For smaller insurance brands in particular it’s good to know which sectors carry a higher risk of defaulting or cancelling cover. Here’s some data from Atradius;
The UK’s second-largest trade credit insurer, Atradius, has revealed that the number of claims it received from UK businesses fell by 17% in the second quarter of 2024, compared to the first quarter of the year.
The new report into payment default trends for H1 2024, however, has also revealed that the prolonged economic and sector challenges are having a significant impact on some business sectors, with increases in payment defaults for metals, transport, and paper companies, despite transport and paper sectors faring better in the second quarter of the year in comparison to the first.
A separate report, Atradius’ Payment Practices Barometer, an annual survey of B2B payment practices in markets across the world, offers exclusive insight into how companies are faring with current economic challenges, trading, and the payment practices of their customers. The latest report shows that 40% of all B2B sales are currently affected by late payments, mainly due to liquidity issues among customers.
Despite these figures, the Payment Practices Barometer reveals that B2B invoices paid on time has increased by 29% year-on-year from 2023, painting a promising picture for businesses finances moving forward.
Construction
Claims in the construction sector fell by 28% in the first half of 2024 compared with the first half of 2023.
This reflects a recovery for parts of the sector after a pandemic support hangover that put some construction firms out of business. Conditions are broadly improving as early indications show purchasing improvements now that inflation is finally decreasing, and as non-residential contractors work through the last of their legacy issues.
Yet, the construction sector remains under pressure. Construction insolvencies remain persistently high and in the short term this is unlikely to change.
Consumer Durables
Consumer durables enjoyed the biggest decline in payment defaults in H1 2024, down 29%, with a rapid decline in claims by 42% month-on-month from May to June. Retail sales have, for the most part, shown some improvements from the same period in 2023, benefiting the sector. However, the sector remains fragile. Firms selling big ticket items like appliances will be hoping for further improvements in the economy to boost sales; while the onset of summer should encourage consumers to invest in new garden furniture.
Hospitality
Despite a damper start to the summer than hoped for, the hospitality sector will be reaping the benefits of England reaching the final of the Euros, which was estimated to deliver a £120 million boost for nation’s pubs. They also benefited from Taylor Swift’s concerts in the UK, with fans expected to have spent an average of £848 on tickets, accommodation, food and drink as well as other amenities.
With the food and drink sector across the UK seeing a 9% decline in claims in the first half of 2024, hospitality firms across the UK will be looking to keep up this momentum during the rest of the year.
Textiles
Atradius’ report reveals the textiles sector – an often over-looked and underappreciated contributor to the UK economy – has seen a 39% decrease in payment defaults in the second quarter of the year, with an overall decline of 11% from January to June this year. The sector, which is heavily dependent on the economic backdrop and consumer spending, has suffered acutely during the cost of living crisis, so it’s promising to see improvements amid inflation declines and as consumers feel more confident about putting their hands in their pockets.
The apparel and fashion sector is particularly sensitive to business rates, so if and when the new Labour Government goes ahead with the reforms promised in its manifesto, then many businesses should receive a significant boost.
James Burgess, Head of Commercial and insolvency expert at Atradius, says:
“It is very encouraging to see the declines in default rates across most sectors, as businesses start to benefit from the gradual uptick in the economy.
“However, businesses still very much have a battle on their hands, as consumers continue to face high prices, the cost-of-living crisis persists, and we’re still waiting for an interest rate cut to bring down borrowing costs.
“This could make the second half of the year challenging for many firms. Amid the ongoing challenging conditions, companies need to be aware of how to protect themselves against the domino effect of insolvency. It remains crucial for businesses to protect themselves with trade credit insurance, enabling them to trade with confidence and explore new markets or products.”
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