July & August 2016 Credit Management magazine

PAYMENT TRENDS
THE NOT-SO DARLING
BUDS OF MAY?
Jason Braidwood FCICM(Grad), Head of Credit and Collections at Creditsafe Group analyses
the latest monthly business to business payment performance statistics.
OH dear – it appears I may have
spoken too soon last month. When
we reviewed the April figures we were
celebrating what looked like a third
month of small, but steady improvement in
most regions and sectors – with the exception
of the few inevitable outliers. However, our
analysis of the May figures in our database
appears to have brought us back to earth with
a bump. Increases in the time taken to pay
invoices seems to have stretched out across
all parts of the country and also in most
industries, with increases of on average more
than five days beyond terms undoing all the
progress we’ve seen during 2016.
The big question for us all is whether this is
a blip, and whether as the summer continues
we’ll see things reverting to a positive
trend, or we find that we have fallen back
into a norm of poorer payment that we saw
dominating through the latter half of 2015. I
speculated in the last issue whether there was
any effect from the uncertainty around the
EU referendum filtering through into the real
economy, and with the poll a few weeks away
as I write it will be fascinating to see what
effect the result has. On a more positive note
we can only hope that a positive campaign
for the home nations at Euro 2016 (fingers
crossed and apologies to Scotland) can
stimulate something of a feel good factor that
results in more companies paying on time!
Regardless, we can only hope matters
improve and we get back onto a positive path
in the second half of the year. As I always say,
you may find your own particular sector or
region has bucked the trend so it’s important
to get hold of the latest intelligence when
setting terms, particularly for new customers.
INDUSTRY SECTORS
Unfortunately, the picture by industry sector
is pretty much uniform with most areas
showing an average increase of around five
days. In fact, the usual rules about swings and
roundabouts appear to have been ignored
as we’ve only seen two sectors show any
improvement this month, and even then it
hasn’t been substantial. However, given the
scale of all the other moves even standing still
looks good and it is just mildly encouraging to
see improvement from the Transport sector as
it looks to stay on track.
Perhaps even more noteworthy is the
performance of the Mining and Quarrying
sector which has traditionally been alongside
the other wider parts of the utility sectors in
registering disappointing numbers and is an
unlikely entry into our ‘Top 5’ chart. Indeed,
while not figuring in any of our charts this
month the better performances we saw back
in April for Energy Supply and Water and
Waste do not appear to have taken big steps
back this month. While looking at the ‘Top 5’
as a whole alongside the more regularly better
performing sectors of Entertainment and
Hospitality, the appearance of Construction
should also be a reason for at least some
celebration.
In reality though these sectors are only
performing less badly than the others, and
we should perhaps be focusing more on the
problem areas. Retail has taken a big step
back and in the month that saw BHS and
Austin Reed finally fail, then an increase in
days beyond terms of nearly three working
weeks is a real cause for concern. Alongside
Retail both Manufacturing and Business
Admin and Support have continued to move
backwards and we should watch them
carefully as we move forward.
REGIONS
On a regional front there are a couple of
performances that are sufficiently different
from the norm to make us all sit up. Last
month I highlighted the apparent fall from
grace of our traditional number one player as
Yorkshire and Humberside was knocked off its
top spot. This month they don’t even appear
in our ‘Top 5’ and it will be fascinating to see
if this is a longer term trend. I cannot believe
this situation will last. Even with a step back
East Anglia has again retained the top ranking,
but at the other end of the scale the big news
sees Northern Ireland no longer the poorest
paying region in the UK.
With only a minor worsening of its position
it has been overtaken by London and Wales
which has now picked up the mantle at
the bottom of the pile with a major step
backwards in May. Once again I think we can
all recognise the seriousness of a situation
that sees London in such a position given its
dominance across the nation’s economy, and
we can only hope that we will at some stage see
this trend brought to an end. It is a challenge
that all of us in credit management should be
looking to address as we head into the summer.
Last month I highlighted my concerns over
the apparent continued fall from grace of one
of our traditionally better paying regions, East
Anglia. I’m delighted to see them back with a
bang showing a significant improvement and
cementing their position at the top of our league
table. Behind them our next three regions remain
the same as last month, and while they have all
seen a step back, it is in all cases less than half
a day, so in effect their performance has been
static. Whether the South West will manage to
stay ahead of Yorkshire and Humberside in the
longer term remains to be seen.
On the other side of the equation once again
Northern Ireland, London and to a lesser extent
Scotland remain areas of concern. London’s
importance to the national economy is such that
we should welcome any signs of improvement,
however it is discouraging to see the capital
continuing to show significantly slower payment
than the rest of the country.
42 July / August 2016 www.cicm.com
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