Corporate insolvencies are on the rise globally due to the more challenging economic environment and high policy uncertainty.

• Corporate insolvencies are on the rise globally.
• North America is now forecast to see the highest insolvency growth (3.2% in 2019; 1.7% in 2020) as economic momentum wanes and companies increasingly face the costs of rising trade tensions.
• Western Europe faces a 2.7% increase in insolvencies this year as economic growth decelerates and the manufacturing sector struggles amid lower global trade. Political uncertainty remains a key risk.

This estimated insolvency increase is in line with the easing global GDP growth momentum which is forecast to grow by just 2.7% in 2019. Europe is expected to have the largest increase in insolvencies at 2%, with the UK and Italy experiencing the most difficult conditions. Slowing economic growth, the escalation of the US-China trade war, and looming uncertainty surrounding Brexit and Italian politics are the key drivers of the upswing in business failures across Western Europe. Those factors also pose negative risk to financial stability and corporate solvency in 2020.

North America and Asia-Pacific have slightly more stable outlooks with forecast rises of 0% and +1% respectively with risks stemming largely from trade uncertainty and a more difficult external environment.

The UK is expected to be at the eye of the insolvency storm with a forecast increase of 7% for 2019, which follows the substantial increase of 10% for 2018. This is the highest increase of all advanced markets with Brexit related uncertainty being a key factor. This is reflected in contractions in business investment for four consecutive quarters and the postponement of investment decisions also having an impact on supply chains. These effects are most severe in the construction and retail sectors and is expected to continue whilst both business and consumer sentiment remains low.

Italy is expected to see a 6% increase in corporate insolvencies, driven mainly by the onset of recession in H2 of 2018. Switzerland and Sweden are forecast a 3% growth in insolvencies and the Netherlands, Germany, Austria and Norway are all looking at an increase of 2%. Luxembourg has a more positive outlook with an expected decline in insolvencies of 10%, however this does follow a 28% increase in 2018. Greece are forecast an 8% drop owing to its strongest economic performance in the last 10 years, and Spain are looking at a 5% drop thanks to employment growth and stronger consumptions. Insolvencies in the USA are forecast to remain at current levels but a decline of 1% is expected in Canada.

Source: https://group.atradius.com/publications/economic-research/insolvency-forecasts-august-2019.html