The head of the International Monetary Fund has warned of the threat to the global economy after a swathe of banks recently collapsed.

The world economy has faced extreme pressure over the past three years with the effects of the Covid-19 pandemic still lingering, the war in Ukraine still sending a ripple effect across global finances, surging borrowing costs, inflation and the rapid increase in the number of overdue payments owed to businesses.

Now the 2023 banking crisis is the latest threat to businesses of all sizes.

What has happened so far in the 2023 banking crisis?

Banks from across the world are currently facing uncertainty as markets have been hit by the biggest banking crisis since the 2008 economic crash.

In the space of just 10 days in March, Silicon Valley Bank collapsed followed by regulators shutting down Signature Bank, which was the third largest banking collapse in US history.

Swiss-based Credit Suisse then looked to secure a government lifeline in the States with regulators agreeing a rescue deal.

This is so significant because 167-year old Credit Suisse is one of the 30 global systemically important banks in the world and if it were to collapse it would send shockwaves across the world.

The UK’s central bank has since confirmed that banks in the UK are ‘safe’ after the deal was agreed to prevent fears over banks across the world spreading.

However, British banks are still trading in the red.

The shape of the UK economy

Are we in a recession?

After repeated warnings that the UK was heading for a lengthy recession the Bank of England recently announced it no longer expects the UK to enter a recession this year.

With the economy expected to show slight growth in Q2 this year it means we will avoid two straight quarters of decline.

However, we should still be wary due to other factors at play.

Recent inflation & interest rate rises

Unexpectedly, inflation rose above 10% in February 2023.

To combat this interest rates were hiked up for the 11^th time in just over a year to 4.25%.

The surge in interest rates, whilst an attempt at doing good to tackle the threat of inflation, brings its own obstacles that businesses must navigate:

• Outstanding loan repayments will increase and lenders will be more selective as to which businesses they allow to borrow cash.
• Increased incentive for customers to save instead of spend.
• High interest rates can increase the value of the British Pound which can make importing cheaper but could see a reduction in exporting goods as overseas clients need to pay more.

Company insolvencies continue to soar

Company insolvencies have been soaring higher and higher for months!

Last year they were 56% higher than 2021, leading to much uncertainty.

The number of companies going under as a result of not being able to pay their outstanding invoices rose 51% to almost 20,000 businesses in just 12 months.

The rapid rise in the number of companies going under due to not being able to repay what they owe should be ringing alarm bells for firms, particularly those who are waiting on overdue invoices to be paid.

Cash is king

With the looming threat of financial instability across the world businesses in the UK should be on high alert and be thinking of how they can boost their cashflow.

Although the banking crisis is very much a global problem it can send shockwaves across the UK economy and we’re not out the woods yet!

With so many businesses going insolvent in the UK it is as if they’re dropping like flies, starved of cash so they’re unable to pay their own overheads.

Even if you don’t think your firm is at risk of insolvency have a think about whether your clients could be. If your clients were to go insolvent with outstanding invoices then you run an extremely high risk of losing out on what you’re owed!

In scenarios like we’re seeing right now it’s critical you have a plan in place to maximise your cashflow to give your business the freedom to successfully navigate difficult waters.

Get tighter with your credit control

The most effective way to maximise your cashflow is to ensure you’re paid for the work you’ve actually carried out or product you’ve delivered.

With the number of unpaid invoices rocketing to £61 billion the credit cycle is under enormous strain, already buckling as we have seen in the rise of Creditors’ Voluntary Liquidations (CVLs).

Failing to recover overdue payments quickly could mean you lose out on what you’re owed.

The best way to combat this is through effective credit control.

If you’re feeling lost with your overdue accounts check out everything you need to know about unpaid invoices!

We’ve wrote a full article on the importance of good credit control!

Credit control support

 Our team here at Darcey Quigley & Co have over 50 years’ experience in credit control, supporting businesses of all sizes.

Here is what you can expect when you entrust your credit management with Darcey Quigley:

• Improved cash flow by getting paid sooner.
• Unlimited advice and guidance.
• Little or no management time required by you, we take care of everything.
• Proven track record and years of experience in credit management working with ledgers and debts of all sizes and volumes.
• Peace of mind that your credit management is being dealt with professionals.
• Significantly reduced debtor days.
• Enhance your client relationship with our personable and professional approach.
• Query dispute resolution service included.
• Reduced levels of bad debt for your business.
• Allows you to budget and plan more effectively.

Schedule a call with one of our specialists today to see how we can help support you.

Did you know you are eligible to claim late payment interest & compensation?

If you have overdue invoices you are legally entitled to claim late payment interest & compensation as well as debt recovery costs.

Here at Darcey Quigley & Co we always strive to recover these additional costs on top of what you are owed, on your behalf, and we have a 94% success rate of doing so.

Find out how much you can claim on top of your overdue amounts!