Credit Management September 2018

EXCLUSIVE REPORT
Shifting Sands
The UK economy is showing signs of inconsistent
payment performance across sectors and rising business
insolvencies.
AUTHOR – Nalanda Matia
AS the global economy
trudges on scattered
with uncertainties and
headwinds, growth
performance of the
UK economy had been
broadly positive. The competitive value
of the pound has boosted UK exports and
inbound tourism, in turn giving a boost
to overall UK GDP growth that should
continue through 2018 and possibly 2019.
Dun & Bradstreet’s forecast for year-onyear
(YoY) growth in real GDP remains at
a stable rate of 1.4 percent and 1.6 percent
through the end of this year and in 2019
respectively.
Unemployment is also expected to
drop and remain at manageable levels for
the UK economy, with inflation expected
to inch down and take some pressure off
the economy as a whole. However, the
Eurozone economy has slowed recently.
Any further escalation of international
trade tensions involving the new tariff
barriers that businesses around the world
involved in cross-border trade are being
subject to could dampen global growth in
2019 and beyond.
Some forward-looking indicators
continue to ease, signalling a somewhat
challenging macroeconomic environment
in the year ahead. Eurostat's Industrial
Confidence Indicator dropped to just 0.1
in March, only narrowly above the neutral
0-points line and the lowest reading since
October 2016. Furthermore, consumers are
still curtailing spending – a consequence
of the elevated inflation rate. Several
insolvencies among retail chains and
increasing problems for so-called 'casual
dining' chains in recent weeks highlight
the elevated levels of credit risk in some
parts of the British economy.
On a positive note, the UK Government
has been successful in pushing the EU
Withdrawal Bill through Parliament in June.
A last-minute compromise with rebels from
within the Government meant that the law
passed with a narrow majority and received
royal assent on 26 June. The bill will repeal
the European Communities Act from 1972
and provides the legal base for Brexit.
Although the adoption of the Withdrawal
Bill creates more clarity about the Brexit
roadmap, it remains unclear what the EU-UK
trade and investment relationship will look
like after Brexit.
Given the divisions within Parliament
(and indeed between the Government's inner
core of ministers) it seems unlikely that any
swift progress on the issue will be made. Dun
& Bradstreet expects some progress towards
the EU summit in October, as this is the
final opportunity for a deal, given that any
agreement will have to be voted on by the
British and the European Parliament before
the UK leaves the EU on 29 March 2019.
Switching from the state of the
macroeconomy to that of the micro, it’s
important to consider the percent of prompt
payments by major industry groups – and
how these industries have fared in this
respect over the past year and the previous
quarter. It seems that the past 12 months
The Recognised Standard / www.cicm.com / September 2018 / PAGE 42