2019 Country Focus – The United Kingdom

  |   Networks News

In the UK it is, of course, impossible to escape the ‘B word’. Every newspaper, TV report and most conversations with clients and underwriters feature at least some Brexit comment. Theresa May’s resignation, less than three years after she assumed responsibility for delivering Brexit, has formally started a battle to become the next Prime Minister and the political landscape appears to be changing. There is evidence that support for the two major political parties is fragmenting. The soap opera continues and Astreos colleagues tell me that the Speaker of the House of Commons, John Bercow (of ‘order, order’ fame) is now something of a European celebrity. Maintaining a British sense of humour is more essential than ever!

Notwithstanding all the Brexit doom and gloom it is perhaps worth highlighting some positives. In December 2018 Forbes magazine issued its listing of countries in which it is best to do business. The UK came top for the second successive year. The report identified 15 different factors – property rights, innovation, technology, corruption, infrastructure, market size, political risk, quality of life, workforce, freedom (personal, trade, monetary), red tape and investor protection. The UK was the only country to rank among the top 30 countries in all categories.

The UK labour market also remains vibrant. Recently published information shows that at 3.8% UK unemployment is at its lowest level since 1974. More than 2 million jobs have been created since 2010 and most of these are in traditional, full-time roles. There has been much comment about European nationals becoming rather more reluctant to work in the UK since the Brexit vote but the statistics suggest this is not the case. In the year to end-March 2019, the number of EU workers in Britain rose by 98,000 and now totals 2.38m. These individuals have been net contributors to the public finances.

There has also been speculation that London’s status and reputation as a financial centre is threatened. In the Global Financial Centres Index London ranks slightly behind New York but ahead of Hong Kong, Singapore, Shanghai, and Tokyo. Zurich takes 7th place and Frankfurt is in 10th place. The concerns are very real but the City, driving a largely services-based economy, has a long way to fall before its position as a major financial centre is seriously threatened.      

The challenges facing the UK economy cannot be ignored. EU membership combined with a relative lack of red tape and a flexible labour market has attracted significant inward investment. Current uncertainties certainly threaten this. The number of new foreign direct investment projects in the UK fell 13% in 2018 according to EY, a professional services company that monitors annual trends. Of particular concern is the manufacturing sector which suffered a 35% drop in the number of projects.

Unsurprisingly, credit insurers have undertaken considerable work to identify sectors that are particularly vulnerable to Brexit. Within these, an underwriting spotlight has been placed on those companies that are perceived to be at most risk. In no particular order, construction, food, and retail are the subject of regular review. The UK credit insurance market is hardening. Premium rates are increasing and this is normally accompanied by a tightening of policy terms and conditions. Generally, this manifests itself in rather less flexibility to justify cover without reference to the underwriter. The extent and operation of discretionary cover may well be reviewed by insurers at renewal.

How is CRS responding to these challenges?

We actually see a more difficult market as presenting an opportunity to differentiate ourselves. Although we continue a policy of recruiting and training new team members, our senior people are very experienced (old?!). We’ve negotiated credit insurance in periods of recession and an ability to call on past experience and precedent is invaluable. In appropriate cases, our role is to challenge underwriters when levels of cover are reducing. Close collaboration with clients through regular meetings is particularly important.

CRS Team 2019

Since the formation of CRS in 2003 we have enjoyed 17 years of successive growth. A particularly pleasing aspect of the journey is to work with clients who have used credit insurance to grow the top line. For many, the cover has supported the development of global business with new markets and customers. We now employ 28 people – recent recruits are Karl Swain in Manchester and Maggie Brotherson in Birmingham. Nexus, our parent company, continues to invest in the specialist credit insurance broking market. In a challenging economic environment, there is a need to work even harder to support our clients and the wider credit insurance market.

All the written material is the property of CRS, and this article has been written by  Mike Clark