UK Demand for Credit Still Healthy

UK business confidence and the outlook for future growth remain high according to new data, as British companies continue to seek new and additional lines of credit, evidenced through a sustained appetite for risk.

The latest Chartered Institute of Credit Management (CICM) UK credit managers’ Index (CMI) for the final quarter of 2014, shows a headline index currently standing at 58.9 – with a figure of above 50 indicating growth. Although down 0.7 on Q3, the first time in six quarters that the headline index has dropped, the figure is still the fourth highest in CMI history.

The CMI, sponsored by Tinubu Square, is important because it gauges the levels of credit being sought and granted by credit managers across both the manufacturing and Services Sectors, and therefore acts as a primary indicator of actual levels of business being conducted.

The latest survey notes a further small decline in services (down 0.2% to 58.7) and highlights a decrease of 1.4 in manufacturing to 59.2, although it follows a Q3 rise of 2.6. Further decreases in overdue debt, down by 0.4 to 53.4, could be a reflection of the increased amount of accounts referred to third parties, which has seen a rise of 1.7 to 58.2.

The latest index also reflects a significant increase in key areas where credit managers believe they must improve their risk management operations going forward. A year on from the Q4 2013 survey, there has been a 27% increase in those wanting to gain detailed intelligence on the credit worthiness of customers; 20% more respondents want to improve connections between back-office and front-line CRM systems; and a similar number want to improve their value with a credit insurer or bank.

Philip King, chief executive (CEO) of the CICM, highlighted the decrease in insolvencies (down 1.9 to 57.7) and picks up on further progress in rejected credit applications, which are down 1.1 to 51.8: “Even though there has been a fall in new credit applications, the drop in the number of those which are being rejected is continuing a three quarter downwards trend,” he commented

“The appetite for credit still remains high which is perhaps unusual in the context of potential economic uncertainty that is prevalent in the lead up to a general election,” he says.

Across industry sectors, positive trends continue, with figures showing 17 out of 18 UK sectors expanded during Q4 with, in particular, construction and materials, chemicals, and industrial goods and services seeing strong growth, highlighting a positive manufacturing outlook. Furthermore, all regions saw Q4 expansion, with the North West England and North East, which collectively saw 15 percent of respondents, showing very positive growth measuring 60.4 and 63.0 respectively.

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