Q4 2014 completes a strong year for credit and risk, with the index averaging at 59.2, the highest in the CMI’s history. A year-on-year 27% increase in those wanting improved risk management operations by gaining detailed intelligence on the credit worthiness of customers

Business confidence and the outlook for future growth remain high, as companies continue to seek new and additional lines of credit, evidenced through a sustained appetite for risk.

These are the results from the latest Chartered Institute of Credit Management (CICM) Credit Managers’ Index (CMI) for Q4 2014, showing a headline index currently standing at 58.9 (down 0.7 on Q3). This is the first time in six quarters that the headline index has dropped, although the figure is still the fourth highest in CMI history.

The CMI, sponsored by Tinubu Square, is important because it gauges the levels of credit being sought and granted by credit managers across both the manufacturing and Services Sectors, and therefore acts as a primary indicator of actual levels of business being conducted.

The latest survey notes a further small decline in Services (down 0.2% to 58.7) and highlights a decrease of 1.4 in manufacturing to 59.2, however this decrease does not negate the Q3 rise of 2.6. Further decreases in overdue debt, down by 0.4 to 53.4, could be a reflection of the increased amount of accounts referred to third parties, which has seen a rise of 1.7 to 58.2.

The CMI has also shown this quarter a significant increase in key areas where credit managers believe they must improve their risk management operations going forward. A year on from the Q4 2013 survey, there has been a 27% increase in those wanting to gain detailed intelligence on the credit worthiness of customers; 20% more respondents want to improve connections between back-office and front-line CRM systems; and finally a fifth wanting to improve their value with a credit insurer or bank.

Philip King, Chief Executive of the CICM, highlights the decrease in insolvencies (down 1.9 to 57.7) and picks up on further progress in rejected credit applications, which are down 1.1 to 51.8: “Even though there has been a fall in new credit applications, the drop in the number of those which are being rejected is continuing a three quarter downwards trend.

“The appetite for credit still remains high which is perhaps unusual in the context of potential economic uncertainty that is prevalent in the lead up to a general election,” he says.

Across industry sectors, positive trends continue, with figures showing 17 out of 18 sectors expanded during Q4 with, in particular, Construction and Materials, Chemicals, and Industrial Goods and Services seeing strong growth, highlighting a positive manufacturing outlook. Furthermore, all regions saw Q4 expansion, with the North West and North East, which collectively saw 15 percent of respondents, showing very positive growth measuring 60.4 and 63.0 respectively.

Sébastien Clouet, Marketing Director at Tinubu Square: “It is great to see the index at this historical high and regional growth outside the south east, and this is a clear reflection of the professionalism of those working in the credit management teams.

“Whilst there has been a decrease in overdue debt, they are clearly casting a critical eye over processes, notable by the significant increase in those wanting to gain better intelligence on creditworthiness and improve the way their internal systems share information.”

Mr King believes the Index, and business attitude to risk management is a good way to show the UK can sustain economic recovery: “Factors that may contribute to the Q4’s slight decrease are widespread, however when we look at 2014 as a whole the figures point to a sustained high point

The latest CMI prompted some 510 responses from credit managers in companies of various sizes broadly split by region, although slightly weighted to businesses in London and the southeast.

The CMI is a diffusion index, producing ‘scores’ of between one and 100 (typically in a range of 40 – 60). Ten equally weighted factors are included – three favourable and seven unfavourable – and the index calculated on a simple average of the 10 factors.