A new report has forecast that insolvencies are to decrease globally by -1% in 2018, although the number of bankruptcies will remain higher than in 2007.
According to the Global Insolvencies Index by Euler Hermes, the UK will be one of the countries to experience an increase in insolvencies, with numbers forecast to increase by 8% in 2018.
It says that as Brexit approaches, importers and consumers have been affected by raising input costs and a weaker pound. The report highlights that the UK is an exception in Western Europe, where most countries should experience either a decrease or stabilisation in the number of insolvencies thanks to the economic recovery and supportive monetary conditions.
The Index also points out that despite the rebound in growth and trade globally, more and more domestic sectors are exposed to large business failures. In 2017, large insolvencies increased by +21% with notable increases in services, retail, agrifood and construction. According to Euler Hermes, competition and digital disruption help explain this trend and subsequent risks for suppliers.
“All in all, insolvencies are stabilising worldwide after seven years of decreases,” said Ludovic Subran, Chief economist at Euler Hermes. “This confirms the return of credit risk with the economic recovery. In 2018, companies in Asia, Latin America, Eastern Europe and the UK should be closely monitored. In addition, large bankruptcies are increasing fast as disruption in industries such as services and retail leaves no one unscathed. Mind the domino effect!”
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