Baker Ing Bulletin: 23rd February 2024

Polymetal's Move, German Bets, CEE Shakes, EU Sanction Storm, and Germany's Economic Outlook — Baker Ing Bulletin

Is it Friday already?! Welcome once again to The Baker Ing Bulletin, where we serve up a dish of the week’s most tantalising economic tales, all with a side of trade credit intrigue.

First up, Polymetal International bails on Russia faster than you can say “sanctions,” flipping its operations for a cool $3.69 billion. Meanwhile, German firms are pouring cash into the US like it’s the last round at a bar. Over in the CEE, wages are popping like champagne corks, stirring up the pot for businesses banking on stable costs. Then there’s the EU’s latest sanctions saga turning the heat up on Russia, pulling Chinese companies into the mix. And for the grand finale, we offer a deep dive into Germany’s economy, providing credit professionals with intel they need to navigate the stormy seas ahead with confidence.


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Gold Rush or Bust? Polymetal Ditches Russia 🏃💰

The divestiture of Polymetal International plc’s Russian operations to JSC Mangazeya Plus for $3.69 billion is particularly interesting due to the nuanced interplay of geopolitical risk and its direct implications on credit management within the precious metals sector and beyond. The transaction, set against a backdrop of potential nationalisation/expropriation by the Russian government, offers insights for managing credit risks in volatile geopolitical environments.

The valuation of Polymetal Russia at 5.3 times its enterprise value/EBITDA under the terms of the deal serves as a valuable reference point when evaluating companies facing similar geopolitical challenges or operating in at-risk industries. Valuations are influenced not just by a company’s financials but also by external geopolitical pressures – Polymetal gives us an indication of by how much this might be so. By integrating this valuation as a scenario-based metric in credit risk models, credit managers may be able to better understand the impact of geopolitical tensions on company valuations and their subsequent creditworthiness. Adjusting risk premiums to reflect this layer of uncertainty helps ensure these models are more aligned with the real risk environment.

The transaction’s strategic rationale, aimed at removing or substantially mitigating critical political, legal, financial, and operational risks points towards the importance of continuously monitoring geopolitical developments and their potential impact on the creditworthiness of counterparties. Furthermore, Polymetal’s board recommendation for shareholder approval of the deal highlights the role of corporate governance in managing credit risks. Trade credit should advocate for and participate in cross-functional teams that assess and respond to geopolitical risks, ensuring that credit perspectives are integral to corporate strategy and risk management frameworks. Here’s your case study to get that buy-in.

Polymetal International’s divestiture of its Russian operations to JSC Mangazeya Plus is not just a manoeuvre to evade the risks of nationalisation or expropriation; it is a case study in the imperative for credit professionals to integrate geopolitical risk assessment into credit management strategies and to be involved in corporate strategy. This transaction illustrates the need for dynamic, nuanced approaches to managing trade credit risks in industries and regions susceptible to geopolitical volatility – which is increasingly many.

American Dream or EU Nightmare? German Giants Bet Big 🇩🇪🇺🇸

There’s been quite the surge of German capital investment into the United States lately, highlighted by a record $15.7 billion in 2023. This influx, largely incentivised by the Inflation Reduction Act and Chips and Science Act, signals a strategic pivot not just for German corporations but for credit professionals too.

Its not merely in the volume of capital flowing from Germany to the US that’s interesting, but the fact that as German companies ramp up their presence in the US, particularly within the manufacturing sector, trade credit is presented with a complex matrix of risks and opportunities to decode…

Firstly, the move reflects a broader trend of diversification away from traditional markets like China, in favour of the perceived stability and growth potential within the US. This shift, underscored by significant projects like Volkswagen’s Scout Motors’ $2 billion investment in South Carolina, necessitates a recalibration of risk assessment models. The geopolitical undertones of this shift—from Europe’s stringent regulatory environment and China’s market uncertainties to the US’s welcoming investment climate—add layers of complexity to credit decision-making.

Understanding the strategic motivations behind these investments is crucial. German firms are not merely seeking safe harbour; they are strategically positioning themselves within a market that promises substantial growth, driven by a robust policy framework and incentives for manufacturing and tech innovation. For credit managers, this requires a deeper dive into the stability and long-term prospects of these investments, beyond conventional financial metrics and into geopolitical and policy-driven risks and opportunities.

Moreover, the sector-specific nature of these investments—largely centered on manufacturing and technology—presents a double-edged sword. On one hand, there’s the potential for enhanced business with new entrants and expanded operations of existing players, offering a broader base for trade credit activities. On the other, there’s increased competition and sectoral volatility, particularly as new technologies and manufacturing capabilities evolve under the banner of these investments.

The role of trade credit in this evolving shift extends beyond mere risk assessment to strategic partnership and advisory, guiding clients and customers through the complexities of engaging with or competing against these German investments. This entails not just adjusting credit policies and terms to reflect the new risk landscape but also identifying opportunities for collaboration and growth that these investments may herald.

The surge in German investment into the US, therefore, is not just a testament to shifting global capital flows but a call to trade credit managers. It demands a sophisticated, nuanced approach to credit management that accounts for the geopolitical, sectoral, and policy dimensions shaping the future of US-German trade relations. As this new chapter unfolds, the strategic insights and actions of credit professionals will be pivotal in navigating the opportunities and challenges ahead, ensuring that our firms can capitalise on this wave of investment whilst mitigating the inherent risks it brings.

CEE's Wages: Tightrope Walk for Shared Service Centers 📈🌍

As Central and Eastern Europe (CEE) showcases a vibrant tableau of economic indicators, the spotlight turns sharply to the burgeoning wage growth across the region—a trend stirring both optimism and caution among credit professionals. With Poland leading the charge, boasting a remarkable 12.8% year-on-year wage growth in January, a wider view unfolds across the CEE, revealing a complex dance of economic vitality and inflationary pressures.

At the heart of matters for many credit functions is the burgeoning challenge for businesses leveraging shared service centres in the CEE. These hubs, central to the operational efficiency of multinational corporations, now face the headwinds of escalating labour costs, underscored by wage growth figures out of Poland, Croatia, and beyond. Croatia’s real wage growth, hitting an impressive 8.6% year-on-year in December, mirrors a region-wide trend that, while signalling economic health, also poses nuanced challenges for maintaining competitive operational costs long-term.

This economic dynamism, however, isn’t confined to wage metrics alone. The CEE’s unemployment offers additional layers of insight, with Slovakia maintaining a modest 5.2% in January, juxtaposed against Croatia’s uptick to 6.8%. These figures, when parsed alongside wage growth, paint a detailed picture of labour market tightness and the resultant wage pressures.

Moreover, the currency strength observed across the CEE adds another layer for consideration. The recent appreciation of CEE currencies against the euro not only impacts the cost-competitiveness of exports but also recalibrates the cost structure of shared service centres in the region. For multinational corporations, this currency movement could potentially inflate the local currency cost base.

Navigating this intricate economic environment necessitates engaging in a delicate balancing act, aligning operational and credit risk strategies with the new and nuanced economic realities of the CEE. This includes a proactive engagement with currency hedging mechanisms to mitigate the financial impact of currency fluctuations and even, perhaps, a strategic diversification of service centre locations to dilute the risk concentration in any single market long-term.

The evolving wage growth and economic conditions in the CEE region present a multifaceted challenge for trade credit managers. The path forward calls for a nuanced understanding of local economies, an agile approach to risk management, and a strategic recalibration that aligns operational efficiencies with the economic realities of wage inflation and currency movements. As we move deeper into 2024, the ability to navigate these complexities will increasingly define the resilience and competitiveness of businesses operating in the vibrant, yet challenging, economies of Central and Eastern Europe.

EU's Russia Sanctions Shake-Up: Credit Alert 🌍🔒

On the eve of the second anniversary of the conflict in Ukraine, the European Union has escalated its economic offensive against Russia, unfurling a new suite of sanctions that casts a wider net to include about 200 companies and individuals, notably bringing Chinese firms into the fold for their alleged support to Moscow’s military efforts. This latest manoeuvre, hailed as one of the EU’s broadest sanction packages, underscores an intensification of pressure.

For credit managers, particularly those navigating the complexities of international trade within and beyond the EU, this development could be a critical juncture. The inclusion of Chinese companies in the sanctions list is a clear signal of the EU’s commitment, potentially reshaping the landscape of global trade relationships and credit risks. The measures cut deep into the energy sector, banking, and high-technology components, presenting a multifaceted challenge. This extension of trade restrictions necessitates a recalibration of risk management strategies, especially for those with exposure to or operations within the targeted sectors.

Trade credit must now scrutinise the indirect exposure of our portfolios to sanctioned entities, including the complex supply chains that may inadvertently link to the Russian military-industrial complex or sanctioned Chinese companies. This involves a granular review of counterparties and their affiliations to ensure compliance and mitigate the risk of entanglement in the sanctions web.

The introduction of sanctions against Chinese companies suspected of supporting Russia’s military efforts also introduces a novel dimension of geopolitical risk. This could have ripple effects on the global supply chain and trade dynamics, necessitating a reassessment of credit risks associated with affected regions and industries. We’ll need to closely monitor the unfolding economic repercussions and adjust credit policies to navigate fallout.

As the sanctions take effect, staying ahead of the curve will be paramount for maintaining stability and resilience.

Navigating the Waters: Germany's Economic Landscape 🇩🇪🔍

In the rapidly evolving economic climate of 2024, the insights from Baker Ing’s Germany Spotlight Report gain new significance, especially in light of recent developments that impact Germany’s position on the global stage. With Germany at the forefront of the European Union’s latest sanctions against Russia and the nation’s strategic economic manoeuvres, such as substantial investments in the US, understanding the underlying dynamics of Germany’s economy is more crucial than ever for trade credit.

This report dives into the drivers of Germany’s economy, such as technological advancement and its role within the EU; instrumental in evaluating how recent economic policies and global events might influence Germany’s economic resilience and, consequently, credit risks.

Don’t miss the opportunity to gain a competitive edge in one of the world’s most influential economies. You can download the Germany Spotlight Report now at

And so, as we close the book on another illuminating chapter of The Baker Ing Bulletin, I hope we have helped you traverse the labyrinthine world of credit with the curiosity of a scholar and the insight of a sage.

To our distinguished connoisseurs of commerce, those sagacious scholars of the ledger and ledgerdemain, we must remember that being well-informed is not just a feather in one’s cap; it is, indeed, the secret sauce to triumph! For a deeper dive into the narratives that shape our economic day-to-day, we encourage you to visit

Until next time, may your balance be bountiful and your risk merely a mirage…

Baker Ing Bulletin: 16th Feb 2024

UK Stumbles, VW's Ethics Quagmire, EU's Law Limbo, Eurozone's Fiscal Shuffle, 3PL Exposé — Baker Ing Bulletin: 16th February 2024

Ah, the melodrama of the credit world! Welcome back to The Baker Ing Bulletin, where we take a wry squint at the week’s financial foibles and fumbles, focusing on what they might mean for trade credit.

Leading our parade of pecuniary puzzlements is Blighty’s own economy – less of a catastrophic collapse and more like an aristocrat fainting onto a chaise lounge – a peculiarly British spectacle of economic ennui.

Vorsprung durch Technik? Not on this occasion. Volkswagen finds itself in a bit of a pickle, with Uncle Sam’s boys in blue nabbing their swanky motors over some rather unsavory supply chain secrets. It’s a tale of high-end horsepower meeting low-end ethics, all unfolding like a Shakespearean tragedy set in a car showroom.

As for the Eurocrats, they’ve been busy (or perhaps not busy enough) with the Corporate Sustainability Due Diligence Directive. The grand plan for cleaning up corporate supply chains is, much like our well-intentioned New Year’s resolutions, facing the risk of being quietly shelved.

And then there’s the Eurozone, where the economic outlook is about as hard to pin down as diplomat dodging a direct question.

And for the pièce de résistance, we present Baker Ing’s own magnum opus on Third-Party Logistics. This report, peppered with insights, cuts through the complexities of logistics to deliver sharp analysis without delay.

So, dear readers, settle in for a jaunt through the week’s monetary maze, where every twist and turn is more intriguing than the last. It’s credit, but not as you know it…

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UK Economy Hits a Snag: Recession Creeps In 📉😬

The UK economy, often seen as a bastion of stability, has hit a rough patch, slipping into a recession that’s more about a slow burn than a dramatic plunge. With a GDP dip of 0.3% in the final quarter of 2023, it’s clear that the nation is facing a period of economic stagnation, a context that will have significant repercussions for credit professionals.

This recession, while modest in numbers, is a red flag for those in the business of credit. It’s not just about the current contraction, but the broader implications of a prolonged period of tepid growth that could well reshape the business landscape for the long-term. Key sectors like manufacturing, construction, and wholesale are already feeling the pinch, signaling potential cash flow challenges that could ripple through their credit chains.

In such times, the lessons from previous periods of economic stagnation are particularly instructive. They suggest a need for a more nuanced approach to credit risk assessment, going beyond traditional financial metrics to include a closer examination of current cash flows, market position, and the broader economic context. This level of analysis is crucial in identifying early warning signs of financial stress in client businesses.

The situation also calls for a strategic adjustment in credit policies. In a stagnating economy, businesses will seek longer payment terms to manage tight cash flows. While it’s important to support client relationships, trade credit must balance this with the increased risk of extended receivables. Crafting flexible but prudent credit solutions is key in this landscape. A scalable resource at the ready is also advisable to react quickly to changing circumstances.

Looking ahead, credit professionals must also keep an eye on policy responses from the government and central bank. While these measures aim to stimulate economic growth, they could have varied implications for different sectors. Understanding these policy shifts will be crucial in adjusting strategies accordingly.
The UK’s economic stagnation presents a complex challenge for credit. It requires a blend of in-depth financial analysis, adaptive credit policies, and a keen understanding of the broader economic environment. As ever however, for those that can navigate through these challenging times, there is now as much opportunity to reap rewards as there is succumbing to risk.

Volkswagen's Luxury Car Crisis: US Customs Cracks Down 🚗🚓

The recent seizure by US customs of thousands of luxury cars from the Volkswagen Group, including high-end brands like Porsche, Bentley, and Audi, has sent shockwaves through the automotive industry and beyond. This enforcement action, triggered by allegations of forced labor in China’s Xinjiang region (a risk previously covered in this Newsletter), shines a spotlight on the intricate and often opaque world of global supply chain management.

At the heart of this issue is the use of electronic components suspected of being produced under unethical labor conditions. The implications for Volkswagen are immediate and multifaceted. The company faces not only the logistical hurdle of replacing these components across thousands of vehicles, a process expected to stretch until the end of March, but also the broader challenge of scrutinising and potentially overhauling its supply chain practices.

This situation is a stark reminder of the complexities faced by companies operating in highly globalised markets. In the automotive sector, where supply chains are deeply integrated and span across multiple countries and suppliers, ensuring ethical compliance at every level is challenging. Volkswagen’s response to this crisis, including their investigation and potential actions against suppliers, will be closely watched by industry peers and credit professionals alike.

