Business Insolvencies can be expected to continue to rise in the UK, up 7% or higher in 2020 following Brexit’s confirmation (on Friday 31st January) according to predictions by Atradius.
Atradius says, we can expect to see a rise in business failures throughout most of Europe, albeit at a more moderate rate. Insolvencies in the UK have been growing significantly since 2018, increasing another 8% year-on-year in 2019. The retail sector continues to face more bankruptcies due to lower consumer confidence and the changing dynamics within the sector. Heavily dependent on seasonal opportunity, retailers often look to December sales to bolster performance. However, total retail sales fell overall in November and December, according to industry body the British Retail Consortium.
For British sectors dependent on imports, in particular food & agriculture, Brexit remains a factor with the threat of higher import and logistics costs which they could struggle to absorb. The construction sector is already challenged by weak investment. The threat of increasing costs in order to attract workers and the loss of skilled labour from EU nationals working in the UK could further elevate the risk of insolvency.
The impact on insolvencies in the rest of Europe will be more moderate; with those countries with the closest trading ties to the UK more likely to be at risk, for example Ireland. The impact on insolvencies for other important trading partners, such as Belgium, the Netherlands and Denmark, as well as the rest of Europe, is expected to be visible but more limited. However, the climate remains volatile, and overall the risk of business failures rising outweighs the likelihood of a more modest impact. Industry sectors with strong reliance on exports to the UK, such as automotive, textiles and high-tech goods can be expected to be more significantly impacted.
While the overall economic outlook remains subdued, individual businesses continue to report success stories and the opportunity for trade growth, both during and beyond the transition period, should not be underplayed. One of the keys to success is a robust risk management strategy that combines access to reliable business intelligence to enable informed decision making and the ability to protect the business from trading risks.