Increased Bankruptcy Predictions Spurred by Brexit
In a recent report, Atradius, a global trade credit insurer, has analysed trends in corporate insolvencies across various regions, providing insights into the economic health of nations. The report, The Insolvency Forecast, offers a comprehensive assessment of insolvency levels in the wake of major economic events, such as Brexit.
Despite the uncertainties and operational challenges introduced by Brexit, the report offers a mixed bag of predictions for insolvency levels in advanced markets. Spain is anticipated to witness a 10% fall in bankruptcies for this year, a promising sign of economic recovery. Similarly, the Netherlands, Ireland, Portugal, and Italy are expected to experience reductions in insolvency levels, albeit with underlying levels remaining high.
However, the report predicts a 2% increase in insolvencies in the UK for 2016 and a 3% increase for 2017. This increase in business failures is attributed to the Brexit fallout, which is likely to extend across European markets, with countries struggling indirectly with economic slowdowns. Simon Rockett, senior risk manager for Atradius, comments on the impact of Brexit on the UK, stating that it has led to a decrease in business confidence, as indicated by the Purchasing Managers Index (PMI) contracting to a level not seen since April 2009.
The report also highlights insolvency increases in other parts of the world. Greece is expected to experience a 6% increase in business failures this year, followed by another rise next year. Struggling commodities prices will add pressure to commodity-rich countries like Australia, with bankruptcies for 2016 expected to increase by 8%. Chinese suppliers are experiencing pressure due to lengthening payment terms and increased competition.
Atradius's report also addresses efforts to boost trade finance and combat trade diversion. India is considering credit insurance reform to support Small and Medium Enterprises (SMEs), while the European Union has launched a tool to combat "harmful" trade diversion. The French Export Credit Agency aims to address the reinsurance gap for wine exports to the US.
Insurtech Cartan Trade has appointed a country head for France, further signalling the growth of innovative solutions in the trade finance sector. Meanwhile, Norway's bankruptcies for 2016 are expected to increase by 2%, and insolvencies are predicted to rise year-on-year in Finland, Switzerland, Denmark, Canada, New Zealand, Austria, Sweden, and Luxembourg.
Spain's insolvency levels, however, are expected to decrease due to growth and recovery from a low level. Despite this, insolvency levels in countries like Spain are still expected to remain high compared to pre-crisis times. Portugal and Italy's insolvency reductions are only minor, despite being from significantly higher levels than pre-crisis times.
The report concludes by noting that the actual impact of Brexit on insolvency levels varies by sector and region, and depends on how businesses adapt to the post-Brexit environment. For a precise and detailed assessment of Brexit's effect on insolvency levels in advanced markets according to Atradius, it is recommended to consult the latest edition of The Insolvency Forecast directly from Atradius or their official communications.
The report by Atradius, a global trade credit insurer, suggests that while Spain is anticipated to see a decrease in bankruptcies, the UK is predicted to experience a 2% increase in insolvencies in 2016 and a 3% increase in 2017, due to the Brexit fallout. In an effort to boost trade finance, India is considering credit insurance reform and the European Union has launched a tool to combat "harmful" trade diversion.