For trade credit, the Volkswagen case underscores the importance of a comprehensive understanding of a client’s supply chain. The financial health of a company is no longer just about balance sheets and profit margins; it now involves a critical assessment of supply chain ethics and compliance with international labor laws. The risk of association with unethical practices, even indirectly, can lead to significant reputational damage, legal repercussions, and financial loss.

This incident reflects a broader trend towards greater accountability and transparency in supply chains, driven by both regulatory pressures and a growing consumer demand for ethically produced goods. The ripple effects of this shift are likely to be felt across a range of industries, prompting companies to reevaluate their supply chain strategies and practices.

EU Ethics Drama: Italy and Germany Throw a Spanner in the Works 🇪🇺🔧

The European Union’s recent stumble in advancing the Corporate Sustainability Due Diligence Directive (CSDDD), legislation aimed at enforcing ethical supply chain practices, echoes the broader global narrative on corporate responsibility. The delay, primarily due to Germany and Italy’s abstention, adds a layer of uncertainty to an already complex international trade environment, further complicated by the recent US actions against Volkswagen.

This is significant, as it reflects growing tensions between the drive for ethical supply chains and concerns over economic and bureaucratic burdens for businesses. The CSDDD, designed to hold companies accountable for forced labor and environmental damage within their supply chains, mirrors the objectives of the Uyghur Forced Labor Prevention Act (UFLPA) in the US, which led to the seizure of Volkswagen’s vehicles. Both legislative actions signify a hardening stance on corporate responsibility in global supply chains, yet the EU’s hesitation reveals the challenges in balancing these ethical objectives with practical business concerns.

Germany, traditionally an EU integration engine, now appears to be a brake, with its finance minister Christian Lindner citing the directive’s potential to overburden businesses. For credit professionals, the postponement of the CSDDD, alongside the Volkswagen incident in the US, suggests a period of regulatory uncertainty ahead. Businesses operating within the EU, or those with significant ties to the region, might face a shifting compliance landscape, affecting their operational costs, reputational risks, and ultimately, their creditworthiness.

The EU’s postponement of the CSDDD , set against the backdrop of the US’s actions on Volkswagen, highlights the growing global focus on ethical supply chains, underscoring the need for adaptability and a broadened risk assessment scope that considers not just financial health but also compliance with evolving international regulations and ethical practices.

Eurozone's Economic Wobble: Growth Slows to a Crawl 🐌💸

The European Commission’s recent revision of its growth and inflation forecasts for the eurozone in 2024 signals a nuanced shift, with growth expected to slow to 0.8% and inflation to drop to 2.7%. These forecasts, influenced by the European Central Bank’s interest rate hikes and ongoing geopolitical tensions, bring varied implications for different sectors…

In the construction and real estate sectors, this economic forecast presents a contrasting scenario. Whilst slower growth could dampen investment and consumer spending, potentially impacting the financial stability of businesses in these spaces, the anticipated ECB rate cuts later in the year might stimulate investment, offering some respite.

Energy-intensive industries, such as manufacturing, might find some relief in the forecasted drop in inflation, reflecting lower energy prices. This could ease the cost burdens these sectors have been facing, possibly improving their financial health and ability to manage credit obligations.

Conversely, consumer spending is likely to tighten in response to the eurozone’s reduced growth outlook, impacting the retail and consumer goods sectors. Credit professionals should be particularly vigilant about businesses in these areas, as reduced consumer spending could affect their sales and cash flows, influencing creditworthiness and payment behaviours.

Automotive and machinery sectors could also feel the pinch of the economic slowdown. With potential declines in demand for high-value items like cars and machinery, companies in these sectors may encounter reduced orders and extended payment cycles, necessitating a closer review of credit risks and terms.
The situation in Germany, as the eurozone’s largest economy, deserves special attention. The significant downgrade in its growth forecast is indicative of challenges in key industries like automotive and manufacturing. This necessitates a cautious approach for trade credit dealing with clients in these sectors, as they might be more vulnerable to the impacts of the slowdown.

Meanwhile, in France, the outlook, albeit slightly better than Germany’s, still calls for caution. Sectors like tourism and luxury goods, sensitive to consumer spending and global economic trends, may face hurdles despite the slightly more optimistic forecast.
In summary, the European Commission’s revised forecasts for the eurozone in 2024 present a complex sector-specific outlook. For credit professionals, understanding these nuances is crucial. While some sectors will see opportunities in the easing of inflation and potential rate cuts, others will need careful monitoring due to the broader economic slowdown. Navigating this requires a detailed understanding of each sector’s unique challenges and opportunities in the context of the broader eurozone economy.

Baker Ing Spills the Beans on 3PL: A Deep Dive into Logistics 🕵️📦

Baker Ing’s latest release, a compelling report on Third-Party Logistics (3PL), hits the mark in a week when supply chain and economic developments are making headlines. Now available on LinkedIn and for Download, this detailed analysis offers a sharp look into how global economic shifts are reshaping the logistics landscape.

At a time when companies like Volkswagen are navigating complex supply chain challenges, this report is essential reading. It delves into the impact of booming e-commerce and explores how sustainability is becoming a crucial factor in logistics operations. The report also navigates through the latest technological advancements, including AI and IoT, which are transforming operational and financial strategies within the logistics sector.

A must-read for credit professionals in 3PL and beyond. It’s not just about understanding the current state of logistics; it’s about being prepared for what the future holds in this dynamic industry and how it impacts us all.

View and download the report to stay ahead in the evolving world of Third-Party Logistics.

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And so, we bring down the curtain on yet another week of The Baker Ing Bulletin, with more twists and turns than a politician’s promise.

To our astute aficionados of finance, those shrewd navigators of the ever-twisting maze of credits, debits, and daring deals, let this be your mantra: in the world of credit, knowing the score isn’t just savvy – it’s your ticket to the treasury. Sneak a peek at for more insight and analysis.

Until our paths cross again, keep your assets liquid and your liabilities laughable…

Baker Ing Bulletin: 26th Jan 2024

U.S. Growth Galore, Red Sea Rerouting, Lithium Lows, China's Latin Leap, Credit Insights Unveiled — Baker Ing Bulletin: 26th Jan 2024

Welcome back to the Baker Ing Bulletin, your weekly dose of financial savvy mixed with straightforward credit intelligence.

This week, we’re zooming in on a variety of stories in an increasingly China-centric world – looking at the U.S.’s economic resilience and China’s bold maritime strategy to the ripple effects of lithium’s price drop, China’s investment game-changer in Latin America, and the latest gems from our ‘Credit Frontier 2024’ webinar.

So, let’s get to it…

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1️⃣ U.S. Economic Surge: A Resilient Force in Global Trade 📈🇺🇸

In a striking display of economic muscle, the U.S. economy clocked a formidable 3.3% growth in its fourth quarter, shattering expectations and silencing doomsayers. This isn’t just a dry statistic; it shakes-up what we were beginning to think was the status quo.

The ripple effect of this economic surge on the U.S. dollar is something to watch. A beefed-up economy usually gives the dollar a shot in the arm, but this isn’t a straightforward win for trade credit. A brawny dollar could mean U.S. exports get pricier, potentially squeezing cash flow for American exporters. On the flip side, it’s good news for those importing goods into the U.S., as cheaper imports could be on the cards. Credit managers need to keep their eyes peeled for these currency swings.

Then there’s the Federal Reserve, whose interest rate moves are dictated by the economy’s performance. With the U.S. economy flexing its muscles, immediate rate cuts seem off the table. But here’s the kicker: a robust economy could mean the Fed keeps rates steady or even hikes them to keep inflation in check. This could crank up the cost of borrowing, impacting businesses’ creditworthiness. It’s a tightrope walk for credit; we’ll need to juggle these changes while keeping an eye on both local and international credit risks.

And let’s not forget the driving force behind this growth spurt: consumer spending. With consumers opening their wallets, businesses in sectors like retail and hospitality could see more stable cash flows, making them potentially safer bets for credit managers. It’s a sign of a consumer market buzzing with activity.

Moreover, this economic growth is backed by a number of factors, including government spending and business investments, pointing to an economy that’s not just improving but also balanced. This could mean smoother sailing for trade credit, as growth is not tied to any single sector.

Overall, this robust performance from the U.S. economy in the last stretch of the year provides a complex but largely upbeat start to the new year. The forecast? A mix of currency jitters, shifting borrowing costs, and a consumer market surge. For those managing trade credit, it’s about staying sharp, flexible, and ready to pivot as the economic winds change direction.

2️⃣ Strategic Shift in the Red Sea: Chinese Shipping Lines Make a Calculated Move 🚢🌏

In a move that’s set supply chain gurus abuzz, Chinese shipping lines are boldly steering into the Red Sea, a strategic play that’s rewriting the rules of global trade at a time when other operators are shying away. This development is laden with implications for credit professionals navigating the turbulent waters of international commerce.

The Red Sea, a vital maritime artery, has been a hotspot of geopolitical tension, notably due to the Houthi rebel attacks. The entry of Chinese operators into these troubled waters signals not only a bold assertion of commercial presence but also a willingness to engage in an environment where risk is as prevalent as opportunity. For industries heavily reliant on these maritime routes, such as energy, automotive, and manufacturing, the presence of Chinese lines could offer a semblance of stability and an alternative to the disrupted logistics pathways. However, this comes with an added layer of geopolitical risk, given the volatile nature of the region and geopolitical tussles. Trade credit must now factor in these geopolitical elements into their risk assessment models, considering the upside but also potential for disruptions and the cascading effects on supply chains and payment cycles.

This development also prompts a reevaluation of trade patterns and alliances. Chinese shipping lines may offer new trade routes or partnerships, potentially leading to shifts in trade flows and dependencies. We must keep a vigilant eye on these emerging patterns, understanding how these changes could impact the creditworthiness of businesses engaged in these routes, and adapting their credit policies accordingly.

The potential influence on shipping costs is another important consideration. If Chinese operators manage to offer more competitive rates or efficient services, this could alter cost structures for many businesses, particularly those in sectors like retail and consumer goods. Credit professionals need to stay ahead of these cost implications, reassessing the financial stability and liquidity of businesses that might benefit from or be challenged by these shifts.

The key going forward is in enhanced monitoring of geopolitical developments, particularly in the Red Sea region, and closely tracking the movements and strategies of Chinese shipping lines, as well as Chinese geopolitical developments generally. Developing a nuanced understanding of the interplay between these new maritime routes and global trade dynamics will be crucial. Additionally, fostering relationships with logistics experts and leveraging advanced risk assessment tools will be essential in adapting to, and capitalising on, these changes.

3️⃣ Lithium's Price Plunge: A Jolt to the EV Market 🌏🔋

The electric vehicle (EV) industry is at a critical juncture due to a dramatic drop in lithium prices, with a decrease of over 80% in the past year. While this steep decline in a key component for EV batteries might initially be a positive development for manufacturers, it brings with it a complex array of challenges and opportunities for credit professionals.

Initially, companies heavily reliant on lithium for battery production will benefit from reduced input costs, leading to lower production expenses and improved profit margins. However, such price volatility introduces a high degree of unpredictability into financial planning and budgeting going forward. Lower prices are good, but such a large drop so quickly presents raises long-range concerns.

The development will likely favour Chinese lithium producers due to their extensive domestic reserves and government support. Unlike their Western counterparts, Chinese producers like Ganfeng Lithium and Tianqi Lithium have better resilience against market volatility due to strong domestic support and established production infrastructures. As prices drop, Chinese producers could potentially offer more competitive pricing, increasing their market share and influence in the global supply chain. This realignment might lead to a greater dependency on Chinese lithium, giving China a strategic edge in the global EV industry. With increased reliance on Chinese lithium, global supply chains become more exposed to geopolitical risks and trade policies between major economies like the US and China. Any tension or policy changes in these relations could significantly impact the availability and pricing of lithium worldwide.

Companies that benefit from the lower lithium prices, like EV manufacturers, might warrant higher credit limits in the short-term due to improved cash flow. However, the instability caused by these market changes also demands a more cautious approach to credit assessment in the long-term.

The sharp decline in lithium prices is a complex development for the EV industry, presenting both risks and opportunities. For trade credit, it’s crucial to understand the broader implications of this market shift, not only for EV manufacturers but also for the entire supply chain and adjacent industries like consumer electronics. It requires a multifaceted approach, blending detailed market analysis with flexible credit strategies and proactive client support to effectively navigate this period of significant change. Its important to balance capitalising on short-term gains with avoiding the long-range pain could result from such.

4️⃣ China's Strategic Pivot in Latin America: Reshaping Global Trade Dynamics 🌐💡

China’s recent strategic investment shift in Latin America, concentrating on technology, renewables, and critical minerals, is sending waves across global trade. Moving away from their traditional focus on infrastructure projects, this pivot is reshaping competitive dynamics and supply chain structures in these essential sectors, presenting a a new era for credit professionals to get to grips with.

While China’s overall investment in Latin America has decreased, down from an average of $14.2 billion per year between 2010 and 2019 to $6.4 billion in 2022, the focus has sharpened. High-profile projects like BYD’s electric vehicle plant in Brazil and Tianqi Lithium’s acquisitions in Chile demonstrate a keen interest in sectors critical to China’s economic growth and global standing.

Alignment with sectors such as telecommunications, fintech, and energy transition mirrors China’s ‘new infrastructure’ initiative, signaling a deep and strategic interest in these areas. The move not only indicates a long-term investment strategy but also positions China in direct competition with the US and Europe.

The implications for credit should not be overlooked, with new credit risks and opportunities. We’ll need to closely monitor the financial health and creditworthiness of companies within these sectors, particularly those that may become increasingly reliant on Chinese investments or face heightened competition. Further, investment in critical minerals and renewable energy could also lead to a restructuring of supply chains in these sectors. This shift could affect companies in adjacent industries, such as manufacturing and technology, impacting their supply chain reliability and cost structures.

The growing presence of Chinese investments in strategic sectors also brings geopolitical considerations into play. We must factor in potential political risks, such as changes in trade policies or diplomatic tensions, that could impact the creditworthiness of businesses in the region. Continuous monitoring of China’s investment trends and their impacts on Latin American markets is essential. Understanding how these investments influence market demand, pricing structures, and economic growth in the region will be crucial for making informed credit decisions.

5️⃣'Credit Frontier 2024' Webinar: A Treasure Trove of Economic Insights Now Available On-Demand

The recent ‘Credit Frontier 2024’ webinar has been hugely popular. This event brought together the minds of Shaun Rees, Markus Kuger, and Ray Massey, providing a comprehensive analysis of the economic and credit challenges anticipated for 2024.

Navigating Through Economic Uncertainties: Kuger’s insightful presentation highlighted the crucial economic indicators for the year, painting a picture of weak growth coupled with rising credit risks. The varied performance across sectors – with services showing resilience but basic materials and consumer goods lagging – presents a complex landscape for trade credit professionals.

