PARIS--(BUSINESS WIRE)--Disruptions over the past few years, from the Covid-19 pandemic to the invasion of Ukraine, seem to be leading to the rethinking of global supply chains. How are these events affecting companies, their willingness to trade and the way they operate abroad? Today, Allianz Trade releases the second edition of its Global Survey. The world’s leading trade credit insurer surveyed nearly 3,000 exporters from France, Germany, Italy, Spain, Poland, the UK and the US.1 Allianz Trade asked these companies about their export expectations in 2023, experiences with supply-chain disruptions, plans to make supply chains more resilient and ESG strategies.
Non-payment risk is the fear factor
While companies are relatively optimistic about export prospects in 2023, economic uncertainty remains strong. In 2023, roughly 70% of companies expect business turnover generated through exports to increase year-over-year, down from 80% in the 2022 edition. This echoes the less favourable environment for global trade in 2023: Allianz Trade expects global trade to grow slowly in terms of volume (+0.7% vs. +3.8% in 2022) and to decline in terms of value (-0.1% vs. +9.7% in 2022).
Companies also appear to have a smaller appetite for new markets, favoring a consolidation of existing ones. 63% of respondents favor increasing investment in countries where they are already present, while 47% plan to invest in new countries. When exporting, more than 55% of corporates plan to gain further market share in current countries where they are present, whereas 52% want to diversify and target new countries.
Compared to last year, more respondents expect the length of export payments terms to increase (42% vs. 31%), with the share this year reaching levels close to 50% in both the US and the UK. The share of respondents expecting an uptick in the export non-payment risk has increased compared to our early 2022 survey, rising +11pps to 40% overall. The increase is widespread across countries, but especially visible in the UK and Germany (both +16pps), while it is only +6pps in Italy.
“Companies are facing a combination of lower demand, additional pressure on profitability and squeezing credit conditions as central banks continue to increase interest rates to bring down inflation. In this context, they are clearly bracing for longer export payment terms and higher non-payment risk in 2023. This is in line with our outlook for global insolvencies, which we expect to rise by +21% in 2023 (after +2% in 2022),” says Aylin Somersan Coqui, CEO of Allianz Trade.
Despite improvements, companies are still worried about supply-chain disruptions
Nearly 75% of respondents rated logistics hurdles and high transportation costs as having a moderate to significant impact on export activity in 2023, making it the top challenge in Germany, Italy and Poland. For companies in the US and Spain, the top challenge is the cost and availability of financing. In contrast, for companies in the UK, high energy prices remain the top challenge to overcome this year. In France, companies are most concerned about non-payment risk.
“To mitigate disruptions to their supply chains, the top three strategies are monitoring, risk management and ESG due diligence on suppliers. But despite fears about overlapping crises triggering deglobalization, reinventing supply chains or relocating production sites are the least favored options. However, companies hit the hardest by the energy crisis are leaning towards more supply-chain diversification. Companies that report a fair to severe disruption to their supply chains due to the energy crisis seem to be more concerned with making changes, with 35% expecting to relocate suppliers and production sites in the medium to long-term (against 11% for the least-impacted companies),” explains Ana Boata, Global Head of Economic Research at Allianz Trade.
Cash is still king for export financing
To fund export development plans, firms expect to continue to rely on cash, bank loans and payment terms. The former two options were also the top choices in last year’s survey – though the margin compared to other means has clearly declined this year, in a context of declining cash buffers at firms’ disposal and tightening bank lending conditions.
“Interestingly, beyond traditional sources of financing, companies are increasingly turning to Buy Now, Pay Later schemes to finance their exports. For companies in the UK and France, this is cited as the third source of financing after cash and bank loans. This growing interest could also unlock trade financing for Small and Medium Enterprises that were previously shying away from global trade,” states Ano Kuhanathan, Head of Corporate Research at Allianz Trade.
Even when considering public policies, firms are mostly calling for financial support. Active labor policies for labor upskilling ranks second after state-guaranteed loans and grants, stressing the importance of securing financing in the current environment. Cost control seems to be the top priority as the third preferred public policy measure is lowering barriers to trade, including dropping the Carbon Border Adjustment.
When it comes to ESG, companies favor baby steps and business continuity for now
The energy crisis is accelerating the green transition. Amid the economic slowdown and financing constraints, more than 80% of respondents say that they will prioritize business continuity over ESG commitments in 2023. However, companies have not entirely given up on ESG targets: most respondents (85%) are stepping up efforts to shift to green energy sources over the long-term, especially in Spain, the US and France.
“The main priorities in terms of ESG measures still revolve around short-term actions, such as making environmentally friendly transportation choices, increasing ESG standards expected from suppliers or enhancing health and safety standards within the supply chain. But more structural measures are also being prioritized, such as developing sustainable and innovative products and services, and reducing exposure to brown activities,” ends Aylin Somersan Coqui.
We predict trade and credit risk today, so companies can have confidence in tomorrow
Allianz Trade is the global leader in trade credit insurance and a recognized specialist in the areas of surety, collections, structured trade credit and political risk. Our proprietary intelligence network analyses daily changes in +80 million corporates' solvency. We give companies the confidence to trade by securing their payments. We compensate your company in the event of a bad debt, but more importantly, we help you avoid bad debt in the first place. Whenever we provide trade credit insurance or other finance solutions, our priority is predictive protection. But, when the unexpected arrives, our AA credit rating means we have the resources, backed by Allianz to provide compensation to maintain your business. Headquartered in Paris, Allianz Trade is present in 52 countries with 5,500 employees. In 2022, our consolidated turnover was € 3.3 billion and insured global business transactions represented € 1,057 billion in exposure. For more information, please visit allianz-trade.com
Cautionary note regarding forward-looking statements
The statements contained herein may include prospects, statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such forward-looking statements. Such deviations may arise due to, without limitation, (I) changes of the general economic conditions and competitive situation, particularly in the Allianz Group’s core business and core markets, (II) performance of financial markets (particularly market volatility, liquidity and credit events), (III) frequency and severity of insured loss events, including from natural catastrophes, and the development of loss expenses, (IV) mortality and morbidity levels and trends, (V) persistency levels, (VI) particularly in the banking business, the extent of credit defaults, (VII) interest rate levels, (VIII) currency exchange rates including the euro/US-dollar exchange rate, (IX) changes in laws and regulations, including tax regulations, (X) the impact of acquisitions, including related integration issues, and reorganization measures, and (XI) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.
1 The survey was conducted online over three weeks in mid-April 2023.
Allianz Trade is the trademark used to designate a range of services provided by Euler Hermes.
