It’s been quite the year so far.
In January we started to properly emerge from the pandemic, with the financial press generally optimistic about GDP growth rates, despite some short term supply chain problems.
In February Russia launched their assault on Ukraine, and as well as the immense suffering and displacement of people this caused, it exacerbated the underlying Economic issues across Europe and the Western world – shortage of raw materials and labour. Those supply chain issues? Turned out not to be short term after all.
Here in the UK we have now reached an inflation rate of 9.1%, the highest for a long time, with this forecast to get to at least 11% in 2022. Shortage of material supply, increased transport costs, shortage of labour, and energy prices seem to be the driving factors. Add to this the chaos at airports, the strikes on the railway, the highest petrol prices I’ve ever seen, and a near doubling of gas and electricity (in time for the winter, next increase due in October) and a postcode lottery on GP’s and healthcare, and it’s not a cheery picture.
For business the year has already been challenging, and there’s more to come. The covid related Government support has gone, and businesses who took Covid loans as cheap money are now faced with repaying them, at the point when a consumer led boom was supposed to making life easier. The risk of business failure – of losing a substantial amount of cash flow as trade debt increases – continues to increase.
The good news is that for now the credit insurance market remains soft, and there are some new, innovative ways of targeting cover for SME’s, so you can protect your debts, potentially with little outlay.
But guess what? Insurers have looked at the tea leaves as well, and there are signs of the market starting to harden, combined with a restriction on cover on buyers. It’s certainly not a time for business owners and managers to plunge their head in the sands and simply hope a bad debt will never happen, it’s time to act.