ‘Significant’ financial distress up nearly a quarter (23%). Ric Traynor, Executive Chairman at Begbies Traynor commented: “Given these figures, the impending threat of a potential Brexit raises difficult questions over how the UK’s manufacturing sector will cope with changes in regulation and protracted periods of uncertainty associated with negotiating new trade agreements." To read Begbies Traynor's news release go to http://www.begbies-traynorgroup.com/news/business-health-statistics/brexit-could-spell-disaster-for-struggling-uk-exporters-and-financial-services-firms-despite-boost-from-weak-pound.

Business confidence remains high, but the EU Referendum is now seen as the greatest potential risk to small and mid-size quoted companies’ businesses. Small and mid-size quoted companies are forecasting strong growth whatever the outcome of the EU referendum, according to a survey for the Quoted Companies Alliance and BDO, conducted by YouGov. Since the last survey was conducted in September 2015, net optimism has increased from +19% to +28% and sales forecasts by small and mid-size quoted companies for the next 12 months are at a near record level, with expected turnover set to grow 15.7%. However, the EU Referendum is now the greatest potential risk to small and mid-size quoted companies’ businesses. This has led to the confidence of both companies and advisers in the UK economy falling sharply from 61.8% to 54.4%, and is likely to continue until a clear result is forthcoming. To read BDO's news release go to http://www.bdo.co.uk/press/business-confidence-remains-high-but-the-eu-referendum-is-now-seen-as-the-greatest-potential-risk-to-small-and-mid-size-quoted-companies-businesses.

Trade growth to remain subdued in 2016 as uncertainties weigh on global demand. The WTO had advised that growth in the volume of world trade is expected to remain sluggish in 2016 at 2.8%, unchanged from the 2.8% increase registered in 2015. However, global trade growth should rise to 3.6% in 2017. On the basis of the forecast for 2016, world trade will have grown at roughly the same rate as world GDP for five years (at market exchange rates), rather than twice as fast as was previously the case. The WTO advises that such a long, uninterrupted spell of slow but positive trade growth is unprecedented, but WTO experts caution that its importance should not be exaggerated. Overall, trade growth was weaker between 1980 and 1985, when five out of six years were below 3%, including two years of outright contraction. To read the WTO's news release go to https://www.wto.org/english/news_e/pres16_e/pr768_e.htm.

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