Unique Perspectives from the Insurance Sector: Ray Massey’s engaging keynote provided an invaluable underwriting perspective, focusing on the record-high corporate insolvencies. His emphasis on the importance of robust relationships with credit underwriters in these challenging times was particularly enlightening.

Real-World Business Impacts: Shaun Rees brought the economic trends down to a practical level, discussing their direct impacts on businesses. His session underscored the necessity of strategic risk management and the need for adaptive credit strategies amidst technical recessions and inflationary pressures.

For those who missed the live webinar or are keen to revisit the insights, the full session is now accessible on-demand here:

Moreover, the speakers’ presentations are available on Baker Ing’s LinkedIn page, providing an opportunity to delve into the details of their analyses here:

An in-depth report elaborating on the webinar’s discussions is now live on Global Outlook. This report is a comprehensive guide to arm credit professionals with the knowledge we need to navigate the turbulent waters of 2024’s economy:

In a year that promises both challenges and opportunities, staying informed through current, expert insights is key. Engage with the ‘Credit Frontier 2024’ resources and ensure you’re equipped to navigate the evolving credit landscape.

And that’s a wrap on this edition of the Baker Ing Bulletin.

To all you financial wizards and decision-making maestros out there, don’t forget that staying informed is your secret weapon. Global Outlook is your gateway to clarity in a world of credit complexity. Keep ahead of the game by visiting:

See you next week!

Baker Ing Bulletin: 19th Jan 2024

Cognac's Challenge, Brexit Borders, Corporate Credit Crunch, Eurozone Rate Rigidity — Baker Ing Bulletin: 19th Jan 2024

Welcome to the latest Baker Ing Bulletin, where sharp financial insights meet no-nonsense debt expertise.

We’re taking a deep dive into the week’s hottest topics – from cognac market shake-ups and Brexit border blues to the rising tide of corporate debt. It’s all about the big moves and their bigger impacts on trade credit.

So grab your tea/coffee, and let’s get stuck into this week’s headline grabbers…

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1️⃣ Cognac Conundrum: Luxury Spirit's Trade Tensions Stir Up Global Market Storm 🍷🌍

The cognac industry, emblematic of luxurious excess, is now grappling with significant market shifts, particularly in the U.S. and China, triggering credit concerns for the industry, as well a ripple effect across global trade.

In the U.S., traditionally a robust market for cognac, a noticeable decline in demand is emerging, largely attributed to the African-American community, a key consumer demographic. Rising living costs and inflationary pressures have led to altered consumer spending habits. This trend indicates a potential pivot towards more affordable luxury alternatives and different types of spirits. For trade credit, being aware these shifts – both as regards cognac but extrapolating this across the luxury goods and FMCG sector generally – is crucial for a realistic assessment of debtors’ financial health and market positioning.

Concurrently, the cognac industry faces a complex situation in China. The government’s anti-dumping investigation amidst EU-China trade tensions could result in tariffs and trade barriers, adding more layers of uncertainty. This demands proactive risk management, with close monitoring of political developments and preparing for a range of outcomes. Trade credit must consider the potential impact of tariffs on client profitability and cash flow, as well as the overall stability of trade relations.

Moreover, the cognac industry, known for its long-term planning, must adapt to rapid global market changes. This calls for a flexible approach to credit management, where adapting to short-term market fluctuations is as crucial as maintaining long-term strategies.

The industry’s challenges highlight the interconnectedness of global supply chains. A downturn in U.S. sales affects not only cognac producers but also the broader agricultural, manufacturing, and logistics sectors. Similarly, trade tensions with China could necessitate a reconfiguration of supply routes and partnerships. This underscores the importance of a robust, responsive supply chain that can withstand market pressures. Adjacent industries, particularly within luxury goods and high-value agricultural products, can learn from these challenges. Diversifying markets and supply chains is key to mitigating risks and ensuring preparedness for unexpected shifts.

The cognac industry’s situation mirrors wider global market trends. Export-heavy industries are experiencing the impact of increasing international market fluctuations and political turbulence, emphasising the need for agile risk assessment and a balanced approach to risk and customer support.

2️⃣ Brexit Borders Beckon: UK's New Checks Rattle Supply Chains 🇬🇧🔗

The UK stands on the brink of a significant trade transformation as new post-Brexit import checks are set to kick in from January 31. This pivotal shift, ending a series of postponements since January 2021, introduces fresh paperwork requirements for EU businesses exporting animal and plant products to the UK, with physical inspections commencing in April. The implementation of these checks, a critical aspect of the EU-UK Trade and Cooperation Agreement, has sent ripples of concern across industries, from food importers to horticultural suppliers.

At the heart of these changes, credit professionals find themselves navigating a new landscape of risk. The looming checks are not just a procedural shift but a potential disruptor for businesses heavily reliant on smooth imports. For sectors like food retail and agriculture, timely and efficient importation is the lifeblood of their operations. The prospect of delays and additional bureaucracy at the border poses a serious threat to cash flow and operational efficiency.

The situation is acutely felt in the food industry, where importers are bracing for potential delays at ports, which could translate into shortages on supermarket shelves and increased prices for consumers. The horticultural sector, particularly Dutch flower growers, faces a logistical challenge with the new checks falling around key commercial events like Valentine’s Day and Mother’s Day, times of peak demand and tight supply chains.

For credit managers, this demands a swift and strategic response. The potential for supply chain disruptions calls for a reevaluation of credit risks and perhaps even a restructuring of credit terms for affected businesses. There’s a need for heightened vigilance and flexibility, as clients may face unforeseen challenges in maintaining liquidity and meeting financial obligations.

The UK government remains steadfast in its commitment to these changes, promising a technologically advanced border system to streamline the process. However, for industries and credit professionals, the upcoming transition period is nonetheless worrying.

As the UK moves forward with post-Brexit trading, the impact of these border checks will be a litmus test for the resilience and adaptability of businesses and trade credit. It’s a critical moment to demonstrate our expertise in risk management, offering support and thinking innovatively to navigate through these uncharted waters of post-Brexit trade.

3️⃣ Default Dilemma: Corporate Debt Crises on the Horizon 📉💳

As the clock struck midnight on a tumultuous December, a report from Moody’s revealed a startling surge in global corporate defaults, painting a grim picture for the future of low-grade, highly leveraged businesses. With twenty companies defaulting last month, up from just four in November, the annual count soared to 159. This uptick in defaults, the highest since the economically tumultuous period following the coronavirus pandemic, sets a concerning tone for trade credit.

The surge, predominantly hitting U.S. and European companies, reflects the challenges simmering beneath the surface for borrowers with lower credit ratings. The sharp rise in interest rates, notably in the U.S., has left these companies grappling with steep funding costs. The situation is particularly dire for loan issuers with floating debt payments, now facing the squeeze of rising borrowing costs.

What stands out in Moody’s analysis is the sectors bearing the brunt of these defaults. Business services and healthcare, with 15 and 13 defaults respectively last year, find themselves in the eye of the storm. High-profile bankruptcies like Air Methods and LendingTree’s “distressed exchange” are stark reminders of the fragility in these sectors.

For credit professionals, this landscape demands a strategic recalibration. The rising default rates signal an urgent need for a more nuanced risk assessment, particularly for clients in vulnerable sectors. It’s a scenario that calls for vigilance and perhaps a more conservative approach to extending credit, especially to businesses in industries with a high proportion of floating-rate loans. Particularly vulnerable are sectors like healthcare, where such loans are common for funding expansions; real estate and construction, which depend on them for development projects; retail, with its thin margins and operational costs; and media and entertainment, including cinema chains, which often use these loans for large-scale funding.

Moody’s projection for 2024 doesn’t offer much respite. With the anticipation of more defaults, particularly in sectors tied closely to consumer spending, the task ahead for credit managers is clear. There’s a need to closely monitor the financial health of clients in these sectors, preparing for the possibility of tighter cash flows and increased credit risk.

It’s a balancing act between managing risk and supporting clients through an economic period marked by uncertainty and shifting monetary policies. Navigating this requires a blend of expertise, foresight, and agility, ensuring that risk management strategies are robust yet adaptable to the evolving economic climate.

4️⃣ ECB's Rate Cut Caution: A Tightrope for Credit in the Eurozone 💶🧐

Despite a drop in consumer inflation expectations, the ECB’s resistance to cutting interest rates anytime soon has credit professionals weighing their options carefully. It suggests that the journey back to lower interest rates might be more gradual than what the market’s hopeful eyes saw.

For credit, this is more than just central bank chatter, it’s a pivotal moment that could shape their strategies in the months ahead. The prolonged period of high interest rates, now looking more likely than before, is a critical factor for businesses across the Eurozone, especially those with debts tied to fluctuating rates. Credit professionals are now in a position where they must reassess the financial stability of their clients under these sustained conditions.

The implications are particularly stark for sectors such as real estate and healthcare, where the sensitivity to interest rate changes is often more pronounced. Here, the prospect of continued high rates could strain finances and challenge their ability to meet obligations, including those to trade credit.

This environment demands a nuanced approach from trade credit managers. We find ourselves balancing on a tightrope, needing to manage risks prudently whilst also offering support to clients navigating these turbulent times. The key is to understand the unique challenges of each sector and client, being ready to adapt credit strategies as the economic winds shift. Deep dive time – financial, operational, commercial – everything has to be considered insofar as how customers and clients will hold up under this sustained strain.

But it’s not just about managing risks; we can also seize opportunities. In this environment, by providing insights and guidance, we can help clients hedge against these interest rate uncertainties, optimise their cash flows, and steer through the economic tumult. The more deftly we can do som the greater competitive advantage we offer vs. those businesses that will employ a more blunt approach.

As the ECB continues to navigate the choppy waters of inflation and economic recovery, the message for trade credit is clear: in a world where economic certainty is a luxury, then agility, in-depth market understanding, and proactive client engagement are the tools that will help us chart a course. This period is a test of resilience and adaptability for credit.

5️⃣ Callisto Grand and Baker Ing Join Forces to Tackle Credit Disruption 🤝💼

Callisto Grand, a vanguard in credit management training, and Baker Ing, specialists in managing high-value and sensitive receivables, have announced a groundbreaking three-year strategic partnership. This collaboration aims to tackle the impact of rapidly changing global economic conditions and ongoing technological revolution within credit management.

The partnership is a direct answer to the increasing complexities credit professionals must tackle. With economic uncertainties looming large and technological advancements like AI automation reshaping the industry, there’s an urgent need for credit professionals to evolve their strategies and skillsets. This alliance brings together Callisto Grand’s cutting-edge educational methodologies and Baker Ing’s operational excellence, aiming to equip credit professionals with the necessary tools to navigate these turbulent times.

Mark Harrison, CEO of Callisto Grand, highlights the significance of this partnership, “By combining our educational expertise with Baker Ing’s operational acumen, we’re creating a holistic solution that addresses today’s volatile economic landscape.” This sentiment is echoed by Lisa Baker-Reynolds, CEO of Baker Ing, who emphasises the timeliness of this collaboration in equipping businesses with the skills and strategies vital for the new era of credit management.

For credit professionals, this alliance promises a blend of practical insights and forward-thinking approaches. It underscores a commitment to ensuring that professionals are not merely coping with today’s challenges but are also geared up to lead the charge for future innovations in credit. As this partnership unfolds, it will serve as a critical resource for those looking to stay ahead in an increasingly AI-driven and economically fluid world.

As we wrap up this week’s Baker Ing Bulletin, it’s time to roll up our sleeves for the rest of 2024. This year’s shaping up to be a cracker, packed with twists, turns, and big chances for those who dare to take them.

For all you eagle-eyed number crunchers and gutsy decision-makers, remember that Global Outlook is your ace in the hole. It’s where we cut through the financial fog and get the lowdown on what matters to credit professionals. Keep one step ahead by checking out:

Catch you next week for another round of credit thrills and spills…

Baker Ing Bulletin: 12th Jan 2024

Motor Money Matters, Oil Oscillations, Red Sea Ripples, Credit Frontier — Baker Ing Bulletin: 12th Jan 2024

Welcome to this week’s Baker Ing Bulletin, where high-brow finance meets debt collection savvy.

Buckle up, we’re on a wild ride; from the complex tangle of Taeyoung Engineering’s debt restructuring to the rollercoaster of oil prices post-military strikes, every story is crossroads for trade credit.

So, let’s unwrap these January gems…

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1️⃣ Maersk CEO's Warning: Extended Red Sea Crisis Impacting Credit 🌍🚢

Global trade is facing a significant challenge. The CEO of Maersk, Vincent Clerc, has publicly warned of prolonged disruptions in the Red Sea, caused by Yemen’s Houthi rebels’ attacks, predicting that the crisis could last for months. This stark warning has crucial implications for trade credit, highlighting the need for strategic adaptation in the face of extended supply chain disruptions.

Clerc’s forecast being a long-term is particularly alarming. Extended disruptions mean prolonged delays in shipping times, as vessels are rerouted around the Cape of Good Hope. This not only impacts delivery schedules but also severely strains trade credit arrangements globally. Companies relying on the timely arrival of goods for production and sales are now forced to reevaluate their payment terms and credit strategies, dealing with the ripple effects of these logistical setbacks.

The prospect of a months-long disruption is prompting a reassessment of credit risk and liquidity needs across various sectors. Credit managers are finding themselves in a position where they must extend payment terms and/or increase collections efforts to account for these delays. This situation is compounded by the surge in cargo prices, adding further pressure on businesses already navigating tight margins and challenging market conditions.

For credit professionals, this prolonged crisis calls for a heightened focus on risk management and client support. There is an increased need to closely monitor clients’ financial health, particularly those heavily reliant on goods passing through the Red Sea. The situation demands not only a reevaluation of existing credit policies but also a proactive approach in offering flexible solutions to clients affected by the prolonged disruptions, as well as ramping up the sophistication of collections.

Vincent Clerc’s warning serves as a critical indicator for trade credit. The extended duration of the Red Sea disruptions requires us to be vigilant and adaptable now to the evolving needs of our clients. Staying informed and prepared will be key in navigating the complexities and challenges posed by this ongoing maritime crisis.

2️⃣ Oil Price Surge Amid Military Strikes: Credit Spotlight 🛢️⚠️

Following recent U.S.-U.K military strikes on Yemen’s Houthi rebels, trade credit is now grappling with another critical development – a significant surge in oil prices. This increase, recorded on January 11th 2024, with Brent and West Texas Intermediate futures climbing sharply, comes in the context of the already disrupted shipping routes in the Red Sea covered earlier. This combination of events presents a compounded set of challenges for credit.

The situation demands a refined analysis and a proactive response. The direct impact is increased cost of fuel, affecting the operational expenses of businesses across a range of sectors. This rise in costs will likely lead to tighter cash flows and necessitate a reevaluation of credit terms and conditions for affected businesses.

Moreover, given the context of disrupted shipping routes in the Red Sea, the oil price surge exacerbates the existing challenges. Companies are already facing extended delivery times and supply chain uncertainties due to the rerouting of ships. The additional burden of rising fuel costs adds another layer of complexity to managing trade credit risks….Its a burden which will be too heavy for some.

