Credit, Collections & Insolvency News
New data from insurance specialist Euler Hermes has predicted that 2021 is likely to bring a flood of corporate insolvencies throughout the world’s largest economies.
The company points out that Q4 in Europe is likely to be the time when the surge in business insolvencies reaches its zenith. Whilst insolvencies in the US will rise 57% on 2019, reflecting the largest rise.
The report points out that the worst-hit sectors will those already experiencing fragility before the onset of Covid-19 this will include transportation, automotive, non-essential retail as well as the hotels and restaurants sectors
This is contrasted with the IT and Pharmaceuticals sectors which will demonstrate resilience, for obvious enough reasons.
Emerging from lockdown is going to represent the most critical time and the sudden increase in working capital requirements could push companies over the tipping point.
Until now, a number of key measures have staved off a flood of liquidations these include court delays because of lockdown restrictions – with most countries legal systems are currently experiencing huge backlogs, which means current statistics haven’t yet caught up. Also government interventions such as the UK Bounce Back Loan Scheme and changes in national insolvency regimes, such as the moratorium on statutory demands and winding-up petitions in the UK are also providing a slowdown of measurement factors.
The report also warns that smaller companies should beware of the ripple effect from large corporate insolvencies.
AABRS Insolvency Practitioner Simon Renshaw. said “When major companies fall the entire supply chain feels the domino affect. Clients may find themselves unable to source critical components for their own business and be forced to find immediate alternatives, often with cost implications.”
*It is predicted that half of the countries listed above will record a new high since the 2009 financial crisis. Overall, the UK will be the 6th worst hit amongst the major economies.
