News

Let’s start with the good news! The Obama victory in the US presidential elections will bring a feel-good factor to play in the US economy as well as an increase in US government spending. These will combine to lift the US economy out of recession and lead an upturn in the world economy.

At home, the continuing lowering of interest rates by 1.5% this week, falling fuel prices and lower prices in the shops will free up household disposable incomes despite stagnant income levels. The banking sector is now underpinned by UK (and other) governments and will gradually start to lend again.

The UK economy will pull out of the recession and return to growth.

However, the picture in the short term is frightening! R3, insolvency experts, announced research results this week predicting a 41% increase in insolvencies amongst small businesses – back up to the levels of insolvencies seen at the peak of the last recession in 1992. The accountancy firm Tenon also reported that company receiverships are up by 152% in the last quarter 2008 compared to the same quarter 2007 – this will feed into the insolvency statistics in the coming months as will the increasing level of administrations. Roger Bootle of Deloittes predicts negative growth for both 2009 (-1.0%) and 2010 (-0.5%) – if this proves to be accurate then corporate insolvencies are likely to remain high through until 2011.

The demand for credit insurance has surged in recent months as companies become more aware of the need to address credit risk. The combination of increased demand and limited supply (as insurers are looking to manage their own exposure) has meant that there are significant differences between insurers at the moment. Insurance is not available in some sectors and terms will vary greatly between insurers where cover is available – the message is that any company looking to explore the credit insurance market should act quickly and should act through a specialist broker in order to get best advice on all options currently available.