Welcome to the November 2020 issue of Credit Management News Digest. This issue is sponsored by Tinubu Square.

Index
 
PLUS: Tinubu Square invites you to travel back in time to the most important periods that marked the development of credit insurance in Europe with an infographic: ‘A Credit Insurance Market History in Europe‘. Tinubu Square's Subject Matter Insurance Experts chronicles the emergence of credit insurance and takes you step-by-step through its historical events, ending with what credit insurance looks like today. Enjoy this journey into the past as we look forward to the future!
UK Late Payment, Cashflow & Insolvencies
557,000 UK businesses are now in significant distress as numbers continue to soar. The latest Red Flag Alert research for Q3 2020 has found that +557,000 UK businesses are in ‘significant distress’ - a 6% increase in the last three months and a 9% increase in significantly distressed companies (48,000 businesses) since the end of Q1 2020. The research also indicates that since Q1, there have been double-digit percentage increases in financial distress in 10 of the 22 sectors monitored (including food and drug retailers (+14%), construction (+11%), real estate and property (+11%)), despite significantly reduced court activity due to the pandemic. For example, compared to Q3 2019, Begbies Traynor calculates that CCJs lodged against UK companies in Q3 fell by -62%, and winding up petitions fell by -90%. To read Begbies Traynor's news release go to https://www.begbies-traynorgroup.com/news/firm-news/557000-uk-businesses-now-in-significant-distress-as-numbers-soar.
COVID‐19 will cause unpaid UK business debt to double to £8.6 billion. According to Red Flag Alert’s financial modelling of insolvent debt over the past three years, UK bad debt will spike during the Coronavirus lockdown and rise further in 2021. Mark Halstead, a partner at Red Flag Alert, commented: “Before the Coronavirus outbreak hit the UK, our data shows there were 490,000 UK businesses in significant financial distress. . . The economic impact of COVID‐19 will see this rate of failure rise substantially, reaching well into double figures. This will leave a trail of insolvent debt totalling £8.6 billion this year and we could see levels of bad corporate debt in 2021 rising beyond £15 billion." According to the research, as a conservative estimate, this would mean that UK companies have to contend with almost £24 billion in unpaid bills before the end of the year. To read Red Flag's news release go to https://www.redflagalert.com/news/risk/covid19-will-cause-unpaid-business-debt-to-double-to-8-6-billion.
The pre-pandemic trend of rising UK business insolvencies looks set to re-start as support schemes end. Creditsafe has reported that the number of UK company insolvencies has risen by 16,189 for the year so far - a -13% decrease when compared to the same period (January – October) in 2019; a "significant" reduction, which Creditsafe notes, reflects the particular circumstances resulting from the COVID-19 pandemic and resulting lockdown. However, as UK Government schemes begin to come to an end and cash reserves become scarce, Creditsafe predicts that many businesses will struggle to stay afloat. Furthermore, given that the trend (pre-pandemic) was one of increasing insolvencies - for example, the period of January to March saw an increase of 13%, Creditsafe estimates that we should expect that UK insolvencies will inevitably rise again once the UK economy restarts. To read Creditsafe's overview of data go to https://www.creditsafe.com/gb/en/blog/reports/insolvencies.html.
Driven by government measures, UK insolvencies in Q3 were 39% lower than a year ago. Latest data from the Insolvency Service indicates that the overall number of UK company insolvencies decreased by 9% in Q3 2020 compared to Q2 2020, and by 39% when compared with the same quarter in 2019. In addition, in comparison to Q3 2019, all types of company insolvencies fell, with the largest decrease notably in Creditors' Voluntary Liquidation (CVAs). The Insolvency Service notes that the reduction in company insolvencies is in part driven by the range of support put in place by the UK Government to financially support companies in response to the COVID-19 pandemic, as well as a temporary prohibition on the use of statutory demands and certain winding-up petitions. To read the Insolvency Service's news release go to https://www.gov.uk/government/statistics/company-insolvency-statistics-july-to-september-2020.
