The world’s leading credit insurance provider, Euler Hermes recently held their International Trade Observatory summit in Athens to discuss their newly released economic data. The summit revealed that global growth had increased during Q2 of 2017 especially in parts of the US, the Eurozone, China and even Japan. It was also confirmed that global growth forecasts for 2017 and 2018 were at +3% due to the strong recovery demonstrated by Europe.
The data released during the summit found that global trade is rebounding in value terms with 2017 at +7.0% after two years of contraction and this is expected to grow by +5.7% next year. Unfortunately, as highlighted in the 2017 Autumn Statement, the UK is set to buck that trend, with 2017 growth forecast revised down from 2% to 1.5% with 2018, 2019, 2020 and 2021 following suit, revised down to 1.4%, 1.3%, 1.5% and 1.6% respectively.
With lower than 2% growth comes a rise in the number of insolvencies in any market. Generally speaking, when growth is more than 2% insolvencies account for 0.5% of all companies going bust each year; but this number grows exponentially when growth is less than 2%. With the next five years predicted at growth below 5%, largely relating to uncertainty around Brexit, it is plausible to predict that businesses will see more of their clients and suppliers going bust, and will face above expected levels of bad debt. Credit risk management will become even more important to prevent a domino effect, and recruiters will be wise to review and improve their credit management processes.
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