Issue 86: Credit Insurance News Digest

Business Information

26% increase of ‘significant’ financial distress within key UK sectors. New research from Begbies Traynor has found that rising inflation and growing uncertainty surrounding the UK’s future trade links with Europe is beginning to result in more companies showing increased signs of stress. According to Begbies Traynor’s Red Flag Alert research for Q1 2017, levels of ‘Significant’ financial distress within key sectors in the UK supply chain have risen by 26% on average over the past year following increased cost pressures from rising inflation in both fuel and food prices. Of all the sectors covered by the research, Industrial Transportation & Logistics businesses experienced the largest increase in ‘significant’ distress, up 46% year-on-year (Q1 2017: 7,539 companies). To read Begbies Traynor's news release go to https://www.begbies-traynorgroup.com/news/business-health-statistics/fuel-food-inflation-putting-significant-pressure-on-uk-supply-chain.

Predicted UK growth revised upwards to 1.8% in 2017. As a result of support from a stronger global economy, the EY ITEM Club has predicted that UK GDP growth will reach 1.8% this year (up from 1.3% in its previous forecast), 1.2% in 2018 (up from 1%) and 1.5% in 2019 (up from 1.4%). However, Peter Spencer, chief economic advisor to the EY ITEM Club, warned that political developments could still derail the improving global picture: “The UK’s trade performance and output growth in 2019 and beyond will also depend critically upon the exit terms that can be agreed with the EU 27 and other countries. Our central case is based on the assumption that UK-EU trade will be conducted under World Trade Organization rules. However, there is potential for an upside surprise if transitional arrangements can be put in place, perhaps followed by a Free Trade Agreement later.” To read EY's news release go to http://www.ey.com/uk/en/newsroom/news-releases/17-04-10-stronger-global-economy-paves-the-way-to-brexit-says-ey-item-club.

Ireland is the favourite EU location for insurers after Brexit. According to a survey conducted by Intelligent Insurer, 32% of its readers believe that Ireland is the most attractive location for insurers seeking to create a unit within the EU to retain access to the common market after the Brexit vote. Among reasons presented by participants were the cultural and geographical proximity to the UK and London and the shared language. Some participants also mentioned the legal system and praised the existing regulatory framework as an advantage of the location. Germany was the second most preferred location for insurers seeking to secure access to the EU market after Brexit with 13% of votes. Belgium followed with 12% of votes. To read Intelligent Insurer's article go to http://www.intelligentinsurer.com/article/ireland-favourite-eu-location-for-insurers-after-brexit-claims-survey.
This news story was published on Intelligent Insurer on 5 April. To read more news on Intelligent Insurer, please click here.

UK High Street shop numbers grow for the sixth consecutive month. The April edition of LDC’s Dynamic Location Intelligence Bulletin has reported that UK shop numbers grew for the sixth month in a row as openings increased faster than closures once more. Numbers of stores in town centres continued their recent growth spurt by a net 218 shops opening their doors in March, whilst shopping centres and retail parks continued on their more moderate, but steady, upwards trajectory. Independent businesses also continued to grow, increasing by 385 in March, adding onto a seven month period of growth for Independents. Furthermore, vacancy rates dipped to 12% - the lowest figure recorded by the LDC since the historic high of 14.6% in 2012. To read the LDC's news release go to http://blog.localdatacompany.com/growth-of-independent-businesses-hits-a-12-month-high.

UK High street sales fail to grow for the fourth month in a row. According to figures released by BDO, the UK’s high street is struggling to lift itself out of a lengthy slump. According to BDO’s High Street Sales Tracker (HSST), UK retailers have failed to grow sales for the fourth month in a row, with like-for-like sales flat (0%) in March despite warmer weather, Mother’s day and increases in footfall. In contrast, online with non-store sales rose by 28.1% - the highest monthly result since January 2015. Sophie Michael, Head of Retail and Wholesale at BDO LLP, said: “March 2017 is the fourth month in a row to see no growth on the high street despite a notable rise in footfall. The new season should have triggered high street spending, and retailers will be questioning why they have been unable to convert shoppers into buyers." To read BDO's news release go to https://www.bdo.co.uk/en-gb/news/2017/high-street-sales-fail-grow-fourth-month-in-row.

