Worsening expectations in the United Kingdom

The worsening economic environment is affecting Credito y Caución?s forecast for UK corporate insolvencies: from the 5% decrease estimated early this year to a further increase.

Madrid - 31-out-2011

According to the second estimate by the Office of National Statistics [ONS], in Q2 of 2011 GDP grew by only 0.2% on the previous quarter and 0.7% year-on-year. While construction output increased 0.5%, following its 3.4% decrease in Q1, the contraction of production industries accelerated to 1.6% after a 0.1% decrease in the previous quarter. Services maintained 0.5% output growth. Economic performance has barely shown growth since Q3 of 2010, and remains depressed by massive budget cuts and lower household consumption.  Consecuently, Credito y Caucion consensus economics forecast has been revised for United Kingdom downwards to 1.2% in 2011 and 1.8% in 2012, from May forecasts of 1.6% for this year and 2.2% in 2012.  

No relaxation of austerity measures

As a consequence of the credit crisis and governmental investment in stimulus measures, the fiscal deficit rose to 10.1% of GDP in 2010 and will stand at 8.5% for 2011, with public debt increasing sharply since 2009: to 65% of GDP. The government’s aim is to cut the fiscal deficit to 1.9% of GDP by 2015 to avoid adverse sentiment by international financial markets.

Comprehensive austerity measures and tax rises are designed to save £80 billion and to bring in an additional £30 billion by 2015. In the process, more than 300,000 jobs in the public sector will be lost, but the government believes that a revival in the private sector will create job opportunities to compensate for this. While there is evidence of job creation in the private sector, there is no doubt that the average salary will not be comparable with that of the public sector, and this needs to be taken into consideration when looking at future consumer expenditure trends.

There has been mounting pressure on the government to soften its fiscal tightening, to avoid another recession. Some prominent economists warned that cutting spending may exacerbate the already tense situation by further dampening demand, and that what is needed is a strategy for growth that will reduce the budget deficit while boosting demand. So far, the government has ignored these alternative views and the expectation is that there will be no major change to the current strategy.

Inflation continues to climb

Throughout 2010, consumer price inflation was above 3%, and rose above 4% in 2011, exacerbated by January’s VAT rise from 17.5% to 20%, which was introduced to help tackle the budget deficit. In August 2011 the consumer price index stood at 4.5%, up from 4.4% in July and 4.2% in June, and remains far above the Bank of England’s target rate of 2%.

That said, the Bank of England is maintaining its benchmark interest rate at 0.5%, keeping in place its monetary policy of low interest rates to help mitigate the effects of fiscal tightening and to avoid stalling the already weak growth. However, with global commodity prices continuing to have an impact, it is difficult for the Bank of England and the government to regain control, and there is the danger that higher price expectations become entrenched. Overall it is expected that inflation will peak at around 5% as early as November, due in part to rising energy costs, but then drop fairly quickly throughout the first half of 2012.

While in May Crédito y Caución forecast that household consumption would increase by 0.5% in 2011 and 1.5% in 2012, forecasts have been revised steeply downwards – as far as a 0.4% decline this year, followed by 1.2% growth in 2012.

Manufacturing growth to slow down in 2011

After falling 10.6% in 2009, manufacturing production grew 3.6% year-on-year in 2010. However, industrial production has begun to decrease again: by 0.3% year-on-year in June 2011 and 0.7% in July.

Manufacturing played a pivotal role in the economic rebound in 2010. British manufacturers have profited from a weakening sterling exchange rate and, according to the ONS, the volume of exports of goods [excluding oil and erratic items such as aircraft that may skew the figures] rose 12.0% year-on-year in 2010, while imports increased 12.2%.

However, falling exports - down 1.1% in Q2 on the previous quarter - and export orders are a worry for British manufacturers due to dampened domestic demand. In particular, exports to the US fell by £1.2 billion and the level of trade with China also fell. This is disappointing as a stronger relationship with China could play a pivotal role in the UK’s economic revival. In fact, with the slowdown of growth in the Eurozone and the US, it is even more important that the 7% of UK trade currently channelled towards the leading emerging markets [China, India, Brazil, Russia, Mexico, Indonesia, and Turkey] is significantly increased.  Manufacturing production is expected to slow down: to 2.7% in 2011 and 2.4% in 2012.

Insolvencies expected to increase again in 2011

2008 and 2009 saw spectacular year-on-year increases in corporate insolvencies: of 24.2% and 22.8% respectively. While in 2010 insolvencies decreased by 15.9%, this improving trend has not continued.  In Q2 of 2011 the number of insolvencies [compulsory liquidations/creditors voluntary liquidations] in England and Wales increased 4.4% year-on-year and 2.7% on the previous quarter: to 4,233 cases.

Due to the worsening economic environment, Credito y Caución has revised it UK corporate insolvency forecast for 2011: from the 5% decrease estimated early this year to a further increase.

In the domestic market, the government’s austerity measures continue to have a negative impact, as is highlighted by the forward order books of many construction companies. Add to this the minimal pay increases and high levels of inflation and it is clear that the UK market is currently a difficult one to be focusing on. Moreover, for those businesses reliant on a buoyant export market there is little good news from either the Eurozone or the US. Latest forecasts for the Eurozone now anticipate minimal if any growth in the second half of 2011. This is clearly bad news for UK businesses that focus on export as a way to achieve growth while sterling remains weak.

