Welcome to the December 2020 issue of Credit Management News Digest. This issue is sponsored by SCHUMANN.

Index
 
PLUS: Henning Rahlf, Member of Executive Board at SCHUMANN, rolls up his sleeves to describe the technical challenges and opportunities lying ahead for the trade credit insurance market.
UK Late Payment, Cashflow & Insolvencies
49% of UK businesses report that they are withholding payments to suppliers. New research from MarketInvoice has indicated that 42% of UK businesses are still waiting to be paid for work completed since the first lockdown, two-thirds are reporting that they need to wait longer to be paid, and 20% reported their payments terms from customers had been renegotiated to 3 months or more. As a result, 49% of the business surveyed admitted that they are withholding payments to suppliers fearing cashflow worries and future economic shocks. Meanwhile, 35% reported they are intentionally stockpiling cash reserves to safeguard their companies over the winter trading period. Overall, over a quarter (27%) felt they would not survive to see 2021 based on their current cash balances. To read MarketInvoice's news release go to https://marketfinance.com/blog/marketfinance-news/2020/11/30/more-businesses-likely-to-apply-for-government-backed-loans-as-funds-run-low.
The poor payment practices of UK corporates during the pandemic are revealed in a new survey. London Loves Business has reported that the payment practices of big businesses during the pandemic have been revealed in a new report by Xero which calls for legislated “fair buyer” 30-day payment terms, as part of a plan to support UK SMEs in their economic recovery. Xero found that 59% of small business owners in the UK said that their corporate customers had increased the length of their payment terms during the pandemic. 40% reported that they feel that their bigger counterparts are now asking them to do more for less money. To read London Loves Business' article, go to https://londonlovesbusiness.com/poor-payment-practices-of-corporates-during-pandemic-revealed/.
Large UK businesses are taking longer to pay bills as the COVID cash crisis begins to bite. New analysis from BDO has shown that the average time it took large businesses to pay supplier invoices rose to 35 days in Q3 2020 - up from 33 days in Q3 2019. Meanwhile, the proportion of invoices not paid within agreed terms rose to 29% - up from 26% in the same period last year. The hospitality, retail and manufacturing industries were among the sectors recording the biggest declines in payment performance. Conversely, payment performance by public sector bodies showed signs of improvement. BDO noted that this was likely due to new procurement guidance issued in March which directed contracting authorities to pay all suppliers as quickly as possible to maintain cash flow and protect jobs. To read BDO's news release go to https://www.bdo.co.uk/en-gb/news/2020/large-businesses-taking-longer-to-pay-bills-as-covid-cash-crisis-begins-to-bite.
COVID-19 pandemic leads to deterioration in UK payment practices. Atradius' latest UK Payment Practices Barometer has revealed that UK businesses now report that 47% of the total value of invoices are paid late - an increase of 81% compared to pre-pandemic levels. Furthermore, half of the UK businesses surveyed have been hit by revenue loss, with every £100 of products or services sold now seeing £8 now written off as uncollectible. To avoid liquidity shortages, 48% of UK businesses increased time, costs and resources to collect outstanding invoices, while 39% reported that they are more frequently sourcing customer credit information to assess creditworthiness. 49% of businesses now send more frequent outstanding invoice reminders, 64% offer discounts for early payments, and 46% plan to use credit insurance to protect themselves from non-payment. To read Atradius' news release go to https://group.atradius.com/publications/payment-practices-barometer/uk-businesses-upbeat-about-2021-outlook-despite-challenges.html.
The outlook for UK corporate insolvencies in 2021. Deloitte has warned that the UK government's support measures are likely to have depressed corporate insolvencies in Q2 and Q3 2020, leading to a backlog. As a result, Deloitte expects that UK corporate insolvencies could be much higher in the first half of 2021 compared with previous years, and potentially be even higher than the average 60% increase experienced during the global financial crisis in 2009. This will consist of companies unable to recover due to COVID, as well as those that would most likely have failed in a normal economic climate but have been artificially kept solvent. Automotive, retail and food service are expected to be the most impacted, and, according to Deloitte's projections, could see more than double the number of insolvencies. For example, retail insolvencies in H1 2021 could be 80-100% more than the average for the last few years. To read Deloitte's news release go to https://www2.deloitte.com/uk/en/pages/financial-advisory/articles/another-storm-on-the-horizon-the-outlook-for-insolvencies-in-2021.html.
