COVID-19 to drive 43% rise in UK insolvencies – Euler Hermes

  • Global trade is not expected to return to pre-crisis levels before 2023
  • Global economy to shrink by -4.7% this year, with growth of +4.8% in 2021
  • UK GDP to fall by -13.3% in 2020, before a modest +5% rebound in 2021
  • UK insolvencies to surge by +43% by 2021, and by +35% globally
  • Zombies to eat into the global recovery for years to come


LONDON, 16 JULY 2020 – Business insolvencies in the UK are set to rise by more than +43%, ahead of the global trend of +35%, as the impact of COVID-19 hits Britain harder than other developed economies, according to Euler Hermes.

Global GDP growth is only likely to return to pre-crisis levels at the end of 2021, and worldwide trade will not to return to pre-crisis levels before 2023. However, managing the risks of a second wave will be crucial in determining the size of the shock and speed of recovery.

Alexis Garatti, global head of macroeconomic research at Euler Hermes, said: “Recovery will take place in at different speeds in different countries and markets and is largely dependent how governments are managing fiscal and monetary support. The key question remains how much more support is needed until the end of the year. With increased solvency risks emerging everywhere, we expect global insolvencies to increase by +35% in the next year.

Global trade will contract by -15% in volume in 2020, with a recovery of +8% in 2021 and +4.1% in 2022. Export losses (USD4.5 trillion in 2020) will also reveal large asymmetries between countries and sectors. Germany, the Netherlands, Switzerland and Austria are forecast to recover faster, while Japan, the U.S., Spain, the UK and Italy are likely to need even more fiscal stimulus to support them into recovery.

The fallout from COVID-19 will prompt a wave of business failures in the UK, creating a spike in insolvencies of more than +40% in the next 12 months. The UK economy will shrink by -13.3% this year, followed by a modest +5% rebound in GDP in 2021. Brexit uncertainty is also set to weigh on the country in the second half of 2020 and early in 2021.

Milo Bogaerts, CEO, Euler Hermes UK & Ireland, said: “The UK is amongst the countries with the longest and harshest lockdowns in Europe. The economy is taking time to get back up and running and we are already seeing an increase in claims notifications, foretelling the pain that is still to come for many sectors and businesses. More than ever the government and the private sector must work together to support the return to growth and create the trust to trade.

Worldwide, service sectors such as energy, travel, and transport are among the hardest hit and will take longer to recover than the trade in physical goods. Emerging markets will also take longer to recover than developed markets, and those that engaged in fiscal stimulus programmes to protect against capital outflows in March may face destabilization of their sovereign bond markets in the future.

In the medium term, GDP growth will be impaired by the legacies of the crisis. An accelerating ‘zombification’ of corporates, banks and labour markets dependant on support schemes, a deterioration of social and political risk and definitive losses in terms of capacities of production will prove a drag on a recovery.

The forecasts are included in Coping with COVID-19 in Differing Ways, a macroeconomic report from Euler Hermes that tracks the fortunes of global growth and trade in the wake of Covid-19, and in its latest insolvency report: Calm before the storm Covid19 and the business insolvency time bomb.

 

Media Contacts: 

Euler Hermes Media Relations
Adrian Russell
+44 (0)20 7860 2728
adrian.russell@eulerhermes.com

Citypress
Chris Hopper
+44 (0)161 235 0317
chris.hopper@citypress.co.uk

Jul 22, 2024

Allianz Trade wins IFTA Award

Allianz Trade named Best Trade Credit Insurer 2024 by IFTA for third year in a row.

Jun 18, 2024

Allianz Trade and BPL unveil fully integrated API-powered enquiry system

Allianz Trade and BPL have today launched an industry-first collaboration to transform how underwriters and brokers share enquiry data using API integration via digital trading platform Whitespace, a Verisk business.

May 22, 2024

Allianz Trade wins GTR Award

Allianz Trade recognised as a ‘Leader in Trade’ for second consecutive year by Global Trade Review (GTR) as business wins Best Trade Credit & Political Risk Underwriter 2024

May 14, 2024

Allianz Trade Global Survey 2024

Allianz Trade Global Survey 2024 findings, revealing exporters' optimism amid global crises. Uncover UK exporters' growth projections, challenges in supply chains, and the transformative potential of AI. Find Out More!

May 07, 2024

Allianz Trade x Inclusive Brains

Allianz Trade & Inclusive Brains join forces to foster the inclusion of people with disabilities thanks to AI and neurotechnologies.

Apr 11, 2024

Allianz Trade UK Product Launch

A major milestone in Allianz Trade’s journey of innovation, the refreshed Trade Credit Insurance product suite provides a range of new features to enhance efficiency for brokers and insureds alike.

Mar 06, 2024

Allianz Trade launches Allianz Trade pay

Allianz Trade launches Allianz Trade pay, a new range of services fully dedicated to B2B e-commerce activities, brings simplicity, security, flexibility and competitiveness to the e-commerce ecosystem thanks to comprehensive and easy-to-set-up products.

Nov 20, 2023

Allianz Trade appoints Peter Evola as Commercial Director for the UK & Ireland

Allianz Trade has appointed Peter Evola as Commercial Director for the UK & Ireland with effect from 1 December, subject to regulatory process.

Sep 22, 2023

Allianz Trade win Best Trade Credit Insurer at TFG Trade, Treasury and Payments Awards

Allianz Trade, the world’s leading trade credit insurer, has been awarded Best Trade Credit Insurer at this year’s TFG Trade, Treasury, and Payments Awards.

Sep 22, 2023

Allianz Trade joins the Trade Finance Distribution Initiative

Allianz Trade, the world’s leading trade credit insurer, has joined the Trade Finance Distribution Initiative (TFD Initiative) as a member