UK corporate insolvencies remain near historic lows. Analysis of notices in the London Gazette by KPMG’s Restructuring practice indicates that 246 companies went into administration during the third quarter of the year – down 10% on Q2, and a significant fall of 39% when compared to the same period in 2019. According to KPMG, the last time numbers were this low was in Q4 2015 when 243 companies went into administration. Blair Nimmo, Head of Restructuring for KPMG in the UK, warned: “The question remains, however, whether the can is simply being kicked down the road. We know that as the support schemes start to unwind, and the repayment of loans, tax arrears and rent starts to kick in, cash flow is going to come under significant pressure once more." To read KPMG's news release go to https://home.kpmg/uk/en/home/media/press-releases/2020/10/corporate-insolvencies-remain-near-historic-lows.html.
Are we facing a Trade Credit Crunch? Jo Kettner, Company Watch CEO, recently wrote an article for BIPA, warning that a current lack of current, reliable information available to UK companies will have a detrimental impact on the availability of trade credit as the UK emerges from the COVID-19 crisis. The article explores some of the issues in-depth, and notes that Company Watch believes that some of the recent, well-meaning, emergency measures that the UK Government has taken, "or in other cases not taken," could result in unintended and negative consequences in the provision of trade credit. Ms Kettner concludes that the UK government should now facilitate the availability of key commercial data sources to enable businesses to assess and manage their exposure to risk. To read the article go to https://www.companywatch.net/wp-content/uploads/2020/11/1604328205468.pdf.  
UK Trade Sectors & Economy
The UK sees a record rise in the number of shuttered shops - with more increases expected. New data from the British Retail Consortium (BRC) has found that in the third quarter of 2020, the overall UK retail vacancy rate increased to 13.2% (Q2, 12.4%) - the ninth consecutive quarter of increase. All locations saw an increase, with shopping centre vacancies increasing to 16.3% (Q2, 14.3%) and high street vacancies increasing to 13.3% (Q2, 12.4%). Helen Dickinson OBE, Chief Executive of the British Retail Consortium, commented: “Shopping centres fared the worst among retail sites due to the higher proportion of fashion outlets, where consumer demand has been hit hardest. The uncertain climate has also meant that even those looking to expand are holding off making investments in new stores. As a result, we expect to see the retail vacancy rate continue to rise." To read BRC's news release go to https://brc.org.uk/news/corporate-affairs/shops-shutter-as-covid-continues/.
UK retailers face a disastrous golden quarter. BDO LLP has warned that with another closure of non-essential shops, the UK high street is set to miss critical weeks of Christmas trading. According to BDO's latest figures, each sector was already recording negative in-store results in October, with in-store like-for-like sales for lifestyle, fashion, and homeware sectors having fallen by -19.8%, -36.2% and -6.4% respectively compared to October 2019. Sophie Michael, Head of Retail and Wholesale at BDO LLP, said: “October, while difficult, saw green shoots for the high street and signs of renewed consumer spending. A new lockdown that includes the closure of non-essential shops, coupled with ambiguity around Brexit, and little time for adaptation, has poisoned any potential recovery." To read BDO's news release go to https://www.bdo.co.uk/en-gb/news/2020/october-treat-overshadowed-by-november-lockdown.
UK retail sales fall back at the sharpest pace since June. According to the CBI’s latest monthly Distributive Trades Survey (conducted pre-lockdown 2), conditions across the UK retail sector were mixed in October. On the one hand, grocery volumes were flat - following five months of strong growth, and non-food retail categories, department stores, clothing and ‘other normal goods’, saw a fall in sales. On the other hand, retailers of furniture, DIY and recreational goods reported strong growth, and internet sales growth also returned to its long-run average. Ben Jones, the CBI's Principal Economist, commented: “The fall in retail sales in October is a warning sign of a further loss of momentum in the economy as Coronavirus cases pick up and restrictions are tightened across many parts of the country." To read the CBI's news release go to https://www.cbi.org.uk/media-centre/articles/retail-sales-fall-back-at-sharpest-pace-since-june-cbi/.
