In this edition:
- Allianz predicts insolvencies increase in 2023 and 2024
- Tokio Marine HCC reviews the UK Food Service Sector
- Positive outlook for credit insurers despite Americanas failure
- British Exporters Association update their guide to export credit insurance
- Atradius believes that fears of a banking crisis are overdone
Allianz predicts insolvencies increase in 2023 and 2024
In a recent report, Allianz forecast global insolvencies will increase by 21% in 2023 and 4% in 2024. The main reason behind the forecast is lower growth in the Eurozone and the US. The sectors most affected are expected to be retail, some services including restaurants, transport, construction and durable goods.
In the UK, insolvencies are predicted to rise 16% in 2023 to 28,500. On top of Brexit-related issues, UK business has had to deal with a sharp fall in growth, earlier monetary tightening and rapid inflation. Insolvencies are expected to continue to exceed pre-pandemic levels although falling short of the 2009 peak.
Tokio Marine HCC reviews the UK Food Service Sector
Terry Macauley Deputy Head of Credit Risk at Tokio Marine HCC has published a report reviewing the UK Food Service Sector and the problems resulting from the current economic environment. The cost of living crisis has meant that consumers have less to spend and food price inflation reached almost 17% in January. The sector has also been hit by supply chain issues and labour shortages. Supermarkets who had signed contracts with foreign producers suffered shortages due to poor harvests. Food delivery businesses have seen a fall in demand post Covid.
Looking forwards there are some positives with prices of staples such as wheat (40%), corn (14%) and soyabeans (12%) are down. Lower consumer spending and high inflation and high interest rates are expected to increase risk in the sector.
Positive outlook for credit insurers despite Americanas failure
A recent report from Moody’s states that trade credit insurers are well placed to cope with an anticipated increase in claims. Following the introduction of Solvency ll in 2016 the average Solvency II ratio is 200%. A strong performance in 2022 allowed them to absorb large claims including the bankruptcy of Brazilian retailer Americanas.
Americanas SA is a 93 year-old retailer present in most Brazilian shopping malls filed for protection from their creditors following nearly $4bm worth of accounting inconsistencies and $8.2bm worth of debt. Cash in the company fell linked to the prepayment of suppliers.
Read Reinsurance News article on the Moody’s report
British Exporters Association update their guide to export credit insurance
BExA has published a revised and updated Guide to Export Credit Insurance co-edited by WTW’s own Jenni Donaghy. The guide is free to download.
Export credit insurance covers the risk of not being paid for goods and services that have been delivered, specifically invoices raised on overseas customers, political risks, insolvency and default. It gives exporters the confidence to extend credit to customers, protecting receivables without additional co-operation with your customer.
Alternatively, please contact Jenni Donaghy for further information.
Atradius believes that fears of a banking crisis are overdone
There have been fears that following the failure of Silicon Valley Bank (SVB) in the US and the problems at Credit Suisse there could be a new banking crisis. In a recent report Atradius say that swift action by the Federal Reserve and the US Treasury prevented SVB’s problems spreading across the sector. They agreed to make good all losses above the $250,000 Guarantee Scheme and support and further lending was given to smaller banks. Subsequently, First Republic failed and was taken over by JP Morgan.
In Switzerland UBS bought struggling Credit Swiss with the backing of the Swiss National Bank. The problems at Credit Swiss were caused mainly by losses from large clients such as Archegos and Greensill Capital rather than wider problems in the sector.
Major insolvencies in February, March and April
- H.I. Quality Steel Castings Ltd and BAS Castings Ltd – Steel manufacturers
- Sundeala Ltd – Manufacturer of paper and paperboard
- Swala (Paem) Ltd – Gas manufacturers
- Manchester Giants Ltd – Basketball team
- Eco Modular Buildings Ltd – Construction
- CK Acquisitions Ltd – Clothes and home furnishings retailer t/a Cath Kidston
- Wellpak (UK) Ltd – Supplier of vegetables and salad
- Team Precision Pipe Assemblies Ltd – Motor vehicle parts supplier
- Jarvis Contracting Ltd – Building company
- Cox & Cox Mail Order Ltd – On-line furniture retailer
- Mark Harris Furniture Ltd – On-line furniture retailer
- Dormeo UK Ltd – Furniture wholesalers
- Aartee Bright Bar Ltd – Iron and steel manufacturers
- The Big Prawn Co Ltd – Fish processing company
- Metnor Construction Ltd – Construction company
- Tolent Construction Ltd – Construction company
- Malin Industrial Concreate Floors Ltd – Concrete floor providers
- Outco Surfacing Ltd – Construction of roads
- SD Samuels (Special Projects) Ltd – Roofing contractor
- Gola Wood Works Ltd – Furniture manufacturers
- British Corner Shop Ltd – Food services
Insolvencies increase during Q1 2023
There were 5,747 (seasonally adjusted) company insolvencies in England and Wales during the first quarter of 2022. This was a 4% increase on the previous quarter (after seasonal adjustment) and an increase of 18% compared to the same period last year.
If you’d like to discuss these topics further, please do not hesitate to contact me.
