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Understanding current economic challenges and how to navigate them

The UK economy is currently facing several challenges, and businesses of all sizes are feeling the impact. Here's a breakdown of what's happening and how businesses can navigate these turbulent times:

Economic Pressures on Businesses

  • The economy is slowing down, and consumer behaviours are changing.

  • Businesses are grappling with high inflation, labour shortages, and rising wage costs, which are squeezing profit margins.

  • The Bank of England has raised interest rates 14 times consecutively as of August 2023, with another increase expected soon. This has made borrowing more expensive for businesses, leading to increased financial strain.

Sectors Facing the Most Heat

  • Retail, wholesale, and food and drink sectors are particularly affected.

  • Research by law firm RPC revealed a 56% increase in retail business insolvencies over the past year, reaching a decade high.

  • Beverage manufacturing and food production sectors have also seen significant rises in insolvencies.

Risks for Suppliers

  • The threat of business insolvency affects the entire supply chain.

  • Suppliers often sell goods on credit, with payment terms ranging from 30 to 90 days. If businesses face financial difficulties, they might not honour these credit agreements, leaving suppliers at risk.

  • Some suppliers are shortening payment schedules to manage their cash flow. However, this can strain their customers' finances further, increasing the risk of non-payment.

Global Supply Chain Challenges

  • Many companies are opting for near-shoring of suppliers to reduce carbon emissions and avoid disruptions. However, this can introduce new challenges, such as potential bottlenecks in the supply chain.

Trade Credit Insurance: A Safety Net for Suppliers

  • Suppliers can consider Trade Credit Insurance to protect against the risk of customers not paying for goods or services.

  • Benefits of this insurance include:

    • Confidence to extend credit to new, potentially riskier customers.

    • Better access to funding at competitive rates.

    • Regular monitoring of customers' financial health.

    • Early warnings about any changes affecting customers' ability to pay.

    • Advice on risk mitigation planning.

Best Practices for Managing Risks

  • Suppliers should:

    • Monitor consumer markets to anticipate changing trends.

    • Build strong relationships with customers to understand their financial health.

    • Engage in open dialogues about cash flow and payment challenges to find early solutions.

In these challenging times, it's crucial for businesses to be proactive, stay informed, and adapt their strategies to safeguard their interests.

Trade Credit Insurance can help provide you with confidence to trade well through these challenging times.


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