Insolvency is one of those elements of business that will never leave us. Just as some businesses thrive in the marketplace, others struggle, and of those, some are always destined to become insolvent. Whilst you might be forgiven for thinking that insolvency rates remain the same everywhere, that’s not true. Indeed, according to leading trade credit insurer Atradius, there’s an imbalance in the global economy which will see some countries with increased insolvent business and others seeing numbers drop.
In their latest insolvency forecast, they published their predictions for 22 major trade markets. While their overall prediction is for a fall in the number of insolvent businesses in 2016, that fall will be extremely modest. The potential of a new global economic recession and the continued low oil price across the world pose threats to businesses, though. Nevertheless, they’re sticking with a -5% predicted change in aggregate insolvencies.
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Of more interest is the news that the total number of bankruptcies anticipated for 2016 is 67% higher than in pre-recession 2007, and in some key countries, it is startlingly higher. Consider for a moment that Portuguese businesses are 440% more likely to go insolvent than they were in 2007, Italian businesses are 280% more likely, and Spanish ones are 250% more likely. Clearly, the economic recovery hasn’t hit every nation equally.
The story extends towards Greece, which had huge economic issues in 2015, culminating in their parliament accepting a recovery deal from the Eurozone. Understandably, 2015 saw a 10% increase in business failures, but 2016 is set to see another 5% increase, making it challenging to be a Greek business.
Switzerland, Luxembourg, Norway, and New Zealand are expected to see no improvements to insolvency rates in 2016. The UK will only see a 1% improvement in the number of insolvent businesses, which is a dramatic fall from the 9% improvement witnessed across the 2015 fiscal year.
This is contingent on a series of volatile factors in the global economy, particularly that of China. The country has posted several revisions to its growth for the year and has had to suspend its stock market on numerous occasions because of sharp falls in its value. Should China recover from these stumbles, we could witness an entirely different type of global economy, one that posts good growth despite the dire predictions.
Jason Curtis, Commercial Director at Atradius, had this to say in the report: “The challenging external environment combined with low commodity prices is putting pressure on global markets which is increasing the risk of insolvencies despite strengthening domestic economies. This is a clear warning shot to businesses that must stay attuned to trading risks even as the economy recovers My True Care.
Despite improvements in insolvency statistics for UK and Ireland in 2015 and predicted improvements again for 2016, the market remains challenging, with insolvency levels still significantly higher than pre-recession. Few businesses can absorb the impact of a failed customer, and businesses must continue to protect themselves and have robust credit management systems in place.
Walsh Taylor is one of the North’s leading insolvency practitioners and offers assistance to businesses in trouble every day. Their helpful and friendly staff are always happy to take a phone call, so if you’re looking for insolvency practitioners Wakefield or insolvency practitioners Barnsley, look no further than Walsh Taylor.