The pre-pandemic trend of rising UK business insolvencies looks set to re-start as support schemes end. Creditsafe has reported that 1,691 UK companies became insolvent in November - an increase of 5% compared to October 2020 but 4% lower than in November 2019. For the year until the end of November, the total number of UK insolvencies stood at 17,880, a 12% decrease when compared to the same period (January – November) in 2019. Construction remains the sector with the highest number of insolvencies, with 2,510 companies becoming insolvent - 14% of the total. Looking ahead, Creditsafe warns that as the trend for January to March 2020 saw insolvencies increase by 13%, numbers will rise again once UK government schemes begin to come to an end and cash reserves become scarce. "Businesses may well not recover from the current slowdown, and the administrative backlog in the courts and public administration will work through with a resulting rise in insolvencies." To read Creditsafe's news release go to https://www.creditsafe.com/gb/en/blog/reports/insolvencies.html.
A 42% decrease in insolvencies compared to a year earlier. Latest data from The Insolvency Service indicates that in October 2020 there were a total of 856 company insolvencies in England and Wales, a decrease of 42% compared to October 2019. The Insolvency Service notes that this reduction was likely to be driven in part by the range of government support put in place to financially support companies in response to the Coronavirus pandemic. In addition, the UK government announced in late April that it would temporarily prohibit the use of statutory demands and certain winding-up petitions from 27 April to 30 June 2020 under the Corporate Insolvency and Governance Act 2020. This was later extended to 30 September, and again further extended to 31 December 2020. For more information go to https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/934745/Monthly__Insolvency_Statistics_October_2020.pdf.
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UK Trade Sectors & Economy
UK economy to shrink by 5.7% in November, but vaccine rollout should drive growth next year. After six consecutive months of growth, latest PwC analysis predicts that the UK economy will contract in November by 5.7% as a result of the second national lockdown in England, before marginally recovering by 0.3% in December. Dr Jonathan Gillham, Chief Economist at PwC, said: “While we initially anticipated that recovery would resemble a swoosh, we now envisage it being more of a W shape - albeit with a much smaller second drop." He also advised that the longer-term outlook will very much depend on the nature and duration of further restriction measures and the outcomes of the UK-EU trade negotiation. “Depending on whether there are further lockdown restrictions or an extension of the current measures, GDP may still be around 2.8% to 6.1% below the pre-crisis mark by the end of next year." To read PwC's news release go to https://www.pwc.co.uk/press-room/press-releases/uk-economy-to-shrink-by-5-7-in-november-but-vaccine-rollout-should-drive-growth-next-year.html.
UK GDP in 2021 looks set to fall behind every other major economy except Argentina. The OECD's latest Economic Outlook is forecasting that UK GDP is set to contract again in Q4 2020 as virus containment measures are implemented, and to fall by -11.2% in 2020 as a whole. Every other major economy - except Argentina (-12.9%) - is expected to perform better. The OECD also stressed that risks around the future relationship with the European Union compound COVID-19-related uncertainty, noting that failure to conclude a trade deal with the European Union by the end of 2020 would entail serious additional economic disturbances in the short-term and have a strongly negative effect on trade, productivity and jobs in the longer-term. By contrast, a closer trade relationship with the European Union than expected would improve the economic outlook in the medium-term. For information and a link to the full Outlook go to http://www.oecd.org/economic-outlook/december-2020/. 
Brexit blow to UK recovery after COVID. KPMG has warned that its latest analysis indicates that although an early COVID-19 vaccine could see growth accelerate from early next year, Brexit could hamper the UK’s recovery, bringing GDP growth down to 7.2% in 2021. In the analysis, which assumes that a 'slimmed-down' Brexit deal is agreed and a vaccine is ready to be rolled out early next year, KPMG warns that the manufacturing sectors hardest hit by Brexit could see output at the end of 2021 between 6% and 12% lower than in Q4 2019. Similarly, uncertainty and loss of access to the EU market for the UK’s financial services sector could lead to 10% lower output during the same period. KPMG does not expect that the UK economy will recover to pre-COVID levels until the end of 2022. To read KPMG's news release, go to https://home.kpmg/uk/en/home/media/press-releases/2020/11/kpmg-forecasts-show-brexit-blow-to-uk-recovery-after-covid.html.  