UK stores are closing at twice the rate of last year, with the net decline at its highest level in five years. New research from PwC and the Local Data Company has found that UK shop closures have hit record levels, with over twice as many net store closures in the first half of 2020 in comparison to the same period last year. According to the research, 11,120 chain operator outlets have closed this year so far, with 5,119 shops opening, creating a net decline of 6,001 - almost double the decline tracked last year (3,509). Lisa Hooker, Consumer Markets Leader at PwC, commented: “We all knew that consumers were shifting to shopping online or changing their priorities in terms of the things they buy, but what COVID-19 has done is create a step-change in these underlying trends to where they have now become the new normal." To read PwC's news release go to https://www.pwc.co.uk/press-room/press-releases/store-closures-twice-the-rate-of-last-year.html.
UK business births' increased in Q3. New figures published by the Office of National Statistics, examined by BDO, indicate that UK business births were up by 5% Q3 2020 compared to the same period last year, with the types of businesses created being smaller than usual in terms of employment and turnover and more likely to be in industries less affected by the pandemic. The new data also shows that there was a large increase in the number of retail businesses created relative to earlier quarters, which, BDO suggests, may be due to the large increase in online sales since the pandemic began. BDO notes that the figures reflect a recent report compiled for BDO by the Centre for Economics and Business Research, which identified a number of digital sectors (e-medicine, cybersecurity, e-learning, entertainment and gaming, and home-based IT consultancy) as being ripe for growth. To read BDO's news release go to https://www.bdo.co.uk/en-gb/news/2020/business-births-rise-as-new-homeworking-opportunities-open-up.
COVID-19 will cause UK firms to borrow over five times more in 2020 than in 2019, with many unlikely to start repaying until 2022. According to the latest EY ITEM Club for Financial Services Forecast, COVID-19 has seen UK bank lending to the corporate sector increase rapidly, with many businesses looking for loans to help them through the crisis as their revenues stalled. Banks lent (net of repayments) non-financial companies £43.2 billion between January and August 2020 – a fivefold increase on the net amount they lent over the whole of 2019 (£8.8 billion). EY forecasts that most companies won’t start to repay debt, and reduce their borrowing, until 2022 - or even later if new lockdowns materially affect the projected timeline to a return to more normal economic conditions. To read EY's news release go to https://www.ey.com/en_uk/news/2020/11/covid-19-will-cause-firms-to-borrow-over-five-times-the-amount-in-2020-than-in-2019-with-many-unlikely-to-start-repaying-until-2022.
UK profit warnings hit an all-time annual high. According to the latest EY quarterly analysis of UK profit warnings, the number of profit warnings issued by UK quoted companies has reached a new, annual high - with even more expected due to continued uncertainty from COVID-19, Brexit uncertainty, and the easing of government support. The total number of profit warnings from UK businesses in 2020 at the end of Q3 was 524 (with 449 linked to COVID-19), setting a new record for the annual total, and replacing the 19-year-old record of 506 from 2001. Lisa Ashe, Turnaround and Restructuring Strategy Partner at EY, UK & Ireland, commented: "In the last 12 months, more than a third (36%) of all UK quoted companies have materially lowered their profit forecasts at least once compared with 18% in 2008 and 23% in 2001." To read EY's news release go to https://www.ey.com/en_uk/news/2020/10/uk-profit-warnings-hit-an-all-time-annual-high-after-only-nine-months-despite-the-q3-total-falling-below-average.
