Financial Planning

Bad debt overshadows signs of growth in UK banking and financial sector

By Creditsafe
Financial Planning
Published: 11 October 2017

The UK’s Banking and Financial sector has experienced a strong quarter, despite ongoing uncertainty caused by the Brexit negotiations, according to figures released in the Creditsafe Watchdog Report. The report tracks quarterly economic developments across the Banking and Financial and 11 other sectors (Farming & Agriculture, Construction, Hospitality, IT, Manufacturing, Professional Services, Retail, Sports & Entertainment, Transport, Utilities and Wholesale).

Sales are up 4.19% from Q2, and the number of active companies and new companies have both increased by 5.9% and 8.5% respectively over the same period. This is supported by the rate of company failures, which has dropped by 4.0%. Total employment has also increased by over 1% in Q3.

The research shows a continued return to form for the Banking and Financial sector in terms of these core metrics. However, the financial health of the sector has been hit as the volume of bad debt owed to the sector has increased by 118.8% in Q3, with the average amount of debt owed to companies coming in at £246,318. Suppliers bad debt, the volume owed by the sector, has also seen a big increase of 127.1%.

Rachel Mainwaring, Operations Director at Creditsafe, commented: “While today’s Creditsafe Watchdog Report show signs of optimism for the UK’s Banking and Financial sector, despite the ongoing political and economic uncertainty throughout Europe and beyond, the levels of bad debt seen in Q3 are a serious cause for concern.

“One company, Pearl Finance Co Ltd, is responsible for over £80 million of bad debt owed to other sectors and we can see the potential for contagion if debt spreads across businesses in the UK. With a big increase in bad debt owed both to and by the Banking and Financial sector this quarter, we’ll need to keep a close eye on the industry over the coming months to see if it can rebalance.”