The UK sees its largest drop in annual output since the Great Frost of 1709. The Office for Budget Responsibility's (OBR) latest outlook forecasts that UK GDP will fall by 11% this year – the largest drop in annual output since 1709. Looking ahead, the OBR sets out three scenarios for the UK economy: an upside scenario, in which lockdown brings the second wave of infections under control, and the rapid rollout of effective vaccines enables output to return to its pre-virus level late next year; a central one, in which public health measures need to be in place until Spring and vaccines are rolled out more slowly; and a downside one, in which lockdown is extended and vaccines prove ineffective. In the upside scenario, output eventually returns to its pre-virus trajectory. However, output is left permanently scarred in the other two scenarios - by 3% and 6% respectively. Should Brexit negotiations end without a deal, the OBR, warns that this would further reduce output by 2% initially and by 1.5% at the forecast horizon. To read the OBR's news release go to https://obr.uk/overview-of-the-november-2020-economic-and-fiscal-outlook/.
UK GDP is forecast to contract by 2.2% in Q4. The National Institute of Economic and Social Research (NIESR) has reported that new Office of National Statistics (ONS) estimates indicate that the UK economy grew by 15.5% in Q3 2020 but, at the end of the quarter, was still 8.2% below its pre-pandemic level in February 2020. Looking ahead, NIESR expects a rapid rebound following the end of the second lockdown, leading to an overall decline of 11.3% for GDP in 2020. In terms of UK trade sectors, in the three months to September, the ONS figures show that the services sector (80% of GDP) grew by 14.2%, production output (14% of GDP) grew by 14.3%, manufacturing output (10% of GDP) grew by 18.7%, and output in the construction sector (6% of GDP) grew by 41.7%. To read NIESR's news release, go to https://www.niesr.ac.uk/media/niesr-press-release-gdp-forecast-contract-22-cent-q4-14472.
Bonmarche, Debenhams and Arcadia join the list of major UK retail failures in 2020. The Centre for Retail Research has added Bonmarche, Debenhams and Arcadia to its list of major UK retail failures in 2020. Both Bonmarcher and Debenhams had been in administration at least once before and were known to be experiencing difficulties. Of Arcadia, the analysis notes that the group would probably have been in trouble at some time in 2021-22, but the impact of the Coronavirus pandemic and the closure of non-essential stores in Lockdown 1 and 2 had become "a death sentence" leaving it with no chance to recover. Overall for the year to 30 November, the analysis reports that there have been 52 major retail failures, impacting 4,726 stores and 95,227 employees  - in both cases more than twice the amount recorded for the whole of 2019. For more information go to https://www.retailresearch.org/whos-gone-bust-retail.html.
UK manufacturing demand slumps. According to the latest CBI monthly Industrial Trends Survey, UK manufacturing output volumes in the three months to November fell (-6%) at their slowest pace since September 2019 (+1%), but the pipeline for activity – including output expectations and order books – weakened in October. Output volumes declined in 9 of 17 sub-sectors, with the headline drop in output driven by the aerospace manufacturing sub-sector. The CBI also found that total and export order books both weakened in October, remaining substantially weaker than their long-run averages. Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said: “Government support for the sector has therefore been – and will continue to be – vital in keeping firms going through the crisis.” To read the CBI's news release go to https://www.cbi.org.uk/media-centre/articles/manufacturing-demand-slumps-as-activity-remains-weak-cbi/.
Europe & Global Economy
How late payments impact Europe’s businesses. Intrum's European Payment Report 2020 has reported that 51% of the European businesses it recently surveyed note that late payments have caused a liquidity squeeze to their business, compared with 35% stating the same prior to the outbreak of the pandemic. Overall, Spanish businesses are the worst impacted. Although 38% of the European businesses surveyed admit that late payments have a significant or high impact on the threat to their survival, the report also found that many companies fear undermining a business relationship and losing a contract. As a result, 69% accepted longer payment terms over the past year than they are comfortable with, and 5% took no action at all against late payments. To read Intrum's news release go to https://www.intrum.com/press/news-stories/how-late-payments-affect-europe-s-businesses/.