We must consider both these aspects. One the one hand, it will require strategies for managing increased operational costs, such as exploring alternative logistics solutions or renegotiating supplier contracts. On the other hand, there may be a need for increased flexibility in credit arrangements to accommodate the compounded impact on businesses’ cash flows and financial stability, as well as more robust collections activity.

In response to this double whammy of middle east developments, credit professionals should take specific, targeted actions. Key sectors like manufacturing, logistics, and retail, which are heavily reliant on fuel and efficient shipping, are most at risk and need immediate attention. Credit managers should consider reassessing credit limits and payment terms for clients in these sectors, potentially extending payment deadlines to accommodate for increased operational costs and delayed shipments, whilst shoring-up receivables collection capabilities. We must also advise clients to explore more cost-effective shipping routes or alternative suppliers to mitigate supply chain disruptions. Additionally, implementing more rigorous credit monitoring and risk assessment procedures for these vulnerable sectors will be crucial.

3️⃣ Taeyoung Engineering's Debt Restructuring Rattles Credit Analysts 🚧💳

The recent announcement by Taeyoung Engineering & Construction to undergo debt restructuring with the Korea Development Bank has raised significant concerns in the sector. This move by the mid-sized South Korean builder is not just another restructuring case; it mirrors the preceding events leading up to financial shockwaves in 2022 when the default of a Legoland theme park developer led to significant turmoil. That default led to a spike in corporate borrowing costs and a liquidity crunch, exemplifying how the failure of a single high-profile project can have widespread repercussions on the broader credit market.

Taeyoung’s decision is particularly alarming due to its possible domino effect within the vulnerable construction sector, which is highly sensitive to economic fluctuations. The company’s financial troubles, marked by a dramatic 15% drop in its share value, reflect not only on its own stability but also point to underlying vulnerabilities within the entire sector. This scenario is worrisome for trade credit, as it could mark the beginning of a series of financial difficulties for other companies in construction.

The sector’s importance to global trade and commerce can’t be overstated, and it is often heavily reliant on trade credit. A significant entity like Taeyoung struggling financially raises red flags about the sector’s health and its capability to fulfill financial commitments.

For credit professionals, Taeyoung’s restructuring necessitates a reassessment of risk, particularly within the construction sector. The potential for increased defaults and payment delays is real and could significantly affect the stability of trade credit. Time to review and possibly recalibrate risk models, considering the heightened uncertainty. More conservative credit terms and enhanced risk management practices are likely.

4️⃣ FCA Probes Motor Finance Sector: Implications for Credit Assessments 🚗🔍

The Financial Conduct Authority (FCA) in the UK has announced a thorough investigation into the motor finance industry, a move that holds significant implications for credit. This scrutiny, sparked by rising consumer tensions over commission arrangements, is set to impact the financial stability of companies within this sector, making a deep understanding of these developments essential for evaluating creditworthiness and potential risks.

The FCA’s focus stems from a ban implemented in 2021, prohibiting incentives for brokers that led customers to pay higher interest rates for motor finance. Despite this ban, numerous customer complaints have surfaced, alleging unfair commission arrangements before the prohibition. In response, most motor finance companies have rejected these complaints, asserting compliance with the legal and regulatory standards of the time.

The investigation is poised to significantly impact the entire automotive industry. This probe may lead to tighter financing options as financing firms fall to cost pressures stemming from FCA action, directly affecting car sales and the financial health of manufacturers and dealerships. The potential financial strain on motor finance companies could result in a broad recalibration of credit terms and availability, which would in turn ripple through the automotive supply chain.

As a response, credit professionals should consider conducting a comprehensive reassessment of credit risks within the UK automotive sector. This includes evaluating clients’ exposure to these financial shifts and their capacity to withstand tightened financing conditions. The potential for reduced sales and increased financial strain calls for a meticulous review of clients’ financial stability and resilience.

Staying ahead of FCA’s findings is crucial. This means not only closely monitoring the developments but also proactively adjusting credit and collections models, as well as terms, to reflect the changing risk landscape. Trade credit providers might consider more conservative credit limits and enhanced due diligence for clients within the automotive sector, particularly those heavily reliant on motor finance avenues.

Moreover, this situation demands we engage in proactive dialogue with clients, advising them on diversifying their financing options and preparing for potential sales downturns. This could involve exploring alternative credit facilities or restructuring existing debts to mitigate the impact of tightened financing.

The FCA’s investigation into the motor finance sector requires a sophisticated and dynamic approach from credit professionals. It is essential to balance vigilance with strategic flexibility, preparing for different outcomes of the investigation. The key is to anticipate market shifts, adapt credit policies accordingly, and actively support clients in navigating through these challenges, thereby safeguarding the interests of both parties in a rapidly evolving space.

5️⃣ Credit Frontier 2024 - Decoding Economic Trends for Credit Excellence 🔍💡

In a move that’s buzzing through the corridors of credit and beyond, Baker Ing is rolling out the red carpet for ‘Credit Frontier 2024’ on Thursday January 25th. This webinar is billed as the convergence of high-flying economic intellect and savvy credit tactics.

At the heart of this event is Markus Kuger, Baker Ing’s Chief Economic Advisor. Kuger, a maestro of economic trends, is set to dish out insights on the EU’s economy and global financial currents. His session is tipped to be vital for attendees keen to decode the complex economic puzzle of 2024.

Then Shaun Rees, known for turning economic forecasts into no-nonsense, practical strategies, will transform theoretical knowledge into solid, actionable plans for Credit Managers. Expect tips and tricks that could make the difference between thriving and merely surviving in 2024’s credit landscape.

What really sets ‘Credit Frontier 2024’ apart is its extended Q&A. Here’s where the rubber meets the road – an unscripted, anything-goes opportunity for attendees to pick the brains of the speakers. Its a front-row seat to a brainstorming session with some of the sharpest minds in the business.

Post-event, attendees will be treated to exclusive, detailed reports from Kuger and Rees, accessible from the Global Outlook section of Baker Ing’s website; your credit playbook for the year.

Registration is now open for this high-octane, insight-packed event. ‘Credit Frontier 2024’. Set your reminders – this is one lunchtime session that could redefine your credit strategy playbook for 2024:

As this week’s Baker Ing Bulletin draws to a close, let’s stride confidently into the rest of 2024. This year is already unfolding with opportunities and challenges, each requiring a blend of keen insight and bold action.

With that in mind, for all the sharp-eyed analysts and the fearless decision-makers out there, don’t forget that Global Outlook is your go-to resource for cutting through the complexity of credit narratives. Stay ahead of the curve by visiting:

We’ll see you next week for another cocktail of credit challenges and opportunities..

Baker Ing Bulletin: 5th Jan 2024

Red Sea Alert, Global Tax Reforms, VC Shifts, Italy's EV Leap, EU Payment Overhaul — Baker Ing Bulletin: January 5th, 2024

Welcome to the first Baker Ing Bulletin of 2024, your trusted guide navigating the dynamics of trade credit. As we embark on a new year, the landscape of global commerce and finance continues to evolve at pace, bringing both challenges and opportunities.

Fasten your seatbelts; we’re revving up for a year where every twist and turn in global finance and receivables brings a new adventure. From the high seas’ strategic maneuvers to Italy’s electrifying auto ambitions, let’s unwrap these early-year surprises with a dash of insight and a pinch of foresight..

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1️⃣ Red Sea Ripples: Houthi Rebel Defiance Escalates Maritime Tensions 🌊⚠️

The recent audacious move by Houthi rebels in the Red Sea, involving the detonation of an unmanned surface vessel, has sent shockwaves through the global shipping community and trade credit sectors. This act, narrowly missing US Navy and commercial ships, poses a grave threat to one of the world’s most vital shipping lanes, accounting for a significant 15% of global maritime trade, including crucial supplies of oil, grain, and natural gas.

For trade credit, this escalation is not just a distant geopolitical skirmish but a pivotal event with direct implications. The primary concern is the potential rerouting of shipping lines around the Cape of Good Hope. This detour could lead to longer transit times and increased costs, severely impacting the operational efficiency and financial stability of businesses dependent on these trade routes.

The immediate action for trade credit departments is to assess the heightened risks associated with companies in sectors like energy, agriculture, and manufacturing. The supply chain disruptions could significantly impact these businesses, warranting a re-evaluation of existing credit policies and risk exposure. There’s a crucial need to monitor the ongoing situation and its potential impacts on global trade dynamics continuously.

Moreover, this development calls for a proactive approach in supporting clients affected by these disruptions. It may involve offering flexible payment terms or reassessing credit limits to accommodate the increased operational costs and potential delays in shipment. Also, advising clients on diversifying their supply chain sources and routes could mitigate the risk of concentrated reliance on a volatile trading path.

The Houthi rebels’ actions demands not only a keen understanding of the evolving geopolitical landscape but also a flexible and responsive approach in managing credit risks. As the situation unfolds, maintaining a vigilant and adaptive strategy will be crucial for navigating the complexities of this challenging maritime environment.

2️⃣ Global Tax Gamechanger: Multinationals Under New Fiscal Spotlight 🌐💰

The recent enactment of the global minimum tax reform marks a seismic shift in international corporate taxation, with profound implications for the world of trade credit. Spearheaded by the OECD and supported by 140 countries, this initiative sets a groundbreaking precedent by imposing a minimum 15% tax rate on multinational corporations. This move, expected to generate an estimated $220 billion (€200 billion) annually, aims to curtail the long-standing practice of tax avoidance through havens and shift the fiscal landscape significantly.

For credit professionals, this shift presents both challenges and opportunities. The change in tax policy could impact the profitability and cash flows of multinational clients, especially those previously benefiting from lower tax jurisdictions. This new fiscal environment necessitates a thorough reassessment of the creditworthiness of these corporations. Companies may see changes in their financial strategies as they adapt to the higher tax obligations, potentially affecting their liquidity and credit needs.

In this new tax era, we must closely monitor how these changes influence the financial health of clients. The reform could lead to alterations in corporate investment patterns, operational shifts, and even changes in global supply chain strategies. As a result, the demand for trade credit might fluctuate, requiring a flexible and responsive approach.

As we navigate this transformed fiscal landscape, staying informed and adaptable is key. The global minimum tax reform is not simply a change in taxation; it may well represent a new chapter in international trade and finance.

3️⃣ Venture Capital Downturn: Navigating the New Investment Terrain 📉🚀

In 2023, U.S. venture capital investments plummeted to $170.6 billion, marking a substantial 30% drop from the previous year and reaching a six-year low. This downturn, however, is not confined to the U.S. alone; globally, venture capital investments have decreased by 35% to $345.7 billion, the lowest since 2017.

Traditionally, venture capital has been a cornerstone of innovation and growth, nurturing behemoths like Amazon, Google , and OpenAI. The dynamics of venture capital – how funds are raised and deployed – have profound implications on economic and technological progress. Yet, the landscape has shifted post-pandemic, moving from the investment euphoria of 2021 towards a search for new stability.

For credit professionals, this downturn presents unique challenges and necessitates a nuanced approach. The reduced flow of venture capital funds signals potential financial stress for startups and tech-focused businesses, which often rely on these investments for their operations and growth. . Tighter cash flows and altered financial trajectories for these companies will impact their ability to meet credit obligations. The scenario requires credit managers to engage in a deeper assessment of the financial stability and future prospects of businesses in these sectors, particularly those that are venture-backed, and more so those that are not yet profit-making.

Trade credit should consider a more cautious strategy, possibly tightening credit terms or reducing exposure to higher-risk sectors affected by the venture capital decline. This approach involves a closer examination of a company’s financial stability, including their access to capital, revenue projections, and overall business model viability in a less favorable funding environment.

Furthermore, this shift in the venture capital landscape may lead to increased demand for alternative financing options, including trade credit. Companies that previously relied on venture capital might turn to trade credit as a source of working capital, leading to an influx of new credit requests from sectors that are experiencing funding shortages.

It is also essential we closely monitor industry trends and developments, as the ripple effects of reduced venture capital investment can extend beyond the directly affected sectors. Supply chains may experience disruptions if key players in the chain face financial constraints due to reduced funding.

The current downturn in venture capital investments calls for re-evaluation of credit risk profiles, and an adaptable approach to credit management strategies.

4️⃣ Italian Renaissance in EVs: Rome's Bold Move to Rev Up Electric Car Sales 🚗⚡

The Italian government’s ambitious plan to stimulate a shift towards electric vehicles (EVs) with a €930 million ($1 billion) incentive package marks a pivotal change in the automotive industry. This initiative, targeting the replacement of older petrol and diesel cars with electric models, may well transform the European EV market.

Aiming to rejuvenate Italy’s aging vehicle fleet, one of the oldest in Europe, this initiative is not just an environmental manoeuvre but also a measure to bolster the domestic auto industry. With a 19% increase in new-car registrations in 2023 and Italy’s current EV market share trailing behind other European countries, this policy shift arrives at a crucial time.

For credit professionals, this development has a few implications. Firstly, the anticipated boost in EV production and sales is likely to impact supply chains across the automotive sector. Companies within this chain may experience shifts in demand, affecting their financial stability and creditworthiness. Trade credit should, therefore, reassess their risk exposure to these companies, considering the potential increase in business volume and the corresponding financial risks/opportunities.

Secondly, the focus on domestically produced electric vehicles emphasises the importance of regional market dynamics. Understanding how policy changes influence local industries is crucial for assessing credit risks accurately. We need to closely monitor green-policy developments within different regions, and adjust our credit strategies accordingly.

This policy shift is indicative of a broader trend towards sustainable automotive solutions and the potential ripple effects across related industries. Trade credit must stay informed about these developments, adapting credit management strategies to align with the evolving demand patterns, supply chain dynamics, and financial health of businesses in this rapidly changing sector.

Italy’s drive towards electric mobility is a significant step that may set a trend in Europe’s EV industry. For credit professionals, it’s essential to balance the opportunities and risks, and ensuring that our approaches are flexible and responsive to the market’s evolving demands and challenges.

Don’t forget, you can download the latest Baker Ing in-depth report on the automotive industry here, free and in full:

5️⃣ EU Payment Directive Overhaul: Setting New Standards in 2024 📜💼

As we usher in a promising 2024, Baker Ing remains committed to delivering crucial insights that keep you ahead in the ever-evolving world of trade credit. We’re excited to introduce our latest comprehensive report: “EU Payment Directive 2024: Navigating New Norms.” This report serves as your new year espresso shot of regulatory updates – strong, invigorating, and precisely crafted to jumpstart your year.

We delve into the intricacies of the revised European Payment Directive (Directive 2011/7/EU), a legislative transformation poised to redefine commercial transactions across the European Union. It’s tailored for credit managers, commercial managers, and policy analysts who are keen to stay abreast of the significant changes in the regulatory landscape.

Key highlights of the proposed revision include the establishment of uniform 30-day payment terms, stringent enforcement mechanisms, and a concerted alignment with digital financial tools. These changes are not just procedural but represent a fundamental shift in how businesses across sectors like manufacturing, construction, and retail will manage their transactions and receivables.

