UK retail businesses still at high risk of failure, latest D&B payment statistics show

Although the UK economy will grow next year, 15% of retail and 16% of construction businesses will continue to be at high risk of failure, according to new payment statistics released by D&B. 

However, the construction industry is starting to show green shoots of recovery, with UK companies seeing improving payment times, a key indicator of financial stability, rising one percentage point from August 2012 to 26.5% at the end of July 2013.

These trends are highlighted in the D&B Mid-year Global Economic Report which also flags two major risks which could adversely impact European markets up to 2017. Deviation from fiscal rebalancing could result in bond yields rising even higher than the current two-year record – exerting more pressure on an already fragile recovery. D&B also predicts there is a one in five chance of the Eurozone collapsing in the report, which gauges global economic trends and predicts GDP growth for the major economic regions.

“The risks for the global economy remain substantial, particularly with the transition of US monetary policy, structural imbalances in China, the substantial challenges of the Eurozone, and continued political upheaval throughout the Middle East,” said Paul Ballew, D&B’s chief economist. “However, overall improvement appears to be resilient despite this dynamic environment. Those companies with customer-centric strategies focused on data, insight and predictive analytics are well positioned to take advantage of growth opportunities despite the sluggish macroeconomic environment.”

D&B mid-year report highlights

US private sector poised for growth, despite anticipated Federal policy challenges

While there is more optimism in the US than other parts of the world, it is tempered by uncertainty on a number of fronts. The direction of US monetary policy is nearly a daily global news item, but timing is speculative; private sector growth, though positive, remains sluggish, and there is ongoing political and economic uncertainty in several vital geographies, both developed and undeveloped. However, in our view these issues are offset by the ongoing restructuring of domestic businesses, enabling them to invest and continue to innovate and grow. For example D&B’s proprietary Small Business Health Index in the US continues to reflect continuing improvement in their financial position of small businesses and this is leading to moderate gains in hiring.

Rising political, social risks

Austerity measures and slowing economic growth have led to large-scale political protests in many countries, notably in Argentina, Brazil and Egypt. Arab Spring violence continues to impact the Middle East, while deep-rooted divisions over Turkey’s political future continue to grow. And Greek austerity efforts have significantly decelerated foreign investment activity in that country.

The healing process in terms of debt in the advanced economies remains conflicted

In advanced economies such as the UK, years of cheap credit led to unsustainable levels of household and corporate debt, while public sector debt shot up in light of falling tax revenues and government efforts to hike spending. Many countries have since decreased their household and corporate debt levels, yet some still struggle to keep public sector debt manageable.

Rebalancing underway in emerging economies

Emerging economies are slowly beginning to restructure amid sluggish global growth. While significant economic reforms have yet to take hold in many countries, few – notably Mexico – are aggressively pressing for change.

D&B reports provide informed perspectives on the impact of macroeconomic trends on global business, small business, country risk, and industry.

The global outlook report is part of D&B’s Informed Perspectives series, which examines the impact of macroeconomic trends on global business.