September 2016 Credit Management magazine

PAYMENT TRENDS
THE BRIGHTER
DAYS OF SUMMER
Jason Braidwood FCICM(Grad), Head of Credit and Collections at Creditsafe Group
analyses the latest monthly business to business payment performance statistics.
YOU may remember back when we
analysed the May figures in June that
we had the unpleasant experience
of seeing the positive trends of the
previous few months suddenly reversed with
noticeable increases in the time taken to pay
invoices across nearly all industry sectors
and regions of the UK. Well, as we analyse
the statistics in our databases for July and
compare them back with the rest of the year
we can perhaps breathe a small sigh of relief
as that adverse step begins to look more like
a blip that has now passed us by.
While the July numbers look much better
than May in most areas we haven’t yet quite
got back to the confident position of April.
However, it is encouraging to see something
that looks more like the pattern from Q1,
and one that also keeps us ahead of where
we were when things were slipping back
at the end of last year. Of course, the great
unknown remains the overall effect of the
Brexit decision on the economy as a whole,
and while it really does seem far too early to
tell for sure, we are inevitably in for a period
of economic uncertainty. How that affects
companies’ payment performance isn’t clear
as yet but it will certainly be something to
keep a close watch on. While future trading
arrangements will take some time to finalise,
the effect of currency fluctuations on many
businesses may be more immediate.
As for now we can only hope that the
positive trend of June and July is continued
through the rest of the summer and beyond.
However, I would caution everyone to keep
a close eye on the latest details for your own
industry or region as overall averages of well
over two weeks beyond terms isn’t really
something to be complacent about.
INDUSTRY SECTORS
When looking at the statistics by industry
we see some interesting changes and some
repeats. Back in June when we looked at
the May figures we called out Retail as an
area of concern with a massive increase in
delays and an appearance right near the top
of our ‘Poorer payers’ chart. This time around
the sector is leading the way in improved
performance which is perhaps a sign that the
dust is beginning to settle after the recent
period of upheaval and high profile corporate
failures. Although with Retail’s performance
being an indicator of consumer confidence
we can all be forgiven for not celebrating too
soon; after all its days beyond terms scores at
just over 12 is only back to the average for the
sector over the last 18 months.
Looking at some of the larger indicators,
it is also encouraging to see Manufacturing
take a step forward with an improvement of
nearly five days and Construction remaining
just about even. Staying with the good
news we can also see the traditional public
sector areas of Education, Health and Public
Administration back in the top five, perhaps
reflecting a determination not to let political
turmoil affect business.
On the other side of the coin though the
major service sector of Business Support has
firmly held on as one of the poorer paying
sectors and continues to slip back along with
those traditionally late paying utility sectors of
Energy Supply and Water and Waste. It’s also
interesting to note the ongoing delays from
International Bodies, which again may reflect
either post-referendum concerns or exchange
rate issues.
REGIONS
When we look at the regions, I think we
should begin with a couple of causes for
celebration. The fact that London has made
the biggest move with an improvement in
days beyond terms of nearly ten days is a real
spot of good news. While London’s perceived
disproportionate influence on the economy
as a whole can be seen by many as a cause
of concern, the fact remains that it is still very
dominant and if businesses across the capital
are improving their payment practices that
can only be a very good thing for us all. The
other big mover since May is Wales, which
had slipped back markedly, even overtaking
Northern Ireland in the late payment charts.
A similar improvement to London is to be
welcomed and although they are still in the
bottom five it’s a step in the right direction
and perhaps a reflection of the feel-good
factor spilling over from the national side’s
great performance at the Euro 2016 football
tournament!
Even with a very small worsening in
performance, East Anglia has firmly held onto
its position as the fastest paying region in the
UK, although the gap to some of the other
English regions is narrowing. The South West
has made a big step back up and perhaps
significantly our old friends in Yorkshire and
Humberside have re-entered the top five.
Whether it will continue in a march to reestablish
their old pre-eminence remains to
be seen.
If we are to highlight areas for concern,
then once again Northern Ireland needs
to be considered. There doesn’t appear to
have been a Euros ‘hangover’ here, and the
province is the poorest paying region of the
country as it seems to have been on so many
previous occasions. With the UK’s only land
border with another EU state, Northern Ireland
is in many ways in the front-line of any future
re-arrangement of our trading arrangements
with Europe and its economy is inevitably
influenced by relations with the Republic of
Ireland. How this will play out over the next
few years we will have to wait and see – but
in the meantime if something can be done to
stimulate some improved payment practices
by companies there then it can only be a
hopeful sign.
42 September 2016 www.cicm.com
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