UK CFOs predict that business demand will not recover until after Q2 2021. According to Deloitte’s latest CFO Survey, UK finance leaders continue to rank the effects of the COVID-19 pandemic as the top risk to their businesses, followed by rising geopolitical issues and the effects of Brexit. 75% of CFOs expect the pandemic to have ‘significant’ or ‘severe’ negative effects on their businesses over the next 12 months. By contrast, 23% of UK CFOs expect similar negative effects due to Brexit, with 30% suggesting that they would reduce hiring in the event of a no-deal and 26% expecting to decrease capital expenditure. Deloitte's research also found that almost two-thirds (62%) of UK CFOs do not expect demand for their own businesses to recover to pre-pandemic levels until after Q2 2021. To read Deloitte's news release go to https://www2.deloitte.com/uk/en/pages/press-releases/articles/deloitte-uk-cfo-survey-q3-2020.html.
November's lockdown could increase the fall in UK GDP by -11-12% in 2020. The National Institute of Economic and Social Research (NIESR) has warned that the UK economy’s recovery from the COVID-19 pandemic remains fragile and with significant risks to the downside: risks from the resurgence of the virus, from the negotiations over a trade deal with the European Union, and from the premature withdrawal of economic policy support. As a result, NIESR's predicts that the second wave of the virus, and newly announced November lockdown, are now likely to further increase the fall in 2020 GDP to around -11-12%. Hande Kucuk, NIESR Deputy Director, commented: “The fast-unfolding second wave, November lockdown and looming Brexit threaten the recovery. The economic outlook is extremely uncertain and depends critically on whether we win the fight against COVID-19." To read NIESR's news release go to https://www.niesr.ac.uk/media/niesr-press-release-second-wave-cause-further-contraction-q4-14457.
The UK economy looks set to shrink by more than 10% in 2020. A new statement by IMF staff (Staff Concluding Statement of the 2020 Article IV Mission) warns that despite the unprecedented and coordinated package of fiscal, monetary, and financial sector measures taken by the UK Government, UK GDP has still "dropped precipitously" as a consequence of the pandemic and remains 10% below pre-crisis levels. As a result, the IMF now projects that the UK economy will contract by -10.4% in 2020, before recovering partially in 2021 with growth at +5.7%. Both estimations are downwardly revised from the IMF's latest WEO forecast. By comparison, UK GDP fell by -4.2% during the financial crisis of 2009. To read the IMF's statement go to https://www.imf.org/en/News/Articles/2020/10/29/mcs101920-united-kingdom-staff-concluding-statement-of-the-2020-article-iv-mission.
A Hard Brexit could cost the EU €33 billion in annual exports. Euler Hermes has published a new report which warns that the odds of a no-deal Brexit at the end of 2020 have significantly increased to 45%. This could cost as much as €33 billion in annual EU exports, with Germany (€8.2 billion), the Netherlands (€4.8 billion) and France (€3.6 billion) hit the hardest. Euler Hermes also predicts that in the event of a no-deal on 1 January 2021, the UK could see a -5% contraction in GDP and a -15% drop in exports, besides inflation beyond 5% for at least six months. The latter will mainly be driven by the strong rise in import prices (+15%) on the back of higher average import tariffs on total imports, a significant rise in non-tariff barriers, and a forecasted -10% depreciation of Sterling. To read Euler Hermes' report go to https://www.eulerhermes.com/en_global/news-insights/economic-insights/A-hard-Brexit-could-cost-the-EU-EUR33bn-in-annual-exports.html.
Global Economy
The pandemic's impact could change the balance of world economic power. New research from the Centre for Economics and Business Research (CEBR) has warned that the new wave of lockdowns will reduce GDP in Q4 around the world, with "a quick glance" at the industries that might be affected suggesting that lockdown could reduce monthly GDP by about -5-10% in the Western World. CEBR also notes that the differential effect of the pandemic across countries could be sufficient to change the balance of world economic power. Notably, If China manages to avoid a second wave, it could gain a further year to 18 months in its economic race with the West. This, according to CEBR, would be in addition to the two to three years it has gained already through the crisis. To read CEBR's news release go to https://cebr.com/reports/the-second-wave-could-reduce-monthly-gdp-by-about-5-10-in-the-western-world/.
