The June 2022 CreditorWatch Business Risk Index (BRI) reveals that confidence in business is taking a big hit with key indicators such as trade receivables and credit enquiries on the slide.
The research shows that average trade receivables for June were down 18 per cent year-on-year and another key indicator of business confidence, trade payment defaults, is up 18 per cent year-on-year. The Index also records court actions being at their highest since March 2020, a sign that the ‘goodwill’ shown by lenders at the height of the pandemic has been replaced by a return to more regular collections activity.
CreditorWatch are predicting a rise in business insolvencies throughout the rest of 2022, with what they describe as “multiple adverse impacts” likely to continue hammering the economy in the months ahead, and their CEO Patrick Coghlan says that the Index data indicates that businesses could be in for a softer second half of 2022.
“We continue to see a disturbing rise in trade payment defaults, our leading indicator for future business insolvencies,” Coghlan said. “Court actions are also back to pre-COVID levels, reflecting that the banks are back to their regular collection activity after the ‘loan holidays’ that they provided during the peak of the pandemic. We will be closely watching the data to see if these figures indicate an inflection point in business confidence as economic conditions worsen.”
CreditorWatch Chief Economist Anneke Thompson says that the data suggests the post-COVID ‘surge’ in business confidence is coming to an end, with the data pointing to the start of a deterioration in trading conditions.
“Businesses will be increasingly wary of their credit customers and their ability to pay going forward, even if no problems have arisen to this point,” Thompson said. “Businesses in the growth phase, who require equity or debt for growth, may now see these lines of funding get increasingly more difficult to source.”