As we step into 2024, we highlight our commitment to providing proactive collaboration and insightful solutions. Whether you’re grappling with the challenges of ageing receivables or navigating the pressures of rising inflation rates, Baker Ing is here to guide and support your business’s journey towards growth and stability.

🔗 Download the report now at

As we find our way through this next chapter, let’s embrace the thrills and spills with a blend of caution and courage. Here’s to a year filled with discovery, growth, and strategic mastery.

Whether you’re the eagle-eyed analyst or a bold decision-maker, Global Outlook is your trusted ally in deciphering trade credit narratives:

Happy New Year, and may 2024 be a landmark year in your trade credit journey.

Baker Ing Bulletin: 29th Dec 2023

Sanctioned Success, ECB's Rate Riddles, UK Housing Hurdles, Schengen Shifts, SSC Strategies — Baker Ing Bulletin: 29th Dec 2023

Welcome to this week’s indispensable guide through the ever-shifting sands of trade credit.

As we find ourselves in the serene interlude between Christmas and New Year, we’re not taking a breather. Instead, we’re keeping a finger on the pulse.

So, settle in with a cup of your favourite holiday beverage, and let’s dissect this week’s pivotal developments in trade credit.

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1️⃣ Huawei's Resilient Surge: Navigating Credit in a Sanctioned Landscape 🌐🔍

Huawei Technologies’ reported a remarkable revenue increase, marking its highest in three years. The company announced that its full-year sales for 2023 would surpass Rmb700bn ($99bn), up 9% from the previous year, though still trailing its 2020 peak by 20%.

This development, against the backdrop of severe US restrictions, underlines the resilience and strategic pivoting of Huawei. These sanctions, rooted in concerns over national security and Huawei’s alleged links to the Chinese state and military, have significantly constrained the company’s access to essential technologies and markets. Yet, Huawei’s ability to navigate this challenging landscape and report robust sales figures indicates a remarkable level of agility and resourcefulness.

Huawei’s situation is particularly instructive, as it highlights the need to consider a company’s geopolitical exposure and its capacity to adapt to rapidly changing international trade environments. In high-risk sectors, such as technology and communications, where political dynamics can dramatically influence market accessibility and supply chain robustness, the ability to anticipate and respond to these changes becomes critical.

Credit professionals should focus on holistic evaluation of such companies, with an emphasis on supply chain resilience. Equally important is diversification of revenue streams, which can signal a company’s ability to mitigate risks associated with specific markets or political climates. A significant investment in research and development is another crucial marker, suggesting a commitment to evolving and staying competitive despite external pressures. Additionally, a keen understanding of geopolitical and regulatory landscapes, demonstrated by proactive strategies to counteract trade barriers and sanctions, is vital. This is complemented by scrutinising the company’s financial health, of course. Lastly, the effectiveness and agility of a company’s management in navigating past challenges can offer valuable insights. By integrating these aspects into our analysis, credit professionals can develop a more comprehensive view of a company’s capacity to adapt and maintain creditworthiness in a dynamic global context.

The impact of the sanctions on Huawei reverberates across its supply chains, affecting suppliers and customers alike. This interconnectivity underscores the importance of comprehensive risk assessments that account for external geopolitical influences on trade credit terms and overall market stability. Huawei’s success is not just about overcoming adversity but also about the evolving landscape of trade credit in a world where economic and political considerations are deeply intertwined. It highlights the importance of agility, scenario planning, and a keen understanding of global trade’s political dimensions for effective risk management and decision-making.

2️⃣ ECB Interest Rate Cuts Forecast for 2024: Navigating the Turning Tide 🌊💹

The European Central Bank (ECB) is poised to begin reducing interest rates in 2024. This anticipated shift comes amidst a complex interplay of market expectations and ECB caution.

Market analysts and traders currently predict a high likelihood of rate cuts as early as March 2024, with expectations extending to almost seven cuts throughout the year. This contrasts with the ECB’s more guarded stance, stemming from concerns about wage-driven ‘domestic’ inflation and its potential impact on overall price stability. The ECB’s hesitancy is rooted in the need to fully grasp why domestic inflation, predominantly influenced by wages, persists despite other inflation measures showing signs of abating.

This divergence in inflation outlooks between the ECB and market analysts is at the heart of the concerns. While the ECB projects inflation to remain above its target, market forecasts suggest a quicker decline. The implications for trade credit are manifold. Firstly, the uncertainty surrounding the exact timing and extent of rate cuts necessitates a flexible approach to managing interest rate risks and credit terms. Companies in the Eurozone might experience varying borrowing costs, affecting their liquidity and ability to meet financial obligations. Secondly, the broader economic environment, teetering on the brink of recession, calls for heightened vigilance in monitoring clients’ financial health and industry-specific trends.

It’s important to closely monitor the interest rate trends and economic indicators, such as inflation and wage growth, as these will directly influence clients’ financial stability and creditworthiness. Regularly reviewing and adjusting credit risk models to incorporate these variables is essential.

Additionally, credit managers should engage in dynamic scenario planning, creating and frequently updating financial models based on potential economic outcomes, such as delayed or accelerated rate cuts by the ECB. By doing so, we can better predict and prepare for the impacts these changes might have on clients’ ability to meet financial commitments.

In practical terms, these developments could mean reassessing credit limits, payment terms, and the risk profiles of clients in industries more sensitive to interest rate changes, like real estate and construction, automotive and manufacturing, retail and consumer goods, as well as SMEs, financial services, and energy and utilities. These industries may face impacts ranging from borrowing cost changes to shifts in consumer spending. Proactive monitoring and regular financial health assessments of businesses in these sectors are crucial. Adjusting credit strategies, including reassessment of credit limits and payment terms, will be key to effectively managing the heightened risk landscape and ensuring stable credit operations.

3️⃣ UK Housing Market: A Tightrope Walk in 2024 🏠📉

The UK’s housing market is a pivotal barometer of the economy and is navigating a precarious time right now, with Nationwide predicting a continuation of the 2023 trend, where house prices saw a notable 1.8% drop. This forecast for 2024 paints a picture of a market grappling with the impacts of high mortgage rates and cautious buyer sentiment. The Bank of England’s shift from a historic low-interest rate of 0.1% in late 2021 to a 15-year high of 5.25% has notably cooled the housing market’s momentum, especially impacting regions like East Anglia, which experienced a significant 5.2% price drop.

This isn’t just a housing market concern though. It echoes broader economic signals of changing consumer confidence and economic health, influencing businesses’ financial stability and creditworthiness. The trend points towards a more cautious and restrained consumer spending pattern, which could ripple across various sectors.

Retail, particularly big-ticket items, construction, home improvement, and the automotive industry are likely to experience a downturn in demand due to reduced consumer confidence and spending. Financial services, including mortgage and loan providers, will also face challenges as the housing market cools, impacting their revenue streams.

However, the emerging divide between mortgage-dependent buyers and cash purchasers creates a polarised market. For trade credit, understanding this polarisation is essential. Businesses serving mortgage-dependent clients, like those in the residential construction and home improvement sectors, could face heightened challenges due to restricted consumer spending. Conversely, entities catering to cash-rich buyers or operating in sectors less directly affected by housing market shifts, such as commercial real estate developers, and providers of essential services, may demonstrate greater resilience. This understanding is key to accurately assessing the credit risk of clients.

While some analysts remain optimistic, citing resilience against high borrowing costs and a potential easing of mortgage rates, trade credit must exercise caution. The key is closely monitoring the housing market trends, reassessing exposure to related sectors, and preparing for scenarios ranging from a slight rebound to a more pronounced downturn. As the UK housing market continues its tightrope walk, we must ensure robust risk management strategies are in place for the challenges and changes 2024 will likely bring.

4️⃣ Schengen Expansion: New Horizons for Romania and Bulgaria 🇪🇺 🛂

Romania and Bulgaria are poised to join the European Union’s passport-free travel zone exclusively for flights and sea travel starting in March. This ease of movement across borders is likely to increase business travel and networking, potentially boosting trade activities. For credit professionals, it suggests a probable increase in demand for credit, as businesses in Romania and Bulgaria seek to expand operations and explore new market opportunities within the Schengen zone.

Moreover, the entry into the Schengen zone may influence risk assessments for businesses operating in these regions. The development could have broader implications, especially in industries where ease of travel and personal networking are crucial for growth and operations, such as technology, services, and tourism.

Adjusting strategies and managing risks associated with cross-border trade within Europe becomes more pertinent in light of these developments. The move signals a shift in the European business environment, necessitating vigilance and adaptability from credit professionals to accommodate potential increases in demand for credit and changes in risk assessments.

Romania and Bulgaria’s entry into the Schengen area underscores the ongoing balancing act in the European Union between fostering integration and addressing concerns such as illegal immigration and border security. As the situation evolves, we must stay informed and adapt our strategies to harness the opportunities and mitigate associated risks in this changing landscape.

5️⃣ The Strategic Evolution of in Central & Eastern Europe Amidst Geopolitical Changes 🌍🔗

Central and Eastern Europe are increasingly pivotal hubs for Shared Service Centres (SSCs), a trend underscored by the evolving geopolitical landscape. This complimentary report delves into the dynamics shaping this shift, offering crucial insights for professionals navigating the complexities of the current global economy.

The report highlights the significant factors making Central & Eastern Europe attractive for SSCs. These include geographical and cultural proximity to major European markets, a workforce with superior education levels and diverse language skills, and competitive wages. These elements position the region as an efficient, cost-effective location for business process outsourcing and shared services.

The insights from this report are especially relevant considering the recent inclusion of Romania and Bulgaria in the Schengen zone. This expansion may well facilitate greater business mobility and networking opportunities within the European Union. For Shared Service Centres in Central & Eastern Europe, this could mean enhanced connectivity with key markets and an increase in cross-border collaborations and service delivery efficiencies. The ease of movement is likely to impact sectors critical to SSC operations, like technology and services, potentially boosting demand and operational capabilities in these hubs.

Download this report for necessary insights and guidance in navigating these changes, empowering professionals to make strategic decisions in an increasingly interconnected and dynamic business world:

As we hover in the quiet lull between the festive celebrations of Christmas and the fresh beginnings of the New Year, it’s a time to pause and ponder. In the intricate world of trade credit, each number weaves a tale, and every policy change brings a new turn in the story. Keep your wits about you and your insights keen as we step out of this year’s complexities into the unknowns of the next. For every credit manager, from the analytics aficionado to the strategic visionary, Global Outlookis here to guide you through these narratives with depth and clarity.

As 2023 rolls to a close, let’s gear up for a year of informed decisions and strategic triumphs.

Wishing you a reflective holiday season and a year ahead filled with success and insight.

Baker Ing Bulletin: 22nd Dec 2023

Market Turbulence, Argentine Overhaul, UK Housing Shifts, Eurozone Fiscal Challenges — Baker Ing Bulletin: 22nd Dec 2023

Welcome to this week’s festive foray into the ever-evolving world of trade credit – it may be Christmas in much of the world but credit continues!

This week, we’re delving into the robust resurgence of UK retail in November, exploring the transformative economic reforms in Argentina under President Milei, and deciphering the complexities of the UK housing market’s latest twists. We’ll also unravel the implications of the Eurozone’s fiscal tightening and reflect on Baker Ing’s vibrant journey through 2023.

Grab your cup of choice and settle in…

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1️⃣ Retail Resurgence in November: Implications for Trade Credit 🛍️🔍

In an unexpected turn of events, the UK’s retail sector demonstrated a robust rebound in November, defying the gloomy economic forecasts. According to the Office for National Statistics (ONS), retail sales volumes surged by 1.3%, a figure significantly higher than the anticipated 0.4% growth. This surge was not just a random spike but a reflection of strategic consumer spending, heavily influenced by Black Friday promotions and an early start to Christmas shopping.

For credit professionals, this development could be a bellwether of shifting consumer trends and economic resilience. The ONS’s upward revision of October’s figures, from an initial 0.3% decline to zero growth, further underscores this resilience. Particularly noteworthy was the performance in non-food stores and household goods sectors, which saw a rise of 2.3% and 3.5%, respectively. This indicates a consumer preference for quality and durability in goods, potentially influenced by the ongoing global challenges.

The food sector presented a mixed bag of results. While supermarkets reported a modest growth of 0.1%, specialist food shops like butchers and bakers enjoyed a significant 8.5% increase. This suggests a growing consumer inclination towards specialised, possibly artisanal, choices, likely driven by an early foray into festive shopping.

For trade credit, these figures may necessitate a reconsideration of strategies. The robust sales in certain sectors present an opportunity to reassess credit risks and potentially extend more favourable credit terms to businesses in these thriving areas. However, this enthusiasm must be tempered with caution. The festive season brings a temporary surge in consumer spending, which may not accurately reflect the long-term health of these sectors.

Moreover, the varied growth rates across different sectors highlight the need for a sector-specific approach in credit analysis. While some sectors like household goods are showing promising growth, others are grappling with challenges. This calls for a more granular analysis of sector-specific trends, supply chains and consumer behaviour patterns.

November’s retail figures paint a complex picture of the UK’s economic landscape. For credit professionals, it’s a reminder that in a dynamic market environment, staying attuned to consumer trends and sector-specific developments is crucial. As the year comes to a close, the retail sector’s performance not only reflects the current economic resilience but also provides key insights for informed decision-making.

2️⃣ Milei's Argentine Overhaul: A New Economic Paradigm 🇦🇷💼

The recent decree by new Argentine President Javier Milei, heralding a series of radical economic reforms, marks a pivotal moment for credit professionals with interests in Argentina or connected to this market. Milei’s announcement, focusing on deregulation and privatisation, is poised to entirely reshape the country’s economic landscape, currently struggling with a dire economic crisis.

Milei’s approach, rooted in anarcho-capitalism, signals a significant shift from traditional economic policies. His commitment is to “return freedom and autonomy to individuals” and dismantle regulatory barriers, The privatisation plans, though lacking specific details, hint at substantial opportunities in a range of sectors, potentially including the state-owned oil company YPF.

For trade credit, the shift towards a more market-driven economy will introduce new players and dynamics, altering the creditworthiness of existing and prospective clients. This necessitates a reassessment of current credit portfolios and strategies, considering the potential for rapid changes in the financial stability of Argentine businesses.

Milei’s “shock therapy” for the economy, characterised by deep spending cuts and significant devaluation of the peso, aims to tackle the daunting challenge of triple-digit inflation. This aggressive approach, whilst aiming for long-term stabilisation, may bring short-term volatility. The devaluation of the peso, over 50% since Milei took office, presents a critical concern for foreign creditors. Exchange rate fluctuations could affect the repayment capacity of Argentine debtors, requiring closer scrutiny of currency risks in trade credit agreements.

President Milei’s economic overhaul in Argentina presents an exciting/scary and complex new chapter for credit professionals connected to this market. It demands a vigilant, adaptable approach, considering the potential impacts of deregulation, privatisation, currency devaluation, and the resultant socio-political dynamics. As Argentina embarks on this bold economic journey, staying informed and agile will be key to navigating the evolving trade credit landscape.