OECD GDP rebounded by 9% in Q3 2020 but remains below pre-pandemic levels. The OECD has reported that following the unprecedented falls in GDP in the first half of the year, GDP in the OECD area rebounded by 9% in Q3 2020 - although it remains 4.3% below its pre-crisis high. Among the Major Seven economies, GDP in Q3 rebounded most strongly in those economies that also saw the sharpest falls in Q2: by 18.2% in France, (following a contraction of 13.7%), 16.1% in Italy (following a contraction of 13.0%) and 15.5% in the UK (following a contraction of 19.8%). GDP also rebounded in Canada (by 10%, following a contraction of 11.5% in the previous quarter), Germany (8.2%, -9.8%), Japan (5.0%, -8.2%) and the US (7.4%, -9.0%). Overall however, GDP remained significantly below the levels seen a year earlier in the OECD area (-4.1%) and in all Major Seven economies, with the US (-2.9%) recording the smallest annual fall and the UK (-9.6%) the largest. To read the OECD's news release go to http://www.oecd.org/newsroom/gdp-growth-third-quarter-2020-oecd.htm.
The European Commission urges four member states to comply with the Late Payment Directive. The European Commission has announced that it is taking further steps against Greece, Italy, Slovakia and Spain to ensure the correct application of the Late Payment Directive and prevent losses to businesses – particularly SMEs. The Commission is requesting action due to the following:
  • New legislation removing creditors' rights to interest and compensation in Greece
  • "Excessively late payment" by public authorities in Italy
  • "Excessively delayed payments" in the public health sector in Slovakia
  • Legislation "systematically" extending the statutory payment term by 30 days in Spain
The member states now have two months to notify the Commission of measures taken to remedy the situation. To read the European Commission's news release go to https://ec.europa.eu/commission/presscorner/detail/NL/IP_17_239.  
Business Information
CICM launches critical accounts receivable fact sheets for EMEA countries. CICM has announced that, powered by Baker Ing, it has published six country-specific fact sheets. These contain up-to-date information on payment performance, legislation, and the effects of COVID and Brexit and, CICM notes, are designed for credit professionals. The UK document, for example, covers business structures, data sources, credit checks and judgement search, retention of title, pre-litigation and litigation, and insolvency. The following countries are currently available: Germany, Italy, Czech Republic, Spain, France, and the UK. For more information go to https://www.cicm.com/baker-ing/.
43% of all UK exports are to the EU. The House of Commons Library has published a new report 'Statistics on UK-EU trade' which provides basic figures on UK trade with the EU, as well as trade trends between 1999 and 2019. The paper shows that the EU, taken as a whole, is the UK’s largest trading partner. In 2019, UK exports to the EU were £294 billion (43% of all UK exports), and UK imports from the EU were £374 billion (52% of all UK imports). Services accounted for 42% of the UK’s exports to the EU in 2019. The research also found that the share of UK exports and UK imports accounted for by the EU has generally fallen over time from - 54% in 2002 to 43% in 2019 (exports) and 57% in 2006 to 52% in 2019 (imports). To read the report go to https://commonslibrary.parliament.uk/research-briefings/cbp-7851/.
Final flurry to beat the Crown Preference deadline. Despite the devastating impact of COVID on many UK businesses, the UK government implemented its Crown Preference plan with effect from 1 December 2020. Abolished nearly twenty years ago, this means that in an insolvency, the UK government will now be able to take precedence over creditors (suppliers, some banks and other lenders) with unsecured claims. Previously, HMRC was classed as an ordinary unsecured creditor. Greg Connell, Managing Director of InfolinkGazette, commented: “we normally process around 4 or 5 Notices of Intent to Appoint an Administrator per day, but in a final rush to appoint before the deadline, there were 43 HM Court filings - and counting. From 1 December, the insolvency of a customer will become an altogether more painful and expensive experience.” To read InfolinkGazette's news release go to https://www.infolinkgazette.com/?pid=6.
