Commercial Credit & Collections Conference 2.0 Review

• Is the current ‘economic risk’ in 2024 at a higher level than average years?

Steven Radley, Finance Manager at Turnbull & Co: “I do believe it is higher risk than average years because we have just suffered some rare events COVID, Suez canal, Russia and Israel etc. I think we may have traversed some of the ‘riskiest’ years in my lifetime, but what we are seeing is the fallout and knock on effect of all these events causing a strange environment to trade in.”

John Griffiths, Market Engagement Director from Experian: “We would say yes, still when compared to previous ‘benign’ years (e.g. pre-Covid and before), but balance that with outlook being better than it has been, certainly from last year but also the last 4-5 years since onset of Covid (except for perhaps the “false dawn” in 2021 prior to Ukraine/Cost of living/Inflation/Energy crises).”

Luke Sculthorp FCICM, Head of Strategic Relationships from Chartered Institute of Credit Management (CICM): Yes, economic risk in 2024 is perceived to be higher than in typical years. Key factors include:

1. Rising Insolvencies: Increased corporate insolvencies, particularly among SMEs, are straining trade credit and creating a ripple effect through supply chains.
2. Global Economic Uncertainty: Persistent inflation and slower-than-expected recovery in key global markets are adding pressure on businesses’ working capital.
3. Geopolitical Risks: Ongoing tensions, such as energy security concerns and the lingering impacts of trade disruptions, exacerbate uncertainty.
4. Interest Rate Volatility: Elevated interest rates are increasing borrowing costs, squeezing margins, and limiting cash flow flexibility for many businesses.

Ian Strangward, Credit Manager at Karndean Designflooring: “Such a tricky question! You could argue it’s dependent on sector (or even sub-sector!) as I’m sure there will be winners and losers when everything comes out in the wash – and same for 2025, really. We are seeing signs of an upwards trend in consumer demand once more for our flooring, although the general retail rebound will be limited for some time. Our records indicate increased levels of insolvency across the sectors we operate, so I think you could summarise by saying in line with 2023…and (dependent on sector) in line with 2/3 years preceding Covid years.”

• What do you think is the biggest reason driving that perception of economic instability?

Sukh Jutley, Head of Credit at Bunzl: “We are being impacted by macroeconomics with changes in the UK government and recent budget and the US Election and the impact of how this plays out.”

Steven Radley, Finance Manager at Turnbull & Co: “I think seeing the interest rate/inflation rise so fast post the budget was the main perception of instability, as this affects most/all people in the UK and is seen in most people’s lives causing it to be wider publicised by the media.”

Ian Strangward, Credit Manager at Karndean Designflooring: “Consumer uncertainty (cost of living) is a huge factor, along with change of Governments here and abroad, plus continued political conflicts and the concerns over what that may mean down the line for us economically.”

• How effective do you think the recent late payment reforms proposed by the Government will have on addressing delayed payments to SMEs?

Ian Strangward, Credit Manager at Karndean Designflooring: “The cynical view would be the same as the last lot! When you’re an SME struggling to get sufficient trade to keep going and have opportunities to make margin, albeit with some negative cashflow impact, you take the risk and accept the late payment.”

Steven Radley, Finance Manager at Turnbull & Co: “In my opinion, I don’t think it will help massively, from experience and speaking to customers, Governments are usually slow to pay. Mostly because of the systems or lack of in place, hopefully the reform goes deeper and assesses their procedures to drill down why people get paid late and sort the root cause of the issue.”

Sukh Jutley, Head of Credit at Bunzl: “Good that they are pushing it in the “public domain” , but to police it they need the legislation and regulators to have more ‘bite’.”

• Alluding back to Construction do you think from a credit perspective they are unfairly treated compared to other industries ( domestic reverse VAT and CIS)?

Sukh Jutley, Head of Credit at Bunzl: “The unfair treatment has come from the previous issues within the sector eg. late payment culture and the collapse of Carillion. The government and industry have never really learnt from both, and measures have been put in ( eg. reverse vat / cis / retention payments) and giving sole contracts on government projects, and then ISG happens?!”

Steven Radley, Finance Manager at Turnbull & Co: “I believe they are due to the lack of support given to the industry to keep building houses.”

Ian Strangward, Credit Manager at Karndean Designflooring: “Tough one – the biggest issues in the construction sector are 1) the slowness of cashflow down the pipeline from main contractor to sub-contractor, etc., and 2) the continued high credit risk at the top end – the recent insolvency of ISG has already seen a number of sub-contractor casualties, and there will be a lot more. I’m sure if those two issues were addressed/reduced, we’d be less inclined to think the sector is hard done by from a credit perspective.”