UK Economic Outlook
UK Country Risk Rating Upgraded Amidst Delays to Brexit
The date for Brexit has been postponed to October 2019 as talks between the government and the opposition continue. Discussions in parliament during Q1 seem to indicate little appetite for a no-deal Brexit, which could have severe consequences for the British economy were it to occur.
Dun & Bradstreet has therefore assigned a new “stable” outlook (an improvement on the previous “deteriorating rapidly” status) as the risk of a no-deal Brexit seemingly declines – but there are many more political milestones still yet to come this year.
Labour Market Remains Strong and Wages Increase
Whilst real GDP growth has suffered since the Brexit referendum, the UK labour market remains strong - with the overall level of employment now at a record high of 32.7m people. This growth is also positively impacting wages, with the Office for National Statistics (ONS) also showing growth in average weekly earnings of 3.5% in the three months to February - the sharpest rise seen since mid-2008. With the minimum wage increasing by almost 5% in April and the number of job vacancies rising, there is strong potential for continued improvements to wages being seen over the coming quarters.
Prompt Payments Improve…Marginally
In spite of the continued uncertainty of Brexit and a backdrop of challenging macroeconomic conditions, prompt payments have marginally improved in the last quarter - with Dun & Bradstreet data showing that 36.8% of payments were made on time during last December versus 37.9% in March. Despite this, late payments continue to be a major problem for UK businesses, particularly for SMEs. According to the Association of Chartered Certified Accountants (ACCA), firms with fewer than 50 employees are typically twice as likely as larger businesses to experience late payment issues, resulting in risk of insolvency or even bankruptcy.
Improvements Seen in Corporate Liquidations, But Not Across All Sectors
The rate of corporate liquidations has slowed compared to the previous quarter, with Dun & Bradstreet recording a 17.7% decrease during the January to March period. However, this is not the case across all sectors. In construction, Q1 saw a rise in the number of liquidations by 2.9%, and liquidations in retail increased 24.4% with big household names such as Debenhams going into administration. Data from the Office for National Statistics (ONS) shows that online retail sales rose by 14.5% in 2018 and are continuing to increase – putting additional pressure on our already struggling UK high streets.
Download our full UK Industry report below for additional insights on the UK economic outlook, a deep dive on trends in corporate liquidations and payments performance, as well as recommendations from our expert economist team.