The IMF predicts that European GDP in 2020 will contract by its biggest decline since World War II. The IMF has published its latest Regional Economic Outlook for Europe which warns that in Q2 2020 real GDP fell by about 40% in Europe overall, with deeper contraction in advanced Europe relative to emerging Europe. The IMF now projects that European real GDP will contract by -7% in 2020 - the biggest decline since World War II, followed by a rebound of +4.7% in 2021. However, the IMF stresses that the recovery’s strength will, of course, depend crucially on the course of the pandemic and the degree of continued economic policy support. To read the IMF's news release, with a link to the full report, go to https://www.imf.org/en/Publications/REO/EU/Issues/2020/10/19/REO-EUR-1021#Executive%20summary.
The IMF has also published new Regional Economic Outlooks for Sub-Saharan Africa, the Middle East and Central Asia, and the Western Hemisphere.
US and Euro Area may not regain their pre-COVID GDP levels until mid-2022 and mid-2023 respectively. The National Institute of Economic and Social Research (NIESR) has reported that COVID-19 and consequent lockdowns have led to the deepest contraction in global economic activity since World War II, with global GDP in Q2 -10.5% lower than six months earlier. NIESR also projects that the fall in global GDP this year (-4.5% predicted) will far outweigh the fall seen in the Great Financial Crisis, and equates to a loss above US$9 trillion (relative to the projection NIESR made a year ago). Looking ahead, although NIESR, project an increase in world GDP of +5% in 2020, it warns that many countries will not regain their pre-pandemic level of GDP until later, with, for example, the US and the Euro Area looking set to not regain their pre-COVID GDP levels until mid-2022 and mid-2023 respectively. To read NIESR's news release go to https://www.niesr.ac.uk/media/niesr-press-release-us-and-euro-area-not-regaining-their-pre-covid-gdp-levels-until-mid-2022.
The Eurozone recovery could be delayed but not derailed by Lockdown 2. Euler Hermes has advised that current lockdown restrictions are not a replay of Spring 2020 as their economic hit to Q4 2020 GDP should prove 30-60% less severe. That said, Euler Hermes notes that the fresh round of tough restrictions announced in recent weeks is all but certain to plunge the Eurozone economy back into a contraction in the final quarter of this year, with Q4 2020 GDP looking set to contract by around –4%, bringing the full-year 2020 forecast to –7.6%. However, Euler Hermes adds that the stronger-than-expected growth rebound in Q3 - with GDP growing by a record-setting +12.7% - proved that Eurozone economies can rebound rather swiftly as restrictions are lifted.  "The big question now is if they can do that again." To read Euler Hermes' Economic Insight go to https://www.eulerhermes.com/en_global/news-insights/economic-insights/Delayed-but-not-derailed-The-eurozone-recovery-after-lockdown-light.html.
GDP in Q3 2020 was up by 12.7% in the euro area and by 12.1%. A preliminary estimate from Eurostat has found that in the third quarter of 2020, seasonally adjusted GDP increased by 12.7% in the euro area and by 12.1% in the EU, compared with the previous quarter. These were by far the sharpest increases observed since time series started in 1995, and a rebound compared to the second quarter of 2020 when GDP had decreased by 11.8% in the euro area and by 11.4% in the EU. Among the Member States, for which data are available for the third quarter 2020, France (+18.2%) recorded the highest increase compared to the previous quarter, followed by Spain (+16.7%) and Italy (+16.1%), while Lithuania (+3.7%), Czechia (+6.2%) and Latvia (+6.6%) recorded the lowest increases. To read Eurostat's news release go to https://ec.europa.eu/eurostat/documents/2995521/10663774/2-30102020-BP-EN.pdf/94d48ceb-de52-fcf0-aa3d-313361b761c5.
