Rise in insurance pay‐outs as UK firms face financial struggles
Trade credit insurer pay‐outs hit a nine‐year high in 2017 according to data from the Association of British Insurers, reflecting a growing number of firms that are struggling financially.
An incredible £4.3 million was paid out every week last year, up 7% on the year previously, with such high levels of pay‐outs last seen in 2009.
The rise is accredited to growing pressures on supply chains, where late payments and insolvency issues are prevalent and which can have a knock‐on effect on a number of firms.
Uncertain trading conditions have also played a part, with business owners pointing to the unclear nature of negotiations surrounding Britain and its membership of the EU.
For context, 2017 saw the first yearly rise in corporate insolvencies in recent years, with Monarch Airlines one of the major firms to fail.
Meanwhile Carillion, Toys R Us and Maplin have also entered insolvency so far in 2018, although those failures are not reflected in the latest data.
Designed to protect against risk of non‐payment by suppliers, trade credit insurance provides a level of protection for businesses.
More than 11,000 claims were made in 2017, which equates to around 212 businesses a week calling for the insurance, which covered trade worth £340 billion.
The Association of British Insurers reports that £130 million was claimed in the final quarter of the year, and that such demand had not existed since the first quarter of 2009.
It has also been reported this year that Britain could see the second largest rise in insolvency of all major global economies.
Official figures highlight that levels of corporate insolvency rose by 2.5% in 2017 across England and Wales.
President of insolvency and restructuring trade body R3, Adrian Hyde, said that supply chain pressures have increased, and that high street retailers are particularly hard hit.
He pointed to alterations in customer habits, reduced demand and rising competition as being major factors as to why more businesses are entering administration or requiring alternative financial support.
By Phil Smith