3️⃣ UK Housing Market Shifts: A Complex Puzzle 🏠🇬🇧

Recent data from the Office for National Statistics (ONS) reveals a £3,000 drop in average UK house prices in October 2023 compared to the previous year, juxtaposed with a record rise in private rental prices, this duality reflects underlying economic trends that could significantly impact risk assessment and management strategies.

The 1.2% average fall in property values across the UK, more pronounced in England and Wales, indicates a cooling housing market. This shift, more acute in London with the steepest price fall since 2009, could well be a bellwether for broader economic trends. For trade credit, this raises pertinent questions about the financial health of stakeholders in the housing sector, from developers and construction companies to retailers of home goods. The declining property prices could signal a contraction in these sectors, potentially affecting their creditworthiness and payment behaviours. This is evidenced further by the slow-to-a-crawl of planning applications.

Conversely, the surge in rental prices, especially in London, highlights a burgeoning demand in the rental market, potentially buoyed by those priced out of property ownership. This aspect of the housing market may present opportunities for trade credit. Businesses catering to the rental market, including property management firms and suppliers of rental properties, might see a boost in their financial standing.

The 6.2% rise in UK rental prices, the largest since records began, coupled with a 6.9% annual increase in London, underscores the growing pressure on households. This pressure will likely ripple through the economy, affecting consumer spending patterns and the financial stability of businesses dependent on discretionary spending.

The broader economic context, highlighted by the easing UK inflation to 3.9% in November, also plays a crucial role. The slowing inflation encourages consumer spending and business investments, potentially offsetting some of the negative impacts of the cooling housing market. We must therefore balance these contrasting economic indicators when evaluating credit risks.

In summary, the UK housing market’s current dynamics – falling house prices and rising rental rates – combined with broader economic trends, require a nuanced and cautious response from credit professionals. It’s crucial to continuously monitor these trends, recalibrating risk assessment models to reflect the evolving economic landscape. This approach not only aids in managing current risks but also in identifying emerging opportunities in the fluctuating UK housing market. There are likely tough times ahead…but opportunities too.

4️⃣ Eurozone's Fiscal Squeeze: Strategic Implications 🤔

Recent developments in the Eurozone, marked by a shift towards tighter fiscal policies, present another complex set of considerations for trade credit professionals. As EU finance ministers agree to new fiscal rules leading to lower public spending, the anticipated curtailment of economic growth in the bloc demands a strategic reassessment of credit risks and opportunities.

The Eurozone, which saw a contraction of 0.1% in the third quarter after stagnating for most of this year, is entering a phase where restrictive budget measures are set to become the norm. This shift marks a stark contrast to the supportive fiscal policy stance adopted since the onset of the pandemic in 2020. For countries with high debt, such as Italy, the impact is expected to be particularly challenging. These countries will now have to lay out plans to reduce debt and deficits more aggressively, potentially dampening domestic demand and economic activity.

For credit managers, this heralds a need for heightened vigilance, especially in high-debt countries. The focus should be on considering the potential squeeze government spending will have downstream on various sectors. This will likely entail a more conservative approach to credit terms and heightened monitoring of payment practices, with more robust collections policies.

The situation in Germany, the EU’s largest economy, deserves particular attention. The recent court ruling that created a budget crisis is expected to exert a ‘fiscal drag’ on the economy. With economists slashing Germany’s growth forecast for next year, credit professionals should brace for potential impacts on German businesses and their ability to meet credit obligations.

In this evolving fiscal environment, trade credit must adopt a proactive and dynamic approach. It’s crucial to stay abreast of policy changes and economic forecasts and understand their implications on our customers’ industries and markets within the Eurozone. Regularly revisiting credit risk models, incorporating potential fiscal drags and reduced government spending into these models, and staying in close contact with clients to gauge their financial health will be key.

As the Eurozone moves into a more restrictive fiscal phase, credit professionals need to balance caution with opportunity. Identifying sectors less impacted by government spending cuts or those that might benefit from any potential ECB rate cuts will be essential. The current fiscal squeeze in the Eurozone is not just a challenge; it’s an opportunity for astute credit managers to demonstrate their expertise in navigating complex economic landscapes.

5️⃣ Baker Ing's 2023: Wrapped 🌟🌐

As we bid farewell to 2023, Baker Ing reflects on a vibrant year of growth, innovation, and industry impact. It’s been a period where we not only consolidated our expertise in credit and receivables management but also expanded our reach and influence across the industry.

A standout achievement this year has been the launch of these very Baker Ing Bulletins. These weekly insights are quickly becoming a cornerstone of industry intelligence, amassing nearly 2000 subscribers in just a few short months, already reading weekly. The popularity of these updates underscores our aim to provide thought leadership and act as your trusted advisors in the trade credit space.

Commitment to in-depth analysis and actionable insights was further evident in the release of a whole raft of new sector-specific research reports. Covering diverse areas like Healthcare, Automotive, FMCG, and Beauty & Perfumes, these reports offered strategic guidance, helping our clients navigate the complexities of their markets. These publications have been offered free in full for all, and we continued to improve access by offering online viewing of the reports with dynamic updates.

2023 also saw key additions to the Baker Ing family. The arrival of industry experts such as Bill Dunlop EAICD FCICM-MIEx EIICM EACCEE and John Kelly marked a significant expansion of our capabilities. Their expertise in international credit and order-to-cash processes has greatly enriched our service offerings and client interactions, enhancing our reputation as a global leader in our field.

Another highlight this year was our active participation in pivotal events like the Credit Expo Belgium, AICDP – Association Of International Credit Directors and Professionals , Credit Matters XII with Callisto Grand, and the Irish Credit Team Awards with Declan Flood which showcased our commitment to industry engagement and professional development. Additionally, our hosted events and webinars, including the Baker Ing Credit Cruise in London, and the Situation Room in Krakow have been not just platforms for knowledge sharing but also celebrations of our vibrant professional community.

As we look towards 2024, Baker Ing is poised to continue our trajectory of impactful growth and innovation. We are committed to building on the successes of this year, furthering our mission of delivering exceptional services and fostering a community of well-informed and connected credit professionals.

We have a whole lot more planned!

2023 has been a remarkable year for Baker Ing. Our journey has been a testament to the dedication, excellence and leadership of our people, partners and clients. We look forward to the new year with renewed enthusiasm, ready to embrace new challenges, new opportunities, and to continue our journey of innovation and excellence in high-value and sensitive accounts receivable.

Merry Christmas.

As we close the chapter on this week’s credit tales, let’s pause to appreciate staying ahead in this dynamic arena is more than a skill; it’s an art. Keep honing your analytical acumen and strategic thinking – Global Outlookis your indispensable guide through the intricate world of trade credit.

Until next time, stay informed, stay sharp, and may you enjoy this time of year for some peace and rest.

Baker Ing Bulletin: 15th Dec 2023

Global Debt Dilemma, UK Economic Dip, SME Banking Battle, China's Market Malaise — Baker Ing Bulletin: 15th Dec 2023

Welcome to this week’s dive into the dynamic world of trade credit.

We’re navigating the choppy waters of the UK’s economic slowdown, where GDP dips are stirring more than just a nice cup of tea. Across the world, China’s property sector is playing Jenga with global trade risks, and we’re keeping a keen eye on small businesses wrestling with the big banks.

So, buckle up and adjust your office chairs – let’s go…

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1️⃣ Navigating the Debt Quagmire: Precision Tactics for Trade Credit Professionals 📉🔍

The World Bank’s reporting of skyrocketing debt repayments by developing countries rings alarm bells for trade credit professionals. As interest rates soar, these nations face a daunting $443.5 billion repayment bill in 2022, diverting crucial funds from vital sectors like health and education. This unprecedented financial strain, exacerbated by the global shift in monetary policy, notably the US Federal Reserve’s response to inflation, is a critical point of concern for those dealing with emerging markets.

The crux of the challenge lies in the nuanced risk profiles of these markets. Traditional credit assessment models may not adequately capture the heightened geopolitical risks, economic instability, and potential policy shifts in these regions. It’s crucial to enhance country-specific risk analysis. Credit managers should delve deep into the fiscal policies, political stability, and economic health of each country. This involves not just skimming through general economic indicators but also analysing the country’s specific debt composition, repayment schedules, and the proportion of foreign currency debt. Such a detailed approach can help in identifying vulnerabilities that might not be apparent in a broader analysis.

Moreover, credit professionals can seek to actively engage with local financial institutions, credit insurers and international receivables specialists within these markets. These entities often have a more nuanced understanding of local businesses and market dynamics. Collaborating with them can provide insider perspectives, facilitating more informed credit decisions.

The World Bank’s report underscores the need for an even more discerning, hands-on approach to emerging markets. By combining detailed country-specific analysis, strategic diversification, local collaboration, and dynamic credit terms, trade credit can better navigate the complexities and risks.

2️⃣ UK's Economic Contraction: Implications for Trade Credit in Turbulent Times 🇬🇧💼

The unexpected contraction of the UK economy, by 0.3% in October, paints a concerning picture for credit professionals. The broad-based downturn, touching services, manufacturing, and construction, underscores the pressing need for a strategic recalibration in credit risk assessment and management.

For trade credit, this contraction is a red flag. The decline across multiple sectors, especially in services – the backbone of the UK economy – suggests that businesses may face increasing liquidity challenges. This situation is exacerbated by the cost of living crisis, which impacts both consumer spending and businesses’ operational costs. Therefore, a critical review of the creditworthiness of companies, particularly those in the hardest-hit sectors, is essential.

The legal and IT sectors, which experienced notable declines, traditionally have been considered stable credit risks. However, the current downturn necessitates a more cautious approach. Credit professionals should closely monitor these sectors for signs of continued distress, potentially tightening credit terms or seeking additional assurances to mitigate risk.

Moreover, the Bank of England’s stance on interest rates, while aimed at controlling inflation, is likely to add further stress to businesses already grappling with higher costs. This situation could lead to an uptick in defaults and delayed payments, making it crucial for credit managers to reassess their exposure to interest rate-sensitive sectors.

Whilst the government’s measures, including tax cuts to stimulate growth, aim to revive the economy, credit managers should remain vigilant. The anticipated economic stimulus may not immediately translate into improved business performance or creditworthiness. A cautious, forward-looking approach is advised, considering potential delays in economic recovery.

The flatlining of output over the recent quarter is a stark reminder of the fragile economic environment. As credit professionals, we must engage in proactive dialogue with our clients to understand their specific challenges and adjust credit terms accordingly. It demands a dynamic, responsive approach. Ongoing reassessment of risks, close monitoring of sectoral health, and strategic portfolio recalibration are essential.

3️⃣ UK Small Businesses vs. Banking Practices: Walking a Trade Credit Tightrope 🏦🔍

The outcry from UK small businesses calling for regulatory intervention over what they perceive as ‘harsh’ banking practices presents is particularly pertinent, as it sits at the intersection of financial regulation, banking conduct, and the operational realities of small businesses – central to credit management.

The FSB’s super-complaint to the FCA brings to light a significant concern in small business operations: the overuse of personal guarantees. This practice, often seen as a straitjacket for business growth, places pressure on entrepreneurs, compelling them to risk personal assets for business loans. Such demands, particularly on small loans, it is argued stifle business innovation and growth, as owners become cautious, often abandoning or scaling back business or growth plans.

This move by the FSB could potentially reshape SME lending. The prevalent use of personal guarantees, while acting as a security, arguably casts a shadow of risk aversion among small business owners. The fear of losing personal assets could have led many to sidestep opportunities for growth, opting instead for a conservative approach that might safeguard personal interests but stymies business expansion.

As we stand at this crossroads, the potential regulatory responses to the FSB’s complaint could herald a new era in SME lending. Any adjustments in the regulatory framework could tilt the scales either towards easing the burden on small businesses or maintaining the status quo. Trade credit professionals must therefore keep a keen eye on these developments, understanding that the outcome could significantly influence the financial health and creditworthiness of small enterprises.

Moreover, it shines a light on the need for a nuanced approach to lending – one that balances the need for security with growth opportunities. As stewards of credit, we must factor in these shifts, continually optimising for the delicate balance between risk and opportunity that defines the small business landscape.

In summary, the FSB’s super-complaint is more than just a challenge to current banking practices; it’s a call to rethink how risk is perceived and managed in small business financing. As the story unfolds, trade credit should be ready to adapt, ensuring that we are not just evaluators of creditworthiness but also insightful interpreters of an evolving financial ecosystem.

4️⃣ China's Property and Retail Woes: A Tangled Web for Trade Credit 🏙️📉

Property investment fell by 9.4% from January to November year-on-year, (following a 9.3% drop in January-October), and retail sales in November rose by 10.1% (a rate lower than the anticipated 12.5%). However, industrial output grew by 6.6% in November, a positive sign amidst the downturn. Overall, November’s data paints a picture of a Chinese economy struggling to regain its pre-pandemic vigor, with the property sector and consumer spending emerging as key areas of concern.

The downturn in China’s real estate market is a global trade credit headache. With sales and investment plummeting, the ripple effects are felt worldwide, given the sector’s extensive links to a whole range of global industries. This downturn has a cascading effect on the construction, raw materials, and consumer goods sectors, all pivotal elements in international trade credit.

Moreover, the broader retail sector’s underperformance signals a weakening in domestic demand, a crucial driver of global economic activity. Trade credit must now factor in the potential for extended payment terms and increased credit risks associated with Chinese businesses and their international partners.

However, it’s not all doom and gloom. The uptick in industrial output, driven by auto production and power generation, offers a silver lining. This divergence within the economy highlights the need for a nuanced approach to risk assessment. Credit managers must discern between sectors showing resilience and those mired in challenges.

Strengthening relationships with well-performing sectors while carefully navigating the troubled ones will be key to maintaining a healthy cash flow during these uncertain times.

This involves a deeper engagement with industries showing resilience, like automotive production and power generation, which have exhibited growth despite the overall economic slowdown. For credit professionals, this means not just extending credit but also understanding the specific dynamics and growth trajectories of these industries. It’s about becoming a partner, not just a financier.

Simultaneously, navigating through troubled sectors requires a careful balancing act. It’s not just about minimising exposure but also about understanding the long-term potential of these sectors. For instance, the retail sector, despite its current struggles, is integral to China’s long-term growth. Therefore, the approach here should not be to withdraw completely but to recalibrate the terms of engagement. This could mean more stringent credit assessments or adjusted terms that reflect the heightened risk while still keeping the door open for future opportunities.

As China’s property woes and retail sluggishness intertwine, they create a complex web for credit professionals. Navigating this landscape demands agility, insight, and a keen eye on the subtle shifts within China’s economy and its global implications.

5️⃣ Embracing the Spirit of Giving: Supporting Alzheimer's Society 🎄💜

With Christmas almost upon us, Baker Ing is filled with gratitude and warm wishes for our colleagues, clients, and partners.

