In this edition:
- Henry Construction goes into administration
- Atradius predicts falling demand will impact food producers
- Trade credit claims – The ABI and ICISA Reports
- Bloomberg article raises concerns over $500 billion corporate debt storm
- Insolvencies in the retail sector increased by 56%
- WTW examines how Trade Credit Insurance can benefit food and beverage companies
- Wilko goes into administration
Henry Construction goes into administration
Henry Construction Projects became the largest construction company to fail since October 2021. Their accounts to June 2021 showed they had a turnover of £400 million, made a profit of £14 million, and owed creditors £120 million. Last month they were fined £234,000 after being prosecuted by the health and safety executive after a construction worker suffered a serious injury on one of their sites. They received nine winding-up petitions from suppliers last year.
Atradius predicts falling demand will hit food producers
Atradius underwriter Georgios Panzaris has published an article examining the impact reduced consumer demand is having on the food production sector. High interest rates have led to consumers facing increased mortgage or rental payments on top of already high energy and food prices. As a result, people are switching from more expensive branded products to cheaper alternatives, and sales of fillet steaks for example are declining.
The sector is also facing labour shortages and a squeeze on prices from supermarkets. This has led to the planned closure of unprofitable processing units such as poultry processing plants run by 2 Sisters Food Group and Avara Foods.
Trade credit claims - The ABI and ICISA reports
The Association of British Insurers says that their trade credit insurance members received 5,300 claims for the first quarter of 2023 up 81% on the same period last year. Lucy Fraser, the ABI's general insurance policy adviser said: "In these tough trading times, every firm, whatever their size, should be thinking about trade credit insurance. This cover not only protects suppliers from the failure of firms to pay for products or services provided, but the expertise of trade credit insurers can help protect businesses against bad debts and guide them on how to grow as safely as possible."
"In these tough trading times, every firm, whatever their size, should be thinking about trade credit insurance."
The International Credit Insurance & Surety Association representing insurers worldwide reports claims up 66% to €2.5 billion (from €1.5 billion in 2021). Over the same period inured exposure increased by 20% to €3.2 trillion (€2.7 trillion in 2021) and premium increased by 13% to €7.8 billion (from €6.9 billion in 2021).
Bloomberg article raises concern over $500 billion corporate debt storm
Worldwide corporations have a total of $590 billion of outstanding distressed corporate bonds (those trading at less than 80 cents) and distressed loans (those trading at less than 80 cents with a spread greater than 1,000 points). After years of very low interest rates and negative growth, some sectors are left looking vulnerable.
In the U.S. riskier high-yield bonds and leveraged loans doubled from 2008 to 2021 to $3 trillion. In Europe, junk-bond sales jumped 40% in 2021 alone.
One industry particularly hard hit is commercial real estate due to the slow return to offices after the pandemic. In China, Evergrande Group has had to restructure and in the U.S., WeWork has piled up losses since they were listed on the Stock Exchange in 2021. Two buildings at Canary Wharf in the UK have been taken over by Receivers and HSBC has announced they are leaving their 45-storey office tower after 20 years.
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Insolvencies in the retail sector increased by 56%
Research from international law firm RPC showed that insolvencies in the retail sector increased to 1,942 in the year to 30 April 2023 from 1,243 for the same period in the previous year. Some of the larger failures such as Made.com and Joules were bought out by larger groups after going into a Pre-pack administration, saving jobs and creating a higher return for creditors.
WTW examines how trade credit insurance benefits food and beverage companies
Scott Morrison, Business Development Director for Trade Credit and Political Risks at WTW, has published a paper highlighting the benefits of trade credit insurance can deliver beyond bad debt protection.
Wilko goes into administration
Homeware retailer Wilko has collapsed into administration after failing to secure emergency funding. Wilko had a turnover of £1.2 billion and 400 UK stores employing 12,000 staff. In a bid to save costs, they announced 400 job losses late last year. Like most retailers, they have been hit by rising interest rates, high energy costs, and a squeeze in consumer spending.
Major insolvencies in May, June & July
- The Black Sheep Brewery Plc – Beer manufacturers
- Flowline Ltd – Specialised cleaning company
- SVB Financial Group UK Ltd – Bank
- DC Bars Ltd – Bars t/a Dirty Martini
- GWKS Ltd - Construction company
- London Irish Scottish Richmond Ltd – Rugby club
- Henry Construction Projects Ltd – Construction company
- Montezuma's Ltd - Chocolate manufacturers
- Brunchco UK Ltd – Bakery t/a Le Pain Quotidien
- MCE Insurance Ltd – Insurance brokers specializing in motorbikes
- Moda Furnishings Ltd – Furniture retailers
- Majestic Bingo Ltd – Bingo hall operators
- Empire Cinemas Ltd – Cinema operators
Insolvencies increase during Q2 2023
There were 6,342 (seasonally adjusted) company insolvencies in England and Wales during the Second quarter of 2023. This was a 9% increase in the previous quarter (after seasonal adjustment) and an increase of 13% compared to the same period last year.
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