Jeremy Corbyn announces a plan to tackle late payments culture. Labour Party leader Jeremy Corbyn has announced plans to tackle poor payment practices by big companies against their small suppliers. In a speech to FSB members, Mr. Corbyn’s proposals included excluding late-paying large firms from public contracts, and forcing big businesses being paid by taxpayers to pass on prompt payment requirements down the supply chain. FSB National Chairman, Mike Cherry, said: “Small firms are facing a late payments crisis. We know from our research that around 50,000 small firms a year go bust as a result of unfair and lengthy delays in big business customers paying what they owe. Others often have to take out loans to cover the gap. These poor practices and wider supply-chain bullying have to stop." To read the FSB's news release go to http://www.fsb.org.uk/media-centre/press-releases/jeremy-corbyn-plan-to-tackle-late-payments-culture.

Optimism among UK CFOs reaches 18 month high. According to Deloitte’s latest CFO Survey, business optimism and risk appetite have continued to rise from post-referendum lows and the effects of Brexit on corporate sentiment are easing. 31% of CFOs say they are more optimistic about prospects for their company than they were three months ago, up from 27% in Q4 and just 3% immediately after the referendum. This is the highest level since Q2 2015, when 35% were more optimistic. 17% say they are less optimistic, down from 22% last quarter and 74% after the referendum, and 34% report high or very high levels of uncertainty facing their business, down from 50% last quarter. Risk appetite also continues to climb, with 26% say now is a good time to take risk onto their balance sheets - up from 21% in Q4 and 8% after the referendum. However, this compares to 51% 12 months before the referendum. To read Deloitte's news release go to https://www2.deloitte.com/uk/en/pages/press-releases/articles/deloitte-cfo-survey-brexit-shocks-ease.html.

UK SMEs face cashflow barriers. A new SME survey by Ashley Finance has found that smaller businesses are continuing to face barriers to funding across the UK, with 73% of them finding the application process to be overly ‘long and painful’. These figures directly correlate to figures from the British Bankers’ Association that show a dip of £1.6 billion in business borrowing from banks in February 2017. Richard Waldman, Group Sales Director of Ashley Finance, said: “The SME market is facing uncertain times, and our research shows us that matters are being made worse for a proportion of businesses that are struggling to access funding via traditional routes. To read Ashley Finance's news release go to http://ashleyfinance.co.uk/blog/smaller-smes-face-failure-due-to-cashflow-barriers/.

UK small business confidence recovers despite surging costs. According to the latest Federation of Small Businesses' (FSB) latest Small Business Index (SBI), confidence among UK small firms has risen to the highest level in over a year despite spiraling business costs. The SBI stands at 20.0 in Q1 2017, the highest figure since Q4 2015, and up considerably from the -2.9 recorded after the EU referendum. The strong recovery has been spurred by increased international trade. A net balance of 15.6% of small firms report a rise in export activity during the past three months, with a net balance of 30.5% expecting international sales to increase over the next quarter. Both figures are at their highest level since the SBI began. To read the FSB's news release go to http://www.fsb.org.uk/media-centre/press-releases/small-business-confidence-recovers-despite-surging-costs.

Small businesses outside London embrace Brexit Britain in bullish fashion. Business confidence amongst UK SMEs is on the increase, with just under half expecting sales to increase over the next three months according to new data from Bibby Financial Services (BFS). The latest figures show strong confidence in key UK regions, with businesses in Yorkshire & Humberside (56%), the East Midlands (55%), North East (54%) and West Midlands (53%) all expecting strong growth over the months ahead. However, SMEs in London – who overwhelmingly voted in favour of remaining in the UK - have the lowest confidence across the UK regions with only 38% expecting sales to grow. To read BFS' news release go to https://www.bibbyfinancialservices.com/press/news/2017/small-businesses-embrace-brexit-britain-in-bullish-fashion.

Confidence soars among UK small construction firms. Confidence amongst UK construction firms is on the rise, with 74% of subcontractors set to invest in their business over the months ahead, according to the latest SME Confidence Tracker report from Bibby Financial Services (BFS). In addition, 50% of construction SMEs expect work volumes to increase over the next three months – the highest level since before the EU referendum. Helen Wheeler, Managing Director of Construction Finance at BFS said: “There was a collective confidence wobble amongst construction firms after the referendum last year. However, we are now seeing a step-change in attitudes amongst smaller construction businesses, with more firms looking to invest and grow. Work volumes are also rising, which is a positive indicator, particularly in light of wider economic uncertainty surrounding the UK’s separation from the EU." To read BFS's news release go to https://www.bibbyfinancialservices.com/press/news/2017/confidence-soars-among-small-construction-firms-despite-skills-concerns.

