(1888PressRelease)
November 24, 2007 - The steel industry is likely to suffer the fall out of the credit crunch in 2008, despite a buoyant outlook for most product groups over the next couple of years. The spike in interest rates across the wider economy means that steel users’ finances will inevitably be squeezed and potentially bring about an upward blip in insolvencies where least expected.
The boom in UK construction, including the Olympics, is helping to drive higher prices and volume for the steel industry. However, as companies expand to meet demand, they are facing interest rate hikes and restrained cash flow following the sub-prime mortgage crisis. Suppliers are warned that customers could default on payments as a result of unexpected insolvencies, especially among companies with high gearing.
The risk of insolvency is also heightened by increasing pension deficits, parent companies allowing subsidiaries to fail and accounting irregularities.
Phil Grey, steel specialist and account director at Aon Trade Credit, said: “The credit crunch means it’s harder to access capital and could ultimately lead to increased bad debt in the steel industry. Credit insurers could respond by increasing premiums due to the risks of the wider economy rather than any bad claims history in this sector.”
To protect your balance sheet and prevent the backlash from industry insolvencies, Aon recommends taking the following actions:
* keep a tight sales ledger and monitor for evidence of overdue payments
* commit more time and energy to collecting payments
* review debtor book on a regular basis to assess reliable customers and decide whether to sever links with those with poor payment histories.
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Aon UK is ranked by A.M. Best as the number one global insurance brokerage based on brokerage revenues and voted best insurance intermediary, offering classic car insurance, high value home insurance, entertainment and media insurance and construction site insurance.
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