This year, our Christmas spirit is channelled towards an incredibly worthy cause – supporting the Alzheimer’s Society. This organisation dedicates itself to combating Alzheimer’s disease and offering crucial support to those affected. Their work not only aligns with our values of compassion and commitment but also reminds us of the power of community and the impact we can have when we come together.

In this spirit of unity and giving, we extend an invitation to join us in supporting the Alzheimer’s Society. Your generosity, no matter the size, has the potential to bring significant change and hope to countless lives. To contribute to this noble cause, please visit Alzheimer’s Society Donation Page.

As we celebrate this season in our unique ways (or not) whether by enjoying a well-earned rest, continuing our vital work, or engaging in personal traditions, let us unite in making a positive difference in the world.

From all of us at Baker Ing, we wish you a Christmas filled with joy, peace, and the warmth of shared goodwill. Merry Christmas! 🌟🎁

As we turn the final page of this week’s trade credit saga, let’s take a moment to reflect. In a world where numbers weave intricate stories and policy shifts create plot twists, staying ahead is key. Keep your analytical edge sharp and your strategic mind sharper: Global Outlook is your compass in the dynamic landscape of trade credit.

Baker Ing Bulletin: 8th Dec 2023

EU-China Challenge, Irish Tax Triumph, German Investment Gloom, Hottest Tickets in Town — Baker Ing Bulletin: 8th Dec 2023

Welcome to this week’s whirlwind tour of trade credit.

We’re peering through the diplomatic fog of the EU-China trade skirmish, and, in Ireland, it’s raining euros as corporate taxes hit the jackpot. Meanwhile, Germany’s investment brakes have credit in a tizz, and The Situation Room has become the hottest ticket in town.

So, grab your notepad (and perhaps a strong coffee) as we dissect this week’s happenings…

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1️⃣ Navigating Sino-European Trade Surplus 🌐🔍

In the wake of the EU-China summit, the sprawling €400bn trade surplus in China’s favour has emerged as a significant point of contention indicating potential for shifting trade winds that could influence risk across industries.

The surplus itself is emblematic of deeper systemic issues—namely, China’s restrictive market practices and aggressive state support for domestic industries, which have long been bones of contention in Sino-European relations. The EU’s pointed criticism suggests a brewing storm of policy recalibrations that could see European credit managers grappling with the ripples across global supply chains.

For industries ranging from manufacturing to high-tech, European companies may see tighter credit terms and increased premiums as insurers and credit managers weigh the risks of policy-induced market disruptions. Conversely, Chinese companies facing potential EU retaliatory measures could experience credit squeezes as European financial institutions reassess their exposure to these markets. Moreover, with China’s EV market burgeoning under hefty subsidies, European credit managers must now factor in the competitive disadvantages domestic manufacturers may face, which could, in turn, affect their credit ratings.

What now? Granular assessment of exposure to Chinese markets, a comprehensive review of counterparty risk, and an appraisal of how shifts in policy could affect payment terms and credit availability. The EU’s stance could signal a more assertive trade policy era, with credit departments needing to forecast and model scenarios ranging from the imposition of tariffs to the introduction of quotas.

As the EU and China continue their dance of economic interdependence and rivalry, we must adopt an anticipatory and scenario-based approach to credit management. This will be vital in steering through an era where trade policy, politics, and credit risk are increasingly intertwined.

2️⃣ EV Tariff Delay Fuels Credit Strategy Shift 🚗⏳

The European Commission’s decision to extend the transition period for new trade rules in the electric vehicle (EV) sector, coupled with a €3bn investment in the EU’s battery manufacturing, is a significant development. Whilst the immediate focus is on the automotive industry, particularly in the EU and UK, the ripple effects of these changes are expected to be felt across the broader supply chain. The delay in implementing stringent rules provides a temporary reprieve for automotive manufacturers, but it also signals a period of adjustment and realignment for suppliers in related industries.

For credit professionals in automotive and sectors beyond, including electronics, energy, and manufacturing, this development necessitates a reevaluation of risk exposure. Suppliers and businesses within these interconnected industries might experience shifts in demand, production adjustments, and changes in their financial performance as a result of these evolving dynamics in the EV market. Companies supplying components, raw materials, and technology to the EV industry could see changes in order patterns and payment terms, impacting their credit risk profiles.

Furthermore, the EU’s investment in battery manufacturing signals a strategic move towards localising production, potentially reducing reliance on non-EU sources. This could lead to shifts in global trade patterns, affecting suppliers and businesses in regions currently dominant in battery production, like China. Trade credit in these regions will need to monitor developments closely, as they could lead to changes in export volumes, payment terms, and overall market demand.

The extension of the transition period also reflects broader themes of supply chain resilience and diversification, which have become increasingly crucial in the post-pandemic world. For credit managers, this means considering not just the direct impacts on specific industries, but also the indirect effects on the global supply chain. This includes assessing the financial stability and creditworthiness of companies in sectors that may be indirectly impacted by these changes.

3️⃣ Ireland's Tax Windfall Signals Credit Caution 🇮🇪💼

Ireland’s record collection of €6.3bn in corporation tax during November, after a period of concerns about weakening performance, is significant. The government’s decision to set up a sovereign wealth fund with this windfall, and the broader context of Ireland benefiting from tax reforms that attract major global companies, create a multi-layered impact for trade credit.

The surging corporate tax receipts are a result of major companies like Apple restructuring their affairs to declare more profits in Ireland, reflecting the country’s low-tax, high-activity status. This restructuring, driven by global pressures for tax transparency, has led to substantial real operations by these corporations in Ireland, contributing to this tax boom.

The significant increase in corporation tax revenue suggests a robust economic environment, potentially enhancing the creditworthiness of Irish businesses, particularly in the technology sector. This sector’s strong performance implies a stable and potentially growing market for trade credit. However, Finance Minister Michael McGrath’s caution about the volatility of this revenue stream and the end of an era of persistent over-performances must be heeded. The reliance on these temporary receipts for permanent fiscal commitments could lead to future financial instability, a factor that credit managers must account for in their risk assessments.

Furthermore, the impending increase in the headline tax rate from 12.5% to 15% for the largest firms, in response to a global minimum tax rate, adds another layer of complexity. This change may not yet have led to behavioural changes among multinational groups, but its long-term implications on Ireland’s attractiveness as a tax-friendly jurisdiction, and consequently on the businesses operating there, could be significant.

While the current fiscal strength of Ireland presents a favourable environment for trade credit, the shifting tax landscape and potential long-term implications of global tax reforms require a cautious and forward-looking approach.

4️⃣ German Investment Retreat Prompts Credit Reassessment 🏭📉

The stark downturn in German investment plans, as reported by the Ifo Institute, is a critical indicator for credit professionals. With the net investment index plummeting from 14.7 to just 2.2, reflecting a steep decline in business confidence and spending intentions, this trend poses significant challenges for credit management within and beyond Germany.

This shift in investment sentiment, primarily in the manufacturing sector and notably among energy-intensive industries, signals potential cash flow and creditworthiness issues. Trade credit must now closely monitor our German business partners, assessing any increased risk of delayed payments or financial instability. The changing landscape also means revisiting and possibly tightening credit terms and exposure limits for affected companies.

Furthermore, the broader economic implications of this downturn extend to the entire supply chain. Companies that rely heavily on German manufacturing might also face increased risks, necessitating a review of their credit strategies. Given this context, credit professionals should now delve deeper into sector-specific analyses. This required assessing how the curtailment in investment might ripple through the financial health of companies in these sectors. Understanding the intricacies of each sector’s reaction to the current economic climate is crucial.

Moreover, engaging in regular dialogue with German business partners becomes imperative. The objective must be to glean insights into their strategies for navigating these turbulent economic waters. How are they planning to mitigate risks? What measures are they taking to ensure financial stability? These conversations can offer invaluable perspectives that go beyond quantitative analysis, providing a clearer picture of the potential credit risks and opportunities.

5️⃣ A Full House Underlines Industry Trends 🎟️📈

Baker Ing, in partnership with Callisto Grand, successfully hit a nerve in our industry’s zeitgeist with the “Situation Room: Mastering Cash Collection” workshop. The event, which swiftly reached full capacity, is a bellwether of the acute interest in sophisticated cash collection techniques and strategic client communication within credit management.

The event agenda was tailored to the pulse of modern receivables management, addressing advanced methodologies for optimising cash flow and reducing credit risk. Key focus areas included leveraging data-driven KPIs for AR teams, navigating the intricate web of stakeholder relationships, and a holistic approach to collections that marries the ‘why’ with the ‘how.’ This holistic view is particularly pertinent in a business environment where the efficacy of communications can pivotally affect a company’s liquidity and financial health.

The overwhelming response and rapid booking of the seminar underscore the profession’s recognition of the intricate interplay between robust receivables strategies and overarching business success. It reflects a broader industry trend towards not only embracing the quantitative but also the qualitative aspects of financial interactions in a world where soft skills have become as valuable as financial acumen.

Responding to the high demand, Baker Ing and Callisto Grand are set to replicate the success of the seminar with an additional session in Łódź, Poland. This follow-up promises to distil further the essence of effective credit management for professionals seeking to enhance their tactical approach in an ever-evolving market landscape.

In a world where the landscape of trade credit is perpetually shifting, Baker Ing and Callisto Grand’s Situation Room series stands out in continuous professional development, ensuring that the credit community remains agile, informed, and ahead of the curve.

Contact Lisa Garofalo-Moss for more details.

As we close this chapter, remember: every number tells a story, and every policy shift is a plot twist. Stay sharp, stay savvy, and don’t let the fast-paced drama of trade credit catch you off-guard. Whether you’re a numbers master or a strategy guru, Global Outlook is your go-to for in-depth insight and analysis for credit managers.

Update on The Situation Room in Katowice, Poland 📣

We are delighted to announce that our training session on Collections, Communication and Leadership, co-hosted by Callisto Grand and Baker Ing, is now fully booked.

Due to the overwhelming response and to accommodate the high demand, we’re excited to plan another session in Q1. The proposed location for this event is Łódź, Poland.

Interested in participating? We invite you to reach out for more information and early registration for the next event: Please contact Christina Onofrei for more information.

#ProfessionalDevelopment #CreditManagement #LeadershipTraining #BakerIng #CallistoGrand #NetworkingOpportunity

Baker Ing Bulletin: 17th Nov 2023

Retail Rumbles, Far-East Farewell, Germany's Real Estate Rethink, UK Carbon Tax, and Beauty's Bold Blueprint — Baker Ing Bulletin: 17th Nov 2023

Ready to unravel the latest twists in trade credit?

This week, we’re navigating the frosty trails of UK retail, where plunging sales and tightened belts cast long shadows over credit strategies.

As we step into the complex dance of the UK and EU’s carbon tax tango, we’re recalibrating our moves to match the rhythm of this new eco-nomic beat.

Meanwhile, the US Pension Fund Gambit’s retreat from Hong Kong and China echoes through the corridors of global investment, prompting a strategic reshuffle.

And in Germany, the housing market’s seismic shifts send ripples through real estate and construction credit.

So, grab your financial binoculars and let’s zoom in on this week’s dynamic display of credit conundrums and opportunities.

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1️⃣ A Chilly Season for UK Retail 🛍️❄️

The latest tremor in UK retail, marked by a 2.7% plunge in October retail sales year-on-year, is a significant indicator for those of us navigating credit. Against the backdrop of high interest rates and economic tightening, this downturn demands a detailed analysis.

The most striking thread is the consumer spending shift. With wallets snapping shut, discretionary spending is taking a back seat. This behavioural change isn’t just about consumers spending less; it’s about them spending differently. The implications for credit are huge, as this shift necessitates a recalibration of credit risk assessments across a range of retail segments. Retailers reliant on non-essential spending are now in murkier waters, calling for a more cautious credit approach.

The potential response from the Bank of England, hinting at a trim in interest rates next year, adds another layer of complexity. While this move might provide a lifeline to some sectors of retail, it also signals deeper economic concerns that credit professionals must navigate. The anticipation of this change underscores the need for a strategic reassessment of credit terms and payment behaviour expectations, particularly in sectors more susceptible to interest rate oscillations (e.g., Consumer Durables and Home Appliances, Automotive Retail, Real Estate and Home Improvement Retail, High-end Retail and Luxury Goods, Electronics and High-Tech Retail)

Furthermore, the retail downturn isn’t isolated; it affects manufacturers and suppliers linked to the sector. For credit professionals, this means keeping a vigilant eye on the entire supply chain, identifying potential vulnerabilities, and adjusting strategies to buffer against disruptions. While some segments like luxury goods or online retail might offer safer harbours, traditional high-street retail could face rougher seas. Identifying these sector-specific risks and opportunities is key to navigating this changing landscape.

The current state of UK retail is complex with far-reaching implications for trade credit. The challenge is significant, but so are the opportunities for those poised to understand and act on these nuanced shifts.

2️⃣ US Pension Fund Gambit: Shifting Sands in Global Investments 🇺🇸🔄🌏

The Federal Retirement Thrift Investment Board’s (FRTIB) recent withdrawal of investments from Hong Kong and China, marks a pivotal moment for international credit. This decision, steering the helm of a massive $771 billion fund away from its traditional investment indices in these regions, echoes the heightened geopolitical tensions and evolving global risk profiles. For credit professionals, this move signifies a deepening intertwining of geopolitical dynamics with financial strategies, necessitating a re-evaluation of risk management and investment approaches.

The withdrawal from these markets is a manifestation of growing concerns over the stability and predictability of these regions. It reflects an apprehension about the political and economic uncertainties, emphasising the need for credit professionals to reassess their exposure in these markets. It impacts not only direct investments in affected regions but also the broader network of trade relationships.

In response to this development, credit professionals need to scrutinise their portfolios, especially those with significant ties to Hong Kong and China. A comprehensive analysis of the potential impact of these geopolitical tensions on their creditworthiness is crucial. This involves not just looking at direct investments but understanding the extended network of trade relationships that could be affected. Diversification across different markets and sectors becomes critical in mitigating the risks associated. Expanding portfolios to include more activity in more politically stable regions or sectors less susceptible to geopolitical influences is now more important than ever. This strategy is not just about reducing risk but also about capturing opportunities in other markets that might emerge as more attractive due to these shifts.

Moreover, adopting dynamic credit policies that can quickly adapt to changing geopolitical landscapes is imperative. Establishing flexible credit terms and conditions that can be modified in response to evolving international events will be crucial in maintaining the agility needed in today’s volatile market. Trade credit must integrate geopolitical risk analysis into regular market assessments. This enhanced monitoring will ensure we remain aware of emerging risks and opportunities, helping us make more informed decisions.

In navigating these complexities, professionals must maintain a balance between risk mitigation and seizing new opportunities presented by the shifting global economic landscape. Opportunities may arise in industries that are less impacted by global political shifts, such as healthcare, essential consumer goods, and industries focused on domestic markets with lower export risks. Additionally, there’s a chance to reevaluate credit terms to better align with the evolving risks and opportunities in these new markets, potentially offering more flexible or innovative credit solutions to customers in less volatile regions or industries. This strategic shift in focus requires a keen understanding of the changing global dynamics and an agile approach to risk management, ensuring that credit decisions are both prudent and opportune in this new economic context.

