Businesses look for additional lines of credit and increase appetite for risk.  27% increase in interest for technology as a solution for managing trade credit risk.

Business confidence and the outlook for future growth has reached an all-time high as companies seek new and additional lines of credit and show a marked increase in their appetite for risk.

These are the results from the latest Institute of Credit Management (ICM) Credit Managers’ Index for Q3 2014 that shows a headline index that has been on an upward trajectory for the last six quarters and now stands at 59.6 – 0.4 points up on Q2.

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 0.8 to 59.0) and yet a significant increase in manufacturing (up 2.6 to 60.6), a marked rise that negates the small drop seen in the last quarter. New applications for credit have risen by 0.9 points to a high of 68.1, while order book levels have also risen by 2.7 to 72.6, perhaps due to the trend for longer term contracts to impact the figures.

Philip King, Chief Executive of the ICM, says that the number of applications for credit that are being rejected has decreased (down 0.7 to 52.9) in line with a decrease in bad debt provision (down 1.2 to 54.1) and a fall in the number of disputes (down 0.9 to 49.6): “Despite the number of new applications rising, the number of those being rejected has fallen which is a good sign that businesses creditworthiness is improving and the credit risk is decreasing.

“Combined with a decreased in bad debt provision, the figures suggest that the appetite for risk is becoming significantly stronger,” he continues, “and that means that businesses are more confident of their future prospects.”

Improvements were recorded across all industry sectors, and credit managers within construction have renewed confidence despite some warning of possible future business failures.

In addition to the CMI questions the survey asked about credit managers’ reviewing and implementing technology to improve trade credit risk, which has seen a six month increase of over a quarter (27%).  Asked about the reasons for this, there was a 42% increase in those investing in technology to improve productivity