£162bn of British exports at high risk – Allianz Trade
Allianz Trade found that almost a quarter (24%) of exports leave British shores bound for the markets where it is most difficult for UK firms to collect their dues: China, the US and India. Combined, exports to these destinations represent GBP 162bn (USD221bn) of exports leaving the UK. Of the UK’s top 20 export markets, these three nations pose the greatest risk to UK firms attempting to collect payments owed. Difficulties range from long delays on paying invoices, navigating complex legal processes or, most commonly, insolvency-related risks, when debt is written off or becomes highly unlikely to be recovered once insolvency procedures have begun.
For example, 12% of all UK exports go to the US, which has a complexity score of 56 out of 100, putting it in the ‘very high’ category. Debt collection in the US has become riskier since 2022, the last edition of Allianz Trade’s Collection Complexity Report, as the payment culture of domestic companies is becoming increasingly uncertain. With no harmonised framework on late payments, payment terms remain a mere contractual issue, while the average DSO (Days Sales Outstanding) tends to be high. These challenges are compounded by opaque legal structures comprising county, state and federal systems, adding complexity to even the simplest of lawsuits and debt recovery processes.
Meanwhile, China – which makes-up 10% of British exports and has a ‘severe’ rating of 66 – and India – which has a ‘very high’ score of 57 and represents 2% of UK exports – have seen their collection complexity scores decrease by one point apiece over the last four years. However, DSO remains much higher in both locations (China 94 days, India 75 days vs 51 days in the UK). Complex legal systems in which delayed payments are not effectively regulated, court hearings that are subject to delays and high costs make foreign debt rulings difficult to enforce.
The UK’s top 20 export markets are outlined below:
Figure 1 British Exporters: Navigating collection complexity in key markets; (*) In each given country the complexity is measured by a score from 0 (least complex) to 100 (most complex); (**) Countries are ranked by their share in British total exports