M&A activity between the rest of Europe and the UK has trebled. According to analysis from Deloitte's CFO Survey, the value of M&A deals between the rest of Europe and the UK has more than trebled - from US$4.2 billion in the first quarter of last year to US$13.2 billion this year. In addition, the number of UK CFOs expecting M&A activity to decrease over the next three years as a result of Brexit has decreased by 29% - from 40% immediately after the referendum to 11% in Q1 2017. Iain Macmillan, head of global M&A at Deloitte, commented: "dealmakers are getting used to uncertainty as a feature of the M&A landscape. The data shows they are prepared to make bold moves through M&A, rather than wait and watch how the negotiations play out. This shift in attitude is reflected in our latest CFO survey, where only one in ten CFOs now feel M&A will be slowed down by Brexit." To read Deloitte's news release go to https://www2.deloitte.com/uk/en/pages/press-releases/articles/ma-activity-between-uk-and-rest-of-europe-trebles.html.

World Economic Outlook, April 2017: Gaining Momentum? The IMF's latest World Economic Outlook advises that momentum in the global economy has been building since the middle of last year, allowing The IMF to reaffirm its earlier forecasts of higher global growth of 3.5% in 2017 (up from 3.1% in 2016) and 3.6% in 2018. This improvement comes primarily from good economic news for Europe and Asia, as well as the IMF's continuing expectation for higher growth this year in the US. However, the IMF also predicts that some regions and countries, notably the Middle East, North Africa, Afghanistan, Pakistan and Saudi Arabia will continue to struggle this year with growth rates significantly below past readings. To read the IMF's news release with a podcast and link to the full report go to www.imf.org.

Late payments restrict the growth of UK construction companies. The National Federation of Builders (NFB) has highlighted how late payment is preventing construction SMEs from growing their business. The construction industry has the worst payment performance record out of any sector in the UK economy, making up for 31% of all late payment. Richard Beresford, chief executive of the NFB, said: "Construction SMEs such as our members are currently owed more than £30 billion in unpaid voices. These are the local companies that – while working hard to make ends meet – employ local workers, train local apprentices and generate money in their local economy. To read the NFB's news release go to http://www.builders.org.uk/news/late-payments-restrict-growth/.

European construction output grows as civil engineering picks up. An article published by The Construction Index reports that production in the construction sector grew by 6.9% in the Euro area in February compared to January and by 4.4% across the wider EU (EU28). The initial estimates from Eurostat also record that output increased by 7.1% in the Euro area and by 5.2% in the EU28 compared to February 2016. In terms of the month-on-month increase, the highest increases were recorded in Slovenia (+25.7%), Belgium (+18.7%) and Germany (+13.6%), while the largest decreases were observed in Poland (-2.8%), Sweden (-1.8%), and the UK (-1.6%). The annual increase of 7.1% in the Euro area in February 2017, compared with February 2016, is due to civil engineering rising by 10.3% and building construction by 6.2%. In the EU28, the increase of 5.2% is due to civil engineering rising by 5.6% and building construction by 4.8%. To read The Construction Index's article go to http://www.theconstructionindex.co.uk/news/view/european-construction-output-grows-as-civil-engineering-picks-up.

International trade spurs increase in small business confidence in the UK's North West. Despite spiraling costs, small firms in the North West are feeling more confident and planning to take on or maintain staff, with international trade playing a major role, according to the latest Federation of Small Business (FSB) Small Business Index. The recovery has been spurred by increased international trade. More than two-thirds (69%) of exporters surveyed in the region state that international sales have been steady or increased in Q1, with the vast majority (85%) expecting this trend to continue over the coming three months. Interestingly, the recovery in confidence comes despite a surge in the cost of doing business, with 70% of small firms across the North West report a rise in operating costs over the past quarter. To read the FSB's news release go to http://www.fsb.org.uk/media-centre/press-releases/international-trade-spurs-increase-in-small-business-confidence-and-job-creation.

For more details or to apply please email mark.keizner@reedglobal.com.
(Please mention that you saw this vacancy on Credit Insurance News' Job Board).

Copyright © 2017 Credit Insurance News. All rights reserved.
All news stories on Credit Insurance News' website are included with the prior permission of the copyright holder. Reproduction or redistribution in whole or in part, in any manner, without the express prior written consent of the copyright holder, is a violation of copyright law. If you, or your organisation wish to redistribute, republish or link-to all or any part of any Credit Insurance News Digest, you must first contact the copyright holder direct or email sally.brown@creditinsurancenews.co.uk for further information.

Join our mailing list to receive notification each time a new Digest is published.