3️⃣ UK's Carbon Charge Crusade: A New Tax Frontier in 2026 🇬🇧💨🌿

Brace yourselves, trade credit, as we navigate the latest turn in the UK’s climate policy odyssey. In a bold stride towards ‘environmental responsibility’, the UK government, under Chancellor Jeremy Hunt’s stewardship, is setting the stage for a groundbreaking Carbon Border Tax by 2026.

The introduction of CBAM and similar policies signals a move towards penalising high-carbon imports, which will inevitably affect the cost structures of companies reliant on carbon-intensive production processes or supply chains. Credit professionals need to closely monitor these changes, understanding how they might impact the creditworthiness and financial stability of their clients. This requires a deeper analysis of the supply chain and production methods of clients to evaluate their exposure to these new carbon taxes.

Moreover, this shift towards a ‘greener’ economy opens up new opportunities. There is potential for innovative credit products that incentivise low-carbon operations, such as preferential rates or terms for companies demonstrating strong sustainability credentials or investing in green technologies. Staying ahead in this new tax frontier will require us to be more agile and adaptive in our strategies than ever. This might involve developing new risk assessment models that take into account a company’s carbon footprint and its preparedness for a low-carbon economy. It also means being proactive in understanding the varying carbon tax policies across different regions and their potential impact on international trade dynamics.

CBAM and the EU’s carbon tax policies are not just regulatory changes; they are reshaping international trade and commerce. Credit professionals must navigate this new terrain with a keen focus on sustainability, redefining our credit strategies to not only manage risks but also to seize opportunities in a world where environmental considerations are becoming central to economic decisions.

4️⃣ Germany's Housing Market Crisis: Echoes of Economic Concern 🏠📉

The downturn in Germany’s housing market, marked by a shift from robust demand and construction to a period of insolvencies and affordability crises, poses critical challenges for trade credit professionals. This dramatic transformation in Europe’s largest economy requires a reevaluation of credit strategies, especially for those engaged in sectors tied closely to real estate and construction.

The situation is further complicated by external economic factors, such as soaring raw material costs and the European Central Bank’s interest rate hikes. These elements have not only affected market dynamics but also altered the risk profiles of companies within these sectors. Credit professionals must now factor in these heightened risks, adjusting their exposure to these markets accordingly.

For those involved in extending credit to construction and real estate businesses, the current downturn requires a heightened emphasis on liquidity analysis and stress testing of borrowers. Understanding the cash flow dynamics and resilience of businesses in these sectors becomes crucial in ensuring that extended credit lines are secure. The approach should be geared towards identifying early warning signs, adapting credit terms to reflect changing market realities, and ensuring a balanced portfolio that can withstand the fluctuations of this volatile market.

The downturn in Germany’s housing market, beyond its direct impact on construction and real estate sectors, creates significant ripple effects across the economy, affecting a range of interconnected industries. The slowdown in construction not only impacts suppliers of raw materials, furnishings, and equipment but also has broader implications for financial institutions and insurance companies. This situation demands that credit professionals adopt a holistic view of their risk assessments, considering the wider economic repercussions. They must closely monitor these developments, adjusting their credit policies and strategies to manage the increased risk exposure across these interconnected sectors.

5️⃣ Beauty & Perfumes 2023: Navigating New Aromas and Aesthetics 💄🌸

In the beauty and perfume business, change is the only constant and the much-anticipated Beauty & Perfumes 2023 report from Baker Ing has arrived, offering an incisive look at the sector’s evolving dynamics. With a Moderate Worldwide Risk Score (WRS) of 4.5 out of 10, the industry stands at a crossroads of challenge and opportunity.

As the report illustrates, the beauty and perfume industry thrives on a complex network of global manufacturers, suppliers, distributors, and e-commerce platforms. It’s a world where large multinational corporations set the tone, and supply chains stretch across continents. On the flip side, there are challenges; adapting to diverse regulations, rapidly shifting consumer preferences, and the need for innovation to remain competitive. This report highlights the importance of standing out in a crowded market and the necessity of embracing technological advancements like augmented reality (AR) and artificial intelligence (AI) to enhance product formulations and customer experiences.

For credit professionals, the Beauty & Perfumes 2023 report encourages a proactive approach to navigating risks and capitalising on the opportunities that arise from the industry’s ebbs and flows:

As we draw the curtains on this week’s credit saga, remember, for those looking to chart a course through these turbulent times, our Global Outlook remains your steadfast compass, guiding you with insights and analysis for credit professionals:

Until our next rendezvous in risk and reward, keep your eyes on the horizon and your strategies sharp!

Baker Ing Appoints Bill Dunlop, International Credit Visionary, as Associate Director.

Baker Ing Appoints Bill Dunlop, International Credit Visionary, as Associate Director.

Baker Ing is thrilled to announce the appointment of Bill Dunlop EAICD FCICM-MIEx EIICM EACCEE as Associate Director.

Bill brings over four decades of international credit and collections expertise to Baker Ing. His stellar reputation in credit management is reinforced by his role as President & Founder of the AICDP – Association Of International Credit Directors and Professionals.

“We are exceptionally pleased to welcome Bill Dunlop to our team,” states Sarah Ing, COO, Baker Ing International. “His wealth of experience and in-depth industry insights are unparalleled, and we are excited for the strategic value he will bring to our global operations.”

Bill’s accession to Baker Ing solidifies our commitment to delivering top-tier credit control, debt collection, and in-country legal services. His wealth of experience promises to strengthen Baker Ing’s already formidable global infrastructure and facilitate streamlined operations through swift, expert decision-making. Bill has been lauded for his exemplary leadership, particularly in his role with the AICDP – Association Of International Credit Directors and Professionals, where he continues to be instrumental in defining the role of International Credit Director for senior personnel. This aligns perfectly with Baker Ing’s ethos of delivering client-centric solutions with an emphasis on quality.

We empower brands with unparalleled receivables management, specialising in high-value, sensitive accounts, we strengthen client relationships whilst ensuring financial resilience.

With Bill onboard, Baker Ing further cements its role as a client-centric firm, combining robust people, technology, and data for customised collections. His meticulous approach to risk assessment and commercial risk considerations will add an extra layer of precision to Baker Ing’s service offerings.

For more information about our world-class receivables management services and the recent appointment of Bill Dunlop as Associate Director please contact us:
+44 (0)207 871 1790
Office 7, 35-37 Ludgate Hill, London, England, EC4M 7JN

Baker Ing Bulletin: 10th Nov 2023

Sanofi Scrutiny, WeWork Woes, AI Arms Race, Apple's Appeal, and Spain Spotlight — Baker Ing Bulletin: 10th Nov 2023

Ready to dive straight back into the thick of it?

This week, we’re balancing on Sanofi’s tightrope as credit in pharma faces confidence and caution. We’re mapping the fallout in WeWork wonderland, where the promise of endless expansion meets the reality of real estate. As the AI arms race accelerates, credit analysts buckle up for a wild ride through Silicon Valley’s latest frontier. And, with Apple’s tax tangle in the EU spotlight, we’re crunching the numbers on what this means for the fiscal fabric of trade credit.

Meanwhile, Spain’s economic stage is set for a performance that could see trade strategies either taking a siesta or charging like a bull.

Let us pull back the curtain on this week’s ensemble of economic intrigue…

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1️⃣ Sanofi Scandal: Credit Under the Microscope 🔍💊

Sanofi’s potential market manipulation casts a significant shadow over the pharmaceutical industry, particularly for credit. France’s financial prosecutor’s inquiry into alleged dissemination of false information and price manipulation pertaining to Sanofi’s financial communications underscores the fragility of investor confidence and stock valuations, two critical elements influencing credit conditions and insurance terms within the sector.

As credit professionals, we must scrutinise the direct impact of such investigations on the creditworthiness of pharmaceutical companies. Sanofi’s robust defense against the allegations and its aggressive legal stance suggest a potential escalation of the situation. The heightened scrutiny and the associated risks could lead to more stringent credit terms and higher insurance premiums for companies within the industry, especially for those relying heavily on the performance of singular blockbuster products.

Sanofi’s remarkable sales growth of Dupixent, which significantly contributes to its revenue, is a double-edged sword. While it reflects the company’s commercial success, it also highlights a dependency that could be perceived as a credit risk in light of the investigation. The resultant investor skepticism, mirrored in the nearly 20% share price drop after the reduction in earnings forecasts, further complicates the credit landscape.

The Sanofi market manipulation probe is a stark reminder of the interconnectivity between corporate governance, regulatory scrutiny, and the trade credit environment. As professionals, we must maintain a vigilant eye on the developments of this case, preparing for the ripple effects across the credit terms, insurance conditions, and risk assessments within the pharmaceutical sector.

2️⃣ From Co-Working to Cautionary Tale 🏢📉

The descent of WeWork into the abyss of bankruptcy is a narrative of overreach within the vibrant world of flexible workspaces. WeWork’s journey from emblem of urban cool to a cautionary tale underscores the volatility inherent in the commercial real estate sector and carries significant implications for trade credit. The company, once a darling of investment portfolios, found itself struggling beneath the yoke of $13 billion in office lease obligations, an albatross that precipitated its filing for bankruptcy.

This unraveling has cast ripples affecting not only office landlords, who are grappling with a paradigm shift towards remote work, but also the broader financial ecosystem that supports the commercial property market. WeWork’s attempt to renegotiate its leases and shed future rent obligations by $12 billion speaks to a larger industry trend where flexibility is king, and the rigid structures of the past no longer suffice.

While WeWork’s saga could seem an isolated case of mismanagement and flawed business models, it’s a stark reminder to credit professionals of the importance of diligence and the agility required in today’s market. The shift towards hybrid working models, accelerated by the COVID-19 pandemic, presents both a challenge and an opportunity for the flexible working sector. Companies like IWG and Industrious are navigating these turbulent waters with varying strategies, with some distancing themselves from WeWork’s approach, favoring more sustainable models like management agreements and joint ventures.

The repercussions of WeWork’s downfall are multifaceted for credit managers. The scrutiny of flexible workspace providers will intensify, with a keen eye on the sustainability of their operational models. Credit terms may tighten, and risk management practices will need to evolve to anticipate and mitigate the risks associated with such seismic industry shifts.

In the end, WeWork’s bankruptcy is not merely the end of a company but a reflection of a rapidly transforming sector. It serves as a critical lesson; to survive and thrive in this new landscape requires an adaptive mindset and a forward-looking approach to financial strategies, ensuring that flexibility is woven into the very fabric of operations.


3️⃣ Tech Titans' $42 Billion Bet 💻🚀

In a strategic move that is reshaping the technology industry, Google, Microsoft, and Amazon have collectively invested a staggering $42 billion to bolster their cloud infrastructure, marking a clear trajectory towards the burgeoning field of generative AI.

The move indicates that other players in the technology sector might follow suit, increasing their investment in AI and cloud technologies to keep pace. This trend could lead to a ripple effect of increased borrowing and investment across the sector, necessitating a reassessment of credit risk not only for the big three but for the entire technology industry.

As these tech giants scale up their operations in AI and cloud infrastructure, their suppliers and partners may also need to expand their operations to meet new demands. This situation could result in increased credit requests from smaller entities within the supply chain, who may not have the financial robustness of their larger counterparts. Additionally, the substantial investment in AI by these leaders is expected to intensify competition in the tech sector, potentially leading to market consolidation.

The focus on AI and cloud technologies is poised to drive rapid innovation and disruption within the tech sector. This could mean faster obsolescence of existing technologies and business models, affecting the creditworthiness of companies that fail to adapt quickly. Credit professionals must stay attuned to these rapid changes, as they have significant implications for credit risk assessment.

As the tech giants race towards AI dominance, their actions are setting new standards and challenges for credit strategies, heralding a new era for credit management. 

4️⃣ Apple's Tax Tango 🍎⚖️

International tax law and the European Union’s legal framework is brought into sharp relief by the recent developments in Apple Inc’s tax case. The European Court of Justice’s Advocate-General has recommended that a previous ruling, which found in favoUr of Apple and Ireland in a €14.3 billion tax dispute, be overturned. This recommendation, though not binding, often foreshadows the court’s final decision, potentially upending the 2020 judgment that absolved Apple of receiving illegal tax advantages.

The implications of this case stretch far beyond Apple’s ledger. A final judgment aligning with the Advocate-General’s opinion could recalibrate the landscape of trade credit assessments and reshape country risk profiles across Europe. The potential reclamation of billions in back taxes by Ireland, which has been held in escrow pending appeal, has broader ramifications for the EU’s approach to national tax arrangements and the competitive advantages they may confer.

Apple’s case is emblematic of the broader EU crackdown on preferential tax deals, which has seen mixed success. The ongoing legal challenges faced by the EU in asserting its state-aid rules against member states reflect a complex dance of sovereignty, competition, and investment incentives. The pending ECJ ruling, therefore, is a bellwether for future regulatory actions and serves as a critical point of analysis for credit managers and investors alike.

Ireland’s low corporate tax policy, a significant driver of its economic success, is also under scrutiny. With the country poised to raise its corporate tax rate to 15% under an OECD agreement, the outcome of Apple’s case may influence the fiscal strategies of other EU nations. For trade credit and financiers, the case underscores the need for vigilant reassessment of credit terms and the importance of regulatory developments in strategic decision-making.

In sum, the Advocate-General’s opinion against Apple in the EU court represents a potential pivot point. It signals a call for rigorous attention from trade credit managers to the evolving tax landscape and its ramifications on multinational corporations and the broader European economic environment.

5️⃣ Spain 2023 🇪🇸📈

The release of the Spain Spotlight 2023 report offers credit managers an essential resource for navigating this intricate economic landscape. Comprehensive analysis provides a deep dive into the the Spanish economy, from the resurgence of its vital tourism sector to the contrasting developments in the construction and manufacturing industries.

The report offers a granular examination of Spain’s economic resurgence, focusing on the rejuvenation of its tourism industry, a critical component of national revenue that suffered a dramatic downturn during the pandemic. It balances this by shedding light on the slowing factory activity, presenting a nuanced view of the opportunities and risks that lie within these key sectors.

A spotlight is cast on the recent uptick in insolvencies, coinciding with new bankruptcy laws. This analysis is imperative for credit managers to identify potential red flags and adjust their credit practices accordingly.

Payment behaviors and standard terms are evolving too, and the Spain Spotlight 2023 report ensures credit managers are kept informed of these changes, enabling them to adjust their credit terms in alignment with the current market environment.

For optimal utility, credit managers are encouraged to bookmark the online version of the report, which provides a dynamic and interactive experience with updates not available in the static PDF version. This ensures that you have access to the most current data and analyses, allowing for agile decision-making in an ever-changing economic landscape:

As we sign off on this edition of high stakes and ledgers, keep an eye on the horizon where the winds of market change are as swift as the AI algorithms. For acumen and foresight check out Global Outlook here:

 We’ll see you next week with another edition. Until then, fine-tune your figures and fortify your foresight!