Business insolvencies are set to decline by about 1% in 2017, but firms will fail at higher rates in China and the U.K., credit insurance company Euler Hermes said in its Annual Global Insolvencies Index.
In China, insolvencies are expected to rise by 10% in 2018, after a 35% rise in 2017, as the authorities target more sustainable economic growth. U.K. insolvencies are expected to rise by 8%, in the midst of uncertainties surrounding Brexit, rising input costs and sagging consumer confidence, Euler Hermes said.
In Western Europe as a whole, insolvencies will drop by 3% in 2018, thanks to economic recovery and supportive monetary conditions. Insolvencies in North America are expected to drop by 2% as fiscal easing brightens the U.S. economic outlook, although any improvement will be tempered by monetary tightening and input and labor cost pressures.
After six consecutive years of increases, business failures in Latin America are expected to stabilize in 2018 as economic recovery accelerates and fiscal conditions improve.
"All in all, insolvencies are stabilizing worldwide after seven years of decreases. This confirms the return of credit risk with the economic recovery. In 2018, companies in Asia, Latin America, Eastern Europe and the U.K. should be closely monitored. In addition, large bankruptcies are increasing fast as disruption in industries such as services and retail leaves no one unscathed. Mind the domino effect!," Euler Hermes Chief Economist Ludovic Subran said.
