Business confidence rose in the final quarter of 2016 according to data from the Chartered Institute of Credit Management (CICM), although bad debt remains a risk going forward
The institute’s latest quarterly credit managers’ index (CMI) shows the headline index closed up 0.5 points to 59.8, ending a successive three-quarter fall. It is the highest result since Q2 2015 and only the fifth time in the CMI’s seven-year history it has climbed above 59.
The CMI gauges nationwide levels of credit being sought and granted by credit managers across the UK and acts as a primary indicator of actual levels of business being conducted. In the latest report, confidence in manufacturing is up 6.2 points to 61.2, while confidence in services rose 3.6 points to 59, which CICM chief executive Philip King said indicated rising optimism from credit professionals across the board.
However, the survey also found 32% of respondents saw bad debts increase across 2016, with only 13% expecting bad debts to drop in 2017. A fifth (20%) expect debts to continue rising, while a further 28% remain unsure about how debts will change, and are budgeting for rises.
Michael Feldwick, head of Tinubu Square UK, which sponsors the research, said: ‘The findings reflect conversations we are having across sectors, where there is a general concern about debt continuing to rise. Some seem more concerned than others however, such as the construction industry. It particular highlights the need to monitor and manage trade credit risks closely, some customers are telling us that trade credit insurers appear to be slowly becoming more cautious as their loss ratio and cost ratio increases.’
The survey results highlight regional differentiation. Wales, Northern Ireland and Yorkshire and Humber have all dipped below a 52-point threshold; six regions including the north west, south west and east Midlands are reporting scores of over 60 points; and London (which fell to 50.2 in Q3 2016) has risen over the threshold to close at 59.
King said: ‘It is very important for London as the driving force of the UK’s economy to display positive results, and it is good news to see that its decrease was only short-term.
‘Meanwhile, volatility levels are continuing to stabilise and that may signal a positive future in terms of economic confidence and the outlook for growth. But the uncertain geo-political circumstances surrounding the new US administration and Brexit have the ability to do lasting damage to our economic indicators.’
Report by Pat Sweet
