Coface Q4 2023 Barometer: An overview from our UK economist, Jonathan Steenberg

Trading risks for UK and Irish businesses have intensified due to weak economic growth, rising insolvencies and political uncertainties but will there be any improvement this year? Jonathan considers the likelihood of recovery in the second half of 2024 and which countries and sectors are in pole position.

Trading risks for UK and Irish businesses have intensified due to weak economic growth, rising insolvencies and political uncertainties but will there be any improvement this year? Jonathan considers the likelihood of recovery in the second half of 2024 and which countries and sectors are in pole position.   


  • Coface’s country risk rating for the UK is unchanged at A4 (reasonable) while Ireland remains at A3 (satisfactory). Growth of 0.5% forecast for UK in 2024.
  • Global growth forecast of 2.2% but this is largely driven by emerging economies rather than the US, Eurozone or China.
  • Israel downgraded (A3) but 12 countries upgraded: Albania (C), Armenia (B), Barbados (C), Belgium (A2), Croatia (A3), Denmark (A1), Georgia (B), Kyrgyzstan (C), Mauritius (A4), Namibia (B), Romania (A4) and Switzerland (A1)
  • Downgrade for the UK paper sector (very high risk) and upgrade for automotive (high risk)
  • Overall, 17 sector upgrades, largely in the automotive and energy sectors. Five downgrades, mainly within in Western Europe.


Jonathan’s view:

What are the prospects for the global economy this year?

We forecast global GDP growth of 2.2% in 2024 - down from 2.6% last year. This is largely due to a slowdown in activity in the US and Eurozone and a disappointing recovery in China although we believe most regions will escape serious recessions.

Inflation in the advanced economies remains above the Central Banks’ 2% target and is an ongoing concern, particularly in the context of the strikes on Red Sea shipping which have led to supply chain disruption and the spike in sea freight costs. We expect central banks to keep interest rates high for most of this year and for insolvencies to continue to rise as businesses struggle to refinance their debts, with implications for unemployment, wages and ultimately demand.

While there’s a positive balance of country and sector risk upgrades versus downgrades, the outlook is uncertain amid ongoing economic and geopolitical risks.

What’s the economic outlook for the UK and Ireland in 2024?

We generally expect low growth of 0.5% in the UK, but hope to see the beginnings of a recovery in the second half of the year. Businesses continue to be affected by high interest rates and a restrictive credit environment which is unlikely to ease until middle of the year and we expect that insolvencies will continue to rise, albeit at a lower rate. Some companies will also face significantly increased costs due to the impact of the rise in the national minimum wage which could limit hiring and even lead to layoffs. However, as we approach the summer, rising real wages and restocking could stimulate trading activity, even in manufacturing.

In Ireland, we expect the domestic economy to grow, although at a slower rate, with employment levels high and a positive dividend from real wage growth. The gradual easing of the global interest rate environment should also help multinational activity in the country and support growth in 2024. On the other hand, insolvencies rose by almost 30% in 2023 and we’re concerned that 2024 will be the same story, especially as government intervention measures end. Requirements for winding-up petitions have eased, for example, while almost 60,000 companies still have debt warehoused and must make repayment arrangements this year. In response, the Irish Government has now cut the interest rate on warehoused debt to 0% and says it wants to give viable businesses every chance to succeed. While this will help some struggling businesses, more will succumb to the current economic strains.




Why did you upgrade automotive and downgrade paper in your UK sector assessments? What other sectors are you watching closely and why?

Alongside five other countries (India, Japan, South Korea, Poland, and Czechia), we upgraded the automotive sector in the UK in the light of improved sales, production and exports (and signs of the political will to boost electronic vehicle (EV) manufacture). Confidence has been boosted by last year’s EV investment announcements from BMW and Nissan and easing interest rates should also help support demand later in the year.

By contrast, falling turnover and production led us to downgrade the UK paper sector which is also faced with a slowdown in demand for packaging, the long-term decline in the printing industry and environmental concerns. Lending to the sector has fallen and there are a high number of insolvencies.

We continue to monitor very high-risk sectors like construction, textiles and transport. For construction, much will depend on interest rates, while transport risk will be affected by events in the Suez Canal region.  Textile are still suffering from high costs and a diminished ability to pass on costs as textiles, clothing and footwear sales are falling.

Pharmaceuticals, energy and ICT are assessed as medium risk in the UK. The first two have relatively stable outlooks and usually strong balance sheets but the picture in ICT is more mixed. For example, we expect sales of IT equipment to increase this year because many consumers and companies bought their current stock (devices) in 2020/21 (assuming an average lifespan of 3-4 years). On the other hand, insolvencies are rising in the media and IT retailers where companies have been hit by a big fall in advertising revenue and reduced household spending.

How might rising geopolitical tensions affect UK businesses?

Political risk continues to rise for a number of reasons as I explained here and can affect businesses in a number of ways. Most obviously, conflict can directly impact supply chains, as has been the case with the Red Sea attacks but we’re also seeing how geopolitical tensions affect trade (China’s economic pressure on Taiwan) and influence consumer behaviour (boycotts of McDonalds and Unilever in several countries due to a perceived support of Israel).

The concentration of important national elections in 2024 could be helpful for UK businesses by acting as a catalyst for change (for example, elections in both the UK and India could increase the urgency of trade negotiations). On the other hand, the election of nationalistic populist leaders could undermine existing trade relations.




What overseas markets are brighter prospects for exporters?

Emerging economies are clearly the bright spot at the moment and will be the main drivers of global GDP growth this year, contributing 1.7 percentage points or three quarters of global growth, the highest proportion since 2013. Nine of our 12 country upgrades in our Q4 Barometer are emerging economies.

Overall, South-East Asia will be one of the most dynamic regions with growth of 4.6%, (up from 4% in 2023). This is partly thanks to recovery in the global electronics sector where Singapore, Vietnam, and Malaysia are important links in the regional supply chain. Meanwhile, Thailand and the Philippines have benefitted from continued recovery in the tourism sector. We’ve also upgraded three sectors in neighbouring India: automotive, construction (both medium risk) and ICT (low risk) while pharma is also low risk.

Of course, some emerging countries will face greater difficulties, particularly the most indebted because of factors like high interest rates, a strong dollar and the volume of debt reaching maturity in 2024/25. Sri Lanka, Ghana, Ethiopia, Malawi, Pakistan, and Laos are in default or close to it while others are struggling to refinance such as Egypt, Tunisia and Kenya. In South America, the positions of Bolivia and Argentina are particularly precarious.

How can Coface help UK and Ireland business in 2024?

One of the most important ways we can help businesses in this unsettled economic and political situation is through our Business Information services which provide real-time financial, trading, payment, and fraud data on over 130 million companies worldwide to help you manage risks.

We’ve also developed a powerful interactive tool – URBA 360 – which gives you a complete and dynamic view of your trade risk, from an instant assessment, down to the granular details. You can access our unique insights about companies, including our Debtor Risk Assessment and credit opinion, financial ratios to compare the company’s performance against its peers and the relevant sector and country risk assessments.

Another benefit of working with Coface, which is particularly relevant just now, is that credit insurance can help your business secure better borrowing terms. Access to finance, especially for SMEs, has become a talking point since the UK base interest rate was increased 14 consecutive times (up until August 2023) and prompted MPs to launch an investigation last summer. However, it’s long been the case that a TCI policy provides compelling evidence to prospective lenders that your business is financially secure and a good investment.

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

Want to know how Coface can help your business know more and grow more?


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