UK business births outnumber business deaths each year. New research from the Office for National Statistics has shown that between 2018 and 2019 the number of UK business births increased from 370,000 to 390,000, a birth rate of 13.0% in 2019 compared with 12.7% in 2018. The number of UK business deaths also increased from 311,000 to 336,000 between 2018 and 2019, a death rate of 11.2% compared with 10.7% in 2018. London had both the highest business birth rate at 15.7%, and death rate at 13.1%. The research also found that business births and deaths have both grown "relatively strongly over the last five years", with births outnumbering deaths each year. There were approximately 2.99 million active businesses in the UK during 2019, an increase of 74,000 compared to 2018. For more information go to https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/bulletins/businessdemography/2019#main-points.
Virtual Events
GTR MENA 2021 Virtual, 15-17 February 2021.
Global Trade Review's annual trade and export finance conference, GTR MENA, will return in 2021 as a hybrid event, providing an extended offering as the region’s leading gathering for networking and knowledge sharing, with a virtual event on February 15-17 and a physical event on September 29. Proceedings for the year will kick off with GTR MENA 2020 Virtual on February 15-17, set to welcome over 1,500 participants and featuring the chance to hear the latest insights and developments from experts on the most pertinent issues impacting on MENA trade, utilising a mixture of live-streamed and pre-recorded content and fostering a new way of networking via GTR’s dedicated virtual event platform.
As part of its hybrid offering for 2021, GTR MENA will also descend on Dubai in September for an exclusive one-day physical gathering. This will include an extensive programme, full exhibition and that much missed opportunity for participants to hold face-to-face discussions with industry peers and potential clients. 
VIRTUAL EVENT LINK: https://bit.ly/2VT3Q1e 
PHYSICAL EVENT LINK: https://bit.ly/3gnBJk8
GTR India 2021 Virtual, 10-11 March 2021.
GTR India will return in 2021 as a hybrid event, offering an extended offering as the country’s leading trade-based gathering for networking and knowledge sharing, with a virtual event on March 10-11 and a physical event in Mumbai in October.
For over 15 years GTR India has provided critical market insight combined with unrivalled networking opportunities with leading experts on the country’s trade environment and trade finance sector. Both events will delve into the most pertinent discussion topics impacting Indian #trade and #exports, from supply chain challenges, geopolitical considerations (including free trade agreements), support for exporters, digitisation drives and the measures taken across both public and private sector to aid business recovery.
VIRTUAL EVENT LINK: https://bit.ly/36VQ4By.
PHYSICAL EVENT LINK: https://bit.ly/36VbT48.
GTR West Africa 2021 Virtual, 24-25 March 2021.
GTR West Africa will return in 2021 virtually, providing an extended digital offering as the region’s leading event for trade discussion and networking on March 24-25.
Encompassing all the key aspects of the live conference experience through GTR’s established virtual event format, this hugely anticipated gathering will combine the highest level content with bountiful networking opportunities via our dedicated platform.
Harnessing the vast potential of technology for connecting West African trade leaders with their peers, this online gathering promises a comprehensive programme of live and on-demand debate, discussion and engagement, welcoming the region’s leading practitioners in trade, export and commodity finance to explore the latest developments, strategies and solutions employed to drive growth.
LINK: https://bit.ly/36XnLTf
GTR East Africa 2021 Virtual. 12-13 May 2021.
Following the success of the inaugural virtual event in October 2020, GTR East Africa will return once again in a digital form for 2021, taking place on May 12-13, 2021. Utilising GTR’s bespoke virtual event platform, this online gathering promises expansive networking and an extensive and comprehensive programme of live and on-demand content, welcoming the leading practitioners in trade, agribusiness, supply chain and commodity finance. Join industry experts from across the region to explore the latest developments, strategies and solutions employed to drive East African trade growth. LINK: https://bit.ly/3gphJ0x.
About the Sponsor: SCHUMANN
SCHUMANN is the solution provider and marketplace enabler in the area of credit and surety.
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CAM Credit & Surety enables our customers to meet both current challenges and prepare for the future. By replacing outdated, legacy systems, SCHUMANN's modern, state-of-the-art solution automates tasks, promotes efficiency and thereby reduces costs and risks. By leveraging the platform integration capabilities of CAM Credit & Surety, insurers will be able to offer the dual goals of excellent customer service and brilliant customer experience. In terms of compliance, our intelligent software makes it straightforward and easy to handle complex workflows and monitor the ever-changing regulatory framework. 
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