At the beginning of 2021, data showed that 50% of manufacturers expected to achieve their pre-pandemic operating levels by the end of the year.1 By November, a survey conducted by Make UK and PwC indicated increasing optimism—73% believed conditions for the sector would continue to improve in 2022, and that opportunities for their business would outweigh the risks.2
Since then, the Omicron variant has swept across the globe, and although initial signs show little impact to the sector overall, it could still cause uncertainty and disruption for manufacturers at a time when recovery to full capacity had seemed within reach.
The perfect storm is not over yet
The double impact of the pandemic and Brexit means UK manufacturing firms continue to face a multitude of challenges, including supply chain issues, continued staff shortages, increased freight costs and delays at customs, as well as the rising costs of materials including semiconductors for sectors like electrical goods and automotive.
Currently, an Omicron outbreak in China is seeing manufacturers and shippers brace themselves for further supply chain disruption if more cities are locked down, and factories and ports are affected. In recent weeks, for example, computer chip manufacturers in the locked-down city of Xi’an have faced significant disruptions,3 and on 11 January, the manufacturing hub of Shenzhen tightened restrictions on vehicles entering the city, raising concern that the delivery of goods to and from the world’s fourth largest container port is slowing down.4
Given this level of ongoing global uncertainty and disruption, manufacturing firms must consider all available options to protect their cash flow and business continuity.
Protecting your business against non-payment
With risk exposures constantly changing in the current economic climate, bad debt remains a very real threat. Insolvencies in general are expected to increase by 33% in 2022,5 and so the risk of non-payment will inevitably also rise. For manufacturers, this could significantly impact their ability to operate—particularly if a substantial invoice were to go unpaid, or several customers entered into insolvency, resulting in multiple payment defaults at the same time.
Trade credit insurance is designed to help protect businesses against customers failing to pay invoices for goods or services provided. It can be difficult to secure in challenging economic conditions, but Gallagher has long-standing relationships with the UK’s top underwriters, and access to established trade credit insurers, making us well-positioned to help our manufacturing clients obtain cover that is suitable for their needs.
We are one of the largest trade credit insurance brokers in the UK, and our specialist team works with manufacturing clients of all sizes, from small businesses to multinationals. As well as helping to protect your cash flow and day-to-day operations, trade credit insurance can be instrumental in allowing you to grow your customer base—giving you the confidence to build new trading relationships, knowing that you have adequate cover in place.
We understand your industry and the challenges you face, and can work with you to establish a suitable trade credit insurance solution for your business.
If you would like to know more, please get in touch with one of our specialists today.
This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein. It reflects our understanding as at 19/01/2022, but you will recognise that matters concerning COVID-19 are fast changing across the world. You should not act upon information in this bulletin nor determine not to act, without first seeking specific legal and/or specialist advice. Our advice to our clients is as an insurance broker and is provided subject to specific terms and conditions, the terms of which take precedence over any representations in this document. No third party to whom this is passed can rely on it. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to fullest extent permitted by law. Should you require advice about your specific insurance arrangements or specific claim circumstances, please get in touch with your usual contact at Gallagher.