Useful business apps and tools
How much compensation can you claim for unpaid invoices? The UK Small Business Commissioner's website has published a useful and easy to use calculator to allow UK businesses to calculate interest on an unpaid invoice by entering the invoice's due date and amount. For example, for an unpaid debt of £100 due on 30 June 2020, the amount owing as of 8 November would be £142.62 (£2.62 in interest overdue, £40 in compensation). Compensation is £40 for invoices under £1000, £70 for invoices under £10,000 and £100 for invoices above £10,000. Compensation can be charged for each overdue invoice due from a debtor. To see the calculator go to https://www.smallbusinesscommissioner.gov.uk/deal-with-an-unpaid-invoice/how-to-chase-an-unpaid-invoice/interest-calculator/.
Free of charge final demand service. Ko-bolt has announced that it has introduced a free 7 day final demand service which is designed to prompt late-paying customers to pay quickly, whilst maintaining buyer-supplier relationships. The service also uses email tracking software, enabling Ko-bolt to see when the email is delivered, opened and clicked etc, to help businesses determine if further escalation might be required to secure payment. In this instance, Ko-bolt offers a ‘no collection, no commission’ service (although users of the free final demand service are under no obligation to use Ko-bolt to collect the outstanding debt). For more information go to https://www.ko-bolt.com/pricing/ or click on Ko-bolt's advert on this web page.
Credit Insurance News recommends the following useful apps:
1. IMF Reference. This succinct app allows you to find latest the news, data and multimedia from the International Monetary Fund, with easy access to global, regional and country economic trends. In addition, the 'Favourites' function enables users to save news and publications that interest them.
2. World Factbook 2020. This app provides useful and clearly presented up-to-date facts, statistics (including capital and GDP), with comparative data, on countries around the world.
3. World Bank MacroStats to Go. This app presents all the key macroeconomic indicators to provide users with the ability to quickly track, analyse and compare any country in the world. In addition, the app provides up-to-date World Bank projections on key economic variables.
4. Economist World in Figures. This app provides key indicators for 190 countries. In addition, a quiz tests your knowledge of world stats. A premium version includes more than 100 additional indicators per country from the Economist Intelligence Unit.
5. Strategic IQ. This app provides strategic insights and contextual intelligence from the World Economic Forum and enables the user to monitor the issues and forces driving change across economies and industries.
Events & Training
New Stecis’ courses in Trade Credit Insurance and Surety. 
After having cancelled all April courses in 2020, Stecis’ has picked up the pieces again.
All classroom courses in various levels of Credit Insurance and Surety are led by professionals from the industry. The courses are meant for starting and experienced professionals who are working in the Trade Credit Insurance and Surety industry and for all other interested parties like reinsurers, brokers and lawyers. There are courses on offer that will cater for the level of knowledge you are looking. Also it is a perfect way to enhance your network within the industry.
So please check the course descriptions and course dates on our website www.stecis.org – where you are able to register for the Stecis’ courses.
GTR Nordics 2020, 12 November 2020. Stockholm.
After many consecutive years of attendance growth we are delighted to announce that GTR Nordics 2020 will take place on November 12, moving to the larger event space at the Radisson Blu Waterfront, Stockholm. While offering a more comfortable space to mingle, this also provides the opportunity to add some exciting new event features. GTR Nordics 2020 promises to be the biggest and best yet: Watch this space for more details as we move towards the conference date! Last year GTR Nordics returned to Stockholm and welcomed another record-breaking audience of over 500 trade finance experts, insurers, bankers, ECAs, technology innovators and corporates of all sizes. 
Don’t miss your chance to join leading corporates and trade specialists for a day of discussion, debate and networking. Limited amounts of complementary corporate passes are available to those who are exporters, importers, manufacturers, distributors, traders & producers of physical goods only. For more information, visit here.
About the Sponsor: Tinubu Square
Tinubu Square is the industry-leading SaaS platform vendor, enabling Credit Insurance & Surety digital transformation.
For 20 years, Tinubu Square has provided Credit & Surety insurers across the globe with software and services allowing them to offer best-in-class customer experience, as well as significantly reduce their exposure to risk and their financial, operational and technical costs.
Tinubu Square has an international footprint with customers in over 20 countries, including 30 of the top 60 worldwide Credit & Surety underwriters.
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