Coface Business Sector Overview Highlights Opportunities For UK Exporters Beyond Eurozone
Coface’s ‘Panorama: Sectors’ is the first of a quarterly series of reports, focusing on 14 important business sectors in emerging Asia, North America and the European Union, from Agro-food to wood and paper. Coface’s Economic Research Department analysed the strength of turnover, financial robustness* and credit risk of a representative sample of 6,000 companies from all three regions to produce an overview of each sector. The full report can be accessed from the Coface website.
Coface economists revealed that the most resilient sectors globally were pharmaceuticals, energy and transportation but that construction, metallurgy and retail were fragile and the credit risk was high. The agro-food, automobiles and electronics sectors were considered increasingly vulnerable and in need of continued monitoring.
Grant Williams, Risk Underwriting Director at Coface UK commented: “This report gives a valuable insight into the threats and opportunities within different business sectors and how this differs by region. While UK manufacturers have already seen a reduction in sales to the Eurozone, it is more important for them to know the prospects for their particular market in other regions so they don’t jump from the frying pan to the fire. For example, Coface currently considers mechanical engineering to be a higher risk in Asia than in Europe or North America because companies in this region have offered favourable payment terms and are more vulnerable to bad debt.”
Among the highlights from the report are:
Pharmaceuticals has benefited from rising health spending in all three regions. Renewable energy has been hit by cuts in public subsidies but otherwise the energy sector has remained buoyant, thanks to high oil prices. In addition, the shale gas revolution in the United States has reduced costs and given American industry, especially chemicals, a competitive advantage. The maritime and air transportation sector is facing tighter margins but is only considered a moderate credit risk due to its more tightly controlled credit management.
Sectors to be monitored:
Agro-food has seen turnover rise in North America (by 4.2%) and Asia (17.7%) but fall by 0.4% in Europe and Coface underwriters have seen more payment failures in Spain and Italy. Similarly, the automobile sector is contracting in Europe; ‘convalescing’ with federal backing in North America; and yet still strong in Asia where there is steady demand from the growing middle class. Electronics has been a victim of the Chinese economic slowdown and the European recession but sectors such as banking and insurance will continue to invest in software in preparation for regulatory changes.
The outlook is bleak for construction, metallurgy and distribution where frequent payment incidents are evidence of significant risk, particularly in Southern Europe. In the construction sector, Coface expects a slight upturn in activity in North America but in Europe economic difficulties continue to limit investment by households and public institutions. In China measures have been taken to deflate the housing bubble after sharp price rises. Retail is suffering from the contraction in household consumption in developed countries but is more buoyant in Emerging Asia where turnover has increased by 39%.