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Brexit creates “fragile economic climate” for insolvency levels 1 September 2016

Next year is forecast to have the weakest performance, in terms of decreasing corporate insolvencies, in advanced markets since 2009.

The trade credit insurer Atradius has published an economic report citing how Brexit has already been a catalyst for negativity across global economies.

Looking forward to the rest of this year and 2017 the report reveals that there will be no overall improvement of insolvency levels in advanced markets. The firm said this is both a cause and effect of a weakening business cycle.

The insolvency forecast also finds that insolvencies in the UK are projected to rise by two percent in 2016 and by three percent in 2017.

It warns that Brexit is likely to weigh on confidence in many advanced markets and has created financial market volatility; the Eurozone insolvency level (of what) is already 68 percent higher than it was in 2007.

Atradius said that in the UK the vote to leave the EU has sparked a downward revision of gross domestic product (GDP) forecasts, which led to a worsening of bankruptcy projections in a number of advanced markets.

Simon Rockett, senior risk manager for Atradius, said: “Brexit is already impacting confidence in the UK with purchasing managers index (PMI) contracting to a level not seen since April 2009.

“The Brexit fallout is likely to extend further across European markets with countries struggling indirectly with the economic slowdowns.”

The report predicts global demand will remain subdued as low commodity prices negatively affect economic growth in emerging markets.

Rockett said that keeping trading links open is key to stimulating the economy and to achieve this businesses must employ a robust risk management strategy.

He said this is in order “to protect themselves (businesses) from potential insolvencies and the subsequent risk of non-payment in what has become a more fragile economic climate.”

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