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Credit insurer Atradius have published a Report forecasting that UK insolvencies are set to be 33% higher in 2022 than 2019. In 2020 UK insolvencies declined by 27% due to Government support measures during the pandemic. These measures continued during 2021 but a surge in insolvencies is expected in 2022 as support schemes are withdrawn. The Report predicts that UK will have the second highest increase in insolvencies in the 30 Countries studied behind Italy.
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In an article examining energy prices in Europe, Euler Hermes anticipate skyrocketing energy prices in Europe which could take up to 6 months to come down. The increased prices are caused by a mixture of strong demand as the world economy recovers and low levels of stock of liquefied natural gas. In addition, supplies from the US are reduced by 40% due to the effect of hurricanes, and Russia are restocking for the winter and reducing exports. In the UK and Germany some nuclear plants are under maintenance, Europe is seeing lower wind generation and in Brazil low river levels are affecting hydropower generation.
In the UK small utility companies buy power on the wholesale market and sell at guaranteed fixed prices without hedging. The Government has refused to provide support and there have been an increased number of insolvencies in the sector, and this is likely to continue.
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Belgium insurer Credendo warned that disruptions to global supply chains could last until 2023 if further problems occur. As economies open up after lockdown, demand for commodities such as wood and cement, and demand for energy have soared. Supply has struggled to keep up, driving up prices. This has been compounded by a shortage of intermediate goods such as semiconductors and labour. A shortage of containers and ships has led to an increase in shipping costs.
Over the long term could lead to shift in the supply chain with more companies seeking local suppliers.
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Darren Newman Risk Underwriter at Nexus CIFS specialising in Construction has written an article reviewing the outlook for the sector.
Demand is high for both new homes and public sector infrastructure projects. Private sector commercial work is not fairing so well with lower demand for retail, hospitality, higher education and office development.
On the supply side companies are facing severe shortages of materials such as cement and timber leading to price increases. This has been exacerbated by a lack of delivery drivers. The concern is that this could lead to an increase in insolvencies especially for companies working on low margins and fixed-price contracts.
Although the number of insolvencies in the sector have been low, they are expected to increase in Q4 2021 and the first half of next year.
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NMCN became the biggest construction insolvency since Carillion in 2018 after failing to sign off their 2020 accounts and secure a re-financing package.
The £400m turnover business suffered growing profit warnings and was expected to report a pre-tax loss of £43m.
The Administration includes the NMCN Sustainable Solutions Ltd subsidiary, however a number of other subsidiaries are not currently affected and maybe sold.
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There were 3,765 (seasonally adjusted) company insolvencies in England and Wales during the third quarter of 2021. This was an increase of 17% from the previous quarter and an increase of 43% compared to the same period last year. Company insolvencies increased in Q3 2021 driven by an increase in CVL and were slightly lower than pre-pandemic levels.
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