’The UK faces a high risk of a prolonged upside trend in 2023,’ says report
Business insolvencies across the UK have been forecast to rise in 2023 amid economic headwinds, according to Allianz Trade.
The trade credit insurer has released its Global Insolvency Report, where it reviewed its forecasts of business insolvencies for 2023 and 2024.
Published last week (11 April 2023), it warned lower growth, extended pressure on profitability, weaker cash buffers and tighter-for-longer financial conditions were driving insolvencies to rebound.
In the UK, it said businesses were forecast to experience a 16% rise in insolvencies in 2023 to 28,500.
“The UK faces a high risk of a prolonged upside trend in 2023,” the report said.
“Domestic firms have had to deal with a fragile context amid a sharp growth deceleration, earlier monetary tightening and rapid inflation – in addition to specific Brexit-related issues.
“We expect business insolvencies to continue to exceed the pre-pandemic level, gradually closing the gap with 2011 highs by 2024 (to 31,100 cases), albeit still below the 2009 records.”
Global picture
Allianz Trade predicted global insolvencies were set to bounce by 21% in 2023 and 4% in 2024.
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It predicted half of the countries in its panel will surpass their pre-pandemic levels of insolvencies in 2023, with three out of five expected to do so in 2024.
Maxime Lemerle, lead analyst for insolvency research at Allianz Trade, said: “Inside Europe, we expect the number of insolvencies to reach 59,000 in France in 2023, 28,500 in the UK, 17,800 in Germany and 8,900 in Italy.
“In the US, we expect an increase of 49% in 2023 as a result of tighter credit conditions and an expected sharp economic slowdown, which would mean a return to 20,000+ insolvencies per year.
“In Asia, China should see a moderate increase (4%) as the reopening has not eliminated all risks, notably in the real estate sector.”
Allianz Trade also estimated that a financial crisis would result in 21,600 additional insolvencies in the US over 2023 and 2024 and 99,900 in Western Europe.
Lemerle added: “Even without a major financial crisis, a credit crunch of the magnitude seen in the early 2000s during the tech bubble burst would lead to 12,900 and 95,300 additional insolvencies over 2023 and 2024, respectively.
“In case of a credit freeze that would stop new loans, insolvencies would increase by an additional 10,700 cases in the US and 46,300 cases in Europe.”
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