Insolvencies in the UK: Trends, Impacts & Trade Credit Insurance

The UK business landscape is facing mounting challenges as insolvency rates surge, impacting industries across the board. High-profile collapses like ISG Construction have sent ripples through the economy, leaving smaller firms in the supply chain grappling with financial uncertainty; meanwhile, global predictions highlight an escalating insolvency crisis, underscoring the need for robust risk management strategies - like Trade Credit Insurance.

Let’s take a closer look at the current situation, before moving onto how Trade Credit Insurance can be a business’s lifeline.

The Collapse of ISG Construction and its domino effect

The recent insolvency of ISG Construction has exposed the fragility of supply chains in the construction industry, already a sector with small margins. As one of the UK's leading firms, its collapse has left subcontractors and smaller suppliers facing halted projects, unpaid invoices and the risk of going under themselves.

Loss-making contracts between 2018 and 2020 have been pinpointed as the cause for the company’s demise – as well as the loss of 2,200 jobs - and there’s no doubt that news of this insolvency is a cautionary tale for dependent businesses everywhere, and demonstrates how important it is to have protection from such a knock-on threat to their cash-flow.

TGI Friday enters administration

In another blow to the UK hospitality sector, iconic restaurant chain TGI Friday went into administration in September. The chain's struggles highlight the pressures faced by consumer-facing industries, including rising operational costs and reduced discretionary spending. The closure of multiple outlets has not only affected employees and stakeholders but also created ripple effects for suppliers. 87 of the chain’s restaurants have been put up for sale.

Insights from Begbies Traynor's ‘Red Flag Alert’ report

The latest Q3 2024 Red Flag Alert report from Begbies Traynor Group paints a grim picture for UK businesses. The report identifies a 30% increase in companies experiencing significant financial distress in the last year, particularly in sectors such as retail, construction and manufacturing. These findings suggest that many businesses are on the brink of insolvency, with limited options to navigate the challenging economic environment, and highlight the need for Trade Credit Insurance to protect the future of vulnerable businesses.

So, how exactly can Trade Credit Insurance help?

As insolvency rates climb, Trade Credit Insurance (TCI) has never been more critical. TCI provides a crucial safety net for businesses, offering protection against the risk of non-payment by customers. Here’s why it is essential:

• Cash flow stability

Trade Credit Insurance ensures businesses maintain steady cash flow even if a customer defaults on payment.

• Risk Mitigation

A Trade Credit policy protects against the unpredictable nature of insolvencies, particularly in volatile industries like construction and retail.

• Access to Finance

This kind of insurance helps businesses secure better credit terms with banks, as insurers cover trade receivables.

• Customer Insights

Many Trade Credit Insurance providers offer insights into the creditworthiness of potential clients, helping businesses make informed decisions.

• Global Reach

Trade Credit Insurance offers protection for international trade, safeguarding against risks in uncertain markets.

As businesses navigate a challenging landscape, Trade Credit Insurance is more than just an insurance product, but a critical enabler of growth and resilience. The rising tide of insolvencies in the UK is a stark reminder of the importance of proactive risk management but - from safeguarding supply chains to stabilising cash flow - Trade Credit Insurance empowers businesses to weather financial uncertainties and emerge stronger.

For companies looking to future-proof their operations, investing in robust credit insurance is not just advisable—it’s essential.

Other blogs which may be of interest:

The benefits of trade credit insurance

The importance of trade credit insurance for the construction industry

Want to talk about Trade Credit Insurance for your business? Contact Ascend today on 01245 449060 or email info@ascendbroking.co.uk.