Global corporate insolvencies rise for the first time in 10 years

According to research by Atradius, corporate insolvencies are set to rise globally for the first time in a decade, with the biggest increase seen in the UK.

Global Insolvency Rates 2019 2020

Global corporate insolvency statistics for 2019/2020

An outlook report by credit insurance firm Atradius has forecast corporate insolvencies around the globe for 2019 and 2020. The report forecasts the following:

  • corporate insolvencies in developed markets will increase by 2.8% in 2019
  • insolvencies will increase globally by a further 1.2% in 2020
  • business failure rates in the UK will increase by 10% this year
  • North America will see the highest insolvency growth on any continent (3.2% in 2019 and 1.7% in 2020)
  • western Europe will see a 2.7% rise in corporate insolvencies in 2019

The forecasted 2.8 per cent increase in global business failure rates would signify the first rise in insolvencies globally since the 2008 financial crisis. Atradius suggest the rise will largely be driven by a loss of momentum in the global economy, with growth forecast set to slow from 3.2 per cent last year to 2.6 per cent in 2019.

As well as a 2.7 per cent increase in business failures across western Europe in 2019, Atradius forecast a further 0.7 per cent increase in 2020. The firm attribute this to decelerating economic growth, the US-China trade war and looming uncertainty surrounding Brexit and Italian politics.

Insolvency outlook in the UK 2019/2020

According to the report, the UK faces the highest corporate insolvencies increase across all advanced markets, with the outlook suggesting they could rise by as much as 10 per cent in 2019. The firm also predicts a further 5 per cent increase in the UK’s rate of insolvency for 2020 based on the assumption that the UK government will ask the European Union for a Brexit extension before 31 October.

Atradius attribute some of the increases on Brexit uncertainty as it will delay recovery of the sterling, keep inflation elevated and prolong the drag on business investment. They also suggest a no-deal Brexit, or further delays to Brexit followed by a general election, are likely to put further upward pressure on failure rates.

Insolvency outlook around the world 2019/202

In Europe, a 4 per cent increase is forecast for Switzerland, Italy and Belgium, and weaker external demand is expected to increase insolvency in France by 3 per cent this year. Germany and the Netherlands are expected to see a 1 per cent increase in insolvencies, while in Spain insolvencies are forecast to decline 5 per cent in 2019. A decline of 6 per cent is also forecast for Portugal.

Elsewhere in Europe, Ireland isn’t forecast to see an increase in corporate insolvencies for 2019, though it is likely to see a 2 per cent rise next year. However, Atradius does suggest the reality of 2020 will be heavily influenced by the Brexit outcome.

Across the Atlantic, a reversal in the downward trend of annual insolvencies is expected in the US with a forecast rise of 3 per cent this year and 2 per cent in 2020. Canada is forecast to see a 5 per cent insolvency rise for 2019 and a similar 2 per cent rise for 2020.

Finally, insolvencies in the Asia-Pacific region also face the first annual increase since 2009. In Japan, a 2 per cent increase in insolvencies is forecast for both 2019 and 2020, while in Australia insolvencies are also expected to increase 2 per cent in 2019 before declining by 3 per cent in 2020.

Reasons for the global insolvency increases in 2019

On the report, Stuart Ramsden, head of commercial for Atradius UK said: “The strain from a global economic slowdown, political uncertainty and trade tensions is evident, taking a toll on growth and contributing to the first global rise in insolvencies in a decade.”

See also

Restaurant insolvencies rise by 25% in just one year

Scottish company insolvencies up by 46% in six months

Company insolvency statistics - Q2 2019

Image: Getty Images