Coface Q3 2023 Barometer: An overview from our UK economist, Jonathan Steenberg

Our latest assessment of trade risks shows the global economy is not yet out of the woods amid accelerating corporate insolvencies and increasing social and political risk. Coface economist Jonathan Steenberg discusses this uncertain trading environment and its impact on the UK and Ireland. 


  • Coface’s country risk rating for the UK is unchanged at A4 (reasonable) while Ireland remains at A3 (satisfactory). We expect insolvencies to rise in both countries in 2024.
  • Political risk has increased over the last year in two-thirds of countries analysed.
  • The energy sector has been upgraded from high to medium-risk in the UK and Western Europe. Paper has been downgraded to very high risk in Western Europe but this does not extend to the UK.
  • Five countries downgraded: Finland (A3), Sweden (A3), Niger (D), Columbia (C) and New Zealand (A3). Only two upgraded: Belize (C) and Mongolia (C)
  • Coface updated 33 sector risk assessments with 17 upgrades and 16 downgrades.


Jonathan’s view:

Is Coface optimistic or pessimistic about the global economic situation?

The overall picture is better than a year ago but our Q3 Country and sector risk barometer itemises a number of risks for developed economies, some of which are intensifying. Our global forecast for 2024 is 2.2% (below the consensus view) and a trading environment that remains highly volatile and uncertain.

Core inflation remains well above central bank targets, while the situation on the oil and natural gas markets has (again) become more volatile due to the conflict in Israel. Equity markets are sliding (by around 5% since the beginning of August on most markets) and corporate earnings are generally being revised downwards. The full impact of monetary tightening (interest rate rises) by the central banks has yet to be felt but we’ve already seen an acceleration in corporate insolvencies in recent months, amid shrinking cash positions and deteriorating margins which will inevitably have consequences for employment and household spending.

This microeconomic deterioration will hold back economic growth in North America, the Eurozone (notably Germany) and above all China where post COVID economic recovery has hit the buffers due to subdued consumer confidence and a sharp decline in the property sector. Against the backdrop of weak growth and persistent inflation and high interest rates, social and political risks are becoming ever more acute.



Why is Coface so concerned about social and political risk?

Alongside the human cost, political turmoil – such as conflict, terrorism, social unrest and populism – threatens economic security and has a destabilising impact on trade. To obtain a more complete picture of trade risk, Coface has developed our own Political Risk Index and we update our assessments annually. In 2023, our global average score is higher than pre-pandemic, while at national level, we found 101 out of 160 countries analysed have higher levels of political risk than in 2022.

There are several reasons for this: a growing number of bloody and seemingly intractable conflicts in Ukraine, Nagorno-Karabakh, Ethiopia, Syria and now Israel and Gaza; the deteriorating security situation in the Sahel region of Africa; political and social instability in repressive regimes such as Iran, Syria and Afghanistan; and growing social tensions about issues such as the cost of living and the environment.

The UK is one of several developed economies (including the eurozone and the US) where our political risk score has increased in 2023 due to a growing number of industrial disputes, protest marches and other demonstrations – the past twelve months have seen the most working days lost in more than three decades.

What about the economic outlook for the UK and Ireland in 2024

The UK economy is still showing signs of a slowdown although we believe this will be less severe than previously thought and we forecast growth of 0.4% in 2024. Positive signs include slowing food price rises and the lack of significant change in the labour market despite some signs of cooling. That said, the risk outlook will still be heightened with insolvencies rising dramatically in 2023 (official statistics for Q3 show company insolvencies in England and Wales were 10% higher than 2022, while in Scotland they were up 7%). Persistently mean we expect insolvency risk to rise again in 2024 – albeit at a slower rate.

The Irish economy is still buoyant and domestic activity is still strong, despite a slowdown in foreign trading and certain investments which is mainly related to the large multinationals. Even so, corporate insolvencies are rising in Ireland as well and we expect these to be above 2019 levels in 2023. This trend will continue in 2024, especially after the winding up of Government schemes that have helped keep insolvencies at a lower level.

In Western Europe, the energy and paper sectors were the only ones where we changed our risk assessment. The outlook for energy, especially for hydrocarbon production, is generally benign in the current price environment (primarily going from high to medium risk). By contrast, the paper sector is still struggling with high costs, particularly for energy, while demand for packaging paper is generally low, prompting us to downgrade our assessment.

Narrowing our focus to the UK, we upgraded our assessment for the energy sector due to the high price environment that has been helping producer and extractors’ bottom lines. We are seeing this feed into both stronger profit margins and falling insolvencies but there’s still great divergence within the sector. For example, some downstream companies are feeling the consequences of high prices in terms of customer affordability and lowering demand, while producers, especially in the renewable space, are being hit by high financing costs and rising input costs.

Although the UK paper industry has seen a fall in production, it has rallied better than many European countries and there’s no sign of a continued rise in insolvencies, albeit these are higher than usual. This meant we did not feel it necessary to downgrade our assessment here.

One sector where the UK is definitely at higher risk compared to our neighbours is agrifood. We upgraded our assessment from high to medium risk in France, Italy, Czechia and Poland due to better than expected harvests and a fall in some fertiliser prices (potash, phosphate). However, the UK agrifood sector is still experiencing some difficulties and insolvency levels are still elevated, as we explained last month.


Group meeting with coffee and laptops on desk


How can businesses in the UK and Ireland protect their bottom line in the next 12 months?

Businesses have been operating in a difficult environment for some time now and it’s likely that some will be pushed closer to the edge in the coming months, especially if they are approaching the end of a business loan period and need to renegotiate terms at a much higher rate. The Bank of England has insisted that there’s little prospect of an interest rate cut while inflation is persistently above its 2% target.

In the context of higher costs and tighter margins, no business can countenance the financial shock of a bad debt so effective credit management processes will be essential and allow you to focus on converting financially stable prospective customers.

When carrying out due diligence, bear in mind that a company’s financial situation can change quickly so it will be important to have access to the latest information on customers and suppliers. With access to real-time financial, trading, payment, and fraud data on over 180 million companies worldwide, Coface Business Information, can help companies evaluate risk. For instance, our unique Debtor Risk Assessment (DRA) scores show a company’s probability of payment default over a twelve-month horizon based on intelligence from Coface’s global network, including payment incidents. A high score means you can have a high level of confidence that you’ll get paid but most importantly, a change to the score will flag up potential problems at an early stage.

No credit management system is cast iron guaranteed so it will also be wise to have a safety net to prevent protracted late payment and bad debt causing cause fatal damage.

In other words, thousands of companies stayed in business because they had the foresight to obtain a credit insurance policy.


The full Country and Sector Risk report and risk assessment infographics are available to download on the Coface website.



Jonathan Steenberg headshot

Jonathan Steenberg,

Economist for UK and Ireland

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