Against this backdrop, it is our belief that UK business insolvencies are likely to increase by up to 5% year-on-year in 2011. This increase also takes into consideration the unknown impact of the HMRC [Her Majesty’s Revenue & Customs] ’Time to Pay scheme‘ which could potentially lead to a number of insolvencies, as HMRC take a tougher line on those businesses that default on their rearranged tax payments.

With the continuing very difficult trading environment and so many unknowns [e.g. proposals to reform the banks, which could lead to a significant increase in the cost of funding] Crédito y Caucion believes that 2012 UK business insolvencies will remain at 2011 levels, i.e. stabilising at around 5,000 business failures per quarter.

Mantenha-se informado. Receba a nossa Newsletter

Esta pagina web utiliza cookies

Utilizamos cookies de terceiros para fins analíticos (produzindo estatísticas baseadas nos seus hábitos de navegação), personalização (para lembrar o idioma ou as configurações preferidas da web) e publicidade comportamental (para desenvolver perfis e oferecer publicidade adaptada às suas preferências de navegação). Poderá configurar o uso desta tecnologia. Poderá também modificar ou retirar o seu consentimento a qualquer momento, clicando em "Declaração de Cookies".


Os cookies de marketing são utilizados para rastrear os visitantes dos sites. A intenção é exibir anúncios que sejam relevantes e atraentes para o utilizador individual e, por conseguinte, mais valiosos para os editores e anunciantes terceiros.

Nome Fornecedor Finalidade Validade Tipo Informações adicionais
1P_JAR youtube.com Este cookie fornece informações sobre a utilização do website pelo utilizador final e sobre a publicidade que o utilizador final viu antes de visitar o website. 2 anos HTTP
IDE youtube.com Utilizado pelo Google DoubleClick para registar e comunicar a acção do utilizador do Website após visualizar ou clicar num dos anúncios do anunciante, com o objectivo de medir a eficácia de um anúncio e apresentar anúncios direccionados ao utilizador. 1 ano HTTP
YSC youtube.com Regista uma identificação única para obter informações estatísticas sobre os vídeos do YouTube que o utilizador visualizou. sessão HTTP
VISITOR_INFO1_LIVE youtube.com Procura estimar a largura de banda dos utilizadores em páginas com vídeos do YouTube integrados. 179 dias HTTP
GPS youtube.com Regista um ID único em dispositivos móveis para permitir o rastreamento com base na localização geográfica do GPS. 1 dia HTTP
PREF youtube.com Regista um ID único que se usa para gerar dados estatísticos sobre como o visitante utiliza os videos do You Tube nos diferentes websites. 8 meses HTTP

Os cookies necessários ajudam a tornar um site utilizável, ativando funções básicas como navegação na página e acesso a áreas seguras do site. O website não pode funcionar corretamente sem estes cookies.

Nome Fornecedor Finalidade Validade Tipo Informações adicionais
a_sescyc creditoycaucion.es Este cookie é necessário para o serviço de balanceador de carga 1 dia HTTP
JSESSIONID creditoycaucion.es Cookie de servidor Web para manter o estado da sessão do visitante entre pedidos de páginas. sessão HTTP
TS# creditoycaucion.es Este cookie é necessário para o serviço de balanceador de carga. sessão HTTP
NID google.com Necessário para o funcionamento do reCaptcha. Grava um código para evitar a usurpação de identidade do utilizador. 2 anos HTTP

Os cookies estatísticos ajudam os proprietários dos sítios Web a compreender como os visitantes interagem com o sítio Web, recolhendo e fornecendo informações de forma anónima.

Nome Fornecedor Finalidade Validade Tipo Informações adicionais
_gid googletagmanager.com Regista um ID único que se usa para gerar dados estatísticos sobre como o visitante usa o site. 1 dia HTTP
_gcl_au googletagmanager.com Usado pelo Google AdSense para experimentar a eficácia da publicidade em sites que utilizam os seus serviços. 3 meses HTTP
_ga googletagmanager.com Regista um ID único que se usa para gerar dados estatísticos sobre como o visitante usa o site. 2 anos HTTP
_gat Script inline Usado pelo Google Analytics para reduzir a taxa de pedidos. 1 dia HTTP
_gat_UA-# Script inline Usado pelo Google Analytics para reduzir a taxa de pedidos. 1 dia HTTP

Os cookies de preferências permitem que o site se lembre de informações que alteram a forma como o site se comporta ou é apresentado, tais como o seu idioma preferido ou a região em que se encontra.

Nome Fornecedor Finalidade Validade Tipo Informações adicionais

Os cookies são pequenos arquivos de texto que as páginas web podem usar para tornar a experiência do usuário mais eficiente. A lei estabelece que podemos armazenar cookies no seu dispositivo se forem estritamente necessários para o funcionamento desta página. Para todos os outros tipos de cookies precisamos da sua permissão. Esta página utiliza diferentes tipos de cookies. Alguns cookies são colocados por serviços de terceiros que aparecem nas nossas páginas. A qualquer momento pode alterar ou retirar seu consentimento na "Declaração de Cookies" no nosso website. Saiba mais sobre quem somos, como pode entrar em contato connosco e como processamos os dados pessoais na nossa "Política de Privacidade".


O seu consentimento aplica-se aos seguintes domínios: www.creditoycaucion.es