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Atradius comments on interest rate cut

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As the Bank of England cuts interest rates from 5.25% to 5.00%, we ask James Burgess, Head of Commercial at Atradius UK , the UK’s second largest trade credit insurer, how the news is likely to impact on late and failed payment trends.

“Having held interest rates at a 16-year high of 5.25% for an entire year, businesses and consumers across the UK will be relieved at the outcome of today’s announcement with rates falling to a welcomed 5%.”
 
“This positive outlook for the economy is also reflected in our own claims data with an overall decline of 17% in late and failed payments in Q2 2024 compared to Q1 2024.  This trend has continued into the construction sector, following a 28% decline in late and failed payments in the sector in Q2 2024 compared to Q1, showing a step in the right direction for the sector following today’s rate cuts.  This will also be welcome news to homeowners as the cut in rates alleviates their financial burdens around mortgage payments, putting the construction and housing sectors in an improved position as we progress through the second half of the year.”

“For businesses, this news will mean that they can navigate the summer season with more confidence.  Consumers may feel less restricted in terms of spending as this cut in rates could start to loosen purse strings.  As well as a boost to consumer spending, business confidence and investments may improve over the coming months.”
 
“Whilst we are not out of the woods yet, the outcome of today’s announcement is certainly a step in the right direction for the UK economy, offering hope as we move through the remainder of the year.  With inflation rates remaining at their target of 2% and interest rates sitting at 5%, it’s safe to say that the economic position of the UK is improving.  However, despite falling rates, the unpredictability of major world events, not least geopolitics and fears of war between Iran and Israel, mean it’s essential that businesses remain vigilant and protect themselves against the domino effect of insolvency with proactive financial planning.  This includes increasing liquidity, diversifying supply chains, and protecting vulnerable credit agreements with trade credit insurance.”