Figures released from industry heavyweight Atradius have highlighted that the number of insolvencies in developed economies worldwide, are likely to fall by 3% this year and 2% next year, largely due to the robust recovery of the Eurozone. Growing GDP, strengthening labour markets and business confidence, all supported by progressive economic policies are all playing their part.
The news is not quite as rosy for UK businesses however, with Brexit driving an increase in uncertainty and slowing growth. This is triggering the UK to buck the trend, with statistics showing that total corporate failures increased by 1% last year, for the first time since 2011. 2017 is continuing the trend, with the first six months of the year showing a 1.7% increase in insolvency numbers, when compared to the first half of 2016. A worrying indicator.
Key concerns for the UK include slowing growth, driven not only by uncertainty, but also by the impact of inflation on real-time wages, which in turn is impacting on private consumption and a tightening of consumer credit. The most vulnerable industries to insolvency at the moment are consumer-oriented, including retail and food.
It is not all doom and gloom and one perk is the current weakness of the pound, which is currently supporting growth in export markets, and reducing the impact of some of the uncertainty. What does remain to be seen is the full impact of the Brexit negotiations, the result of which will determine the economic landscape for the next five to ten years.
The biggest focus for recruitment businesses should be on adapting, improving and changing their risk management processes to ensure that the right amount of credit is being extended to customers for successful work placements, so that the business is not overextended should it be impacted by the growing number of insolvencies. It is also worth considering credit insurance, which will pay out should a client become insolvent, ensuring that client insolvency does not undermine the stability of your own business.
Why not take advantage of our credit risk assessment offer for Recruitment Growth Network members, to see whether your processes stack up, and what can be done to lower your risk further.