Businesses in the UK are set to end the year on a positive note although challenges in the new year continue to lurk, claims data from the trade credit insurer Atradius has revealed.
Atradius reported a 10% decline year-on-year in payment defaults from UK businesses in November, despite the ongoing cost-of-living crisis and the Autumn Budget’s impact earlier this quarter.
The finance sector showed the biggest decline in payment defaults, followed by the transport sector. The food sector, however, continue to face headwinds.
Payment defaults in the finance sector fell 75% in November from a year ago, the sharpest decline across all UK industries, Atradius said.
Financial companies like banks, insurance firms and fintech firms all saw the improvement as interest rates stabilise and inflation nearing the government’s target of 2%. The sector’s outlook also remains strong, particularly for private equity and financial services trade.
The transport sector also saw improvement in claims despite geopolitical headwinds, such as the Red Sea attacks and the Panama Canal disruptions. Payment defaults in the sector were down 39% year-on-year in November. From October to November 2024, they were down 31%.
Atradius said that lower fuel costs help improved performance in the sector, while enabling sustainable practices.
In the electronics sector, payment defaults were down 35% year-on-year thanks to a strong Black Friday performance, with sales of headphones and smartwatches rising by nearly £8 million from a year earlier.
Smart home devices also contributed to this improvement, with 39% of UK households now owning such devices. That number is expected to reach 50% within three years.
On the other hand, the food sector reported a 107% increase in payment defaults from last year as the sector remains heavily affected by high cost of living and supply chain disruptions.
Revenue in the food industry declined 9% year-on-year, putting pressure on companies to capitalise on the Christmas season. The chemicals sector also saw a 50% year-on-year increase in claims.
James Burgess, head of commercial and insolvency expert at Atradius, said that while businesses are beginning to benefit from the Christmas holiday, as well as signs of economic recovery in the country, they should remain cautious and look for opportunities ahead of the first quarter of 2025.
“With high prices still challenging consumers, businesses must prepare for a tough Q1 2025 by focusing on customer needs, leveraging technology, and adopting sustainable practices to stay resilient,” he said.
Burgess also warned about the threat of insolvency. He said: “It remains crucial for businesses to protect themselves with trade credit insurance, enabling them to trade with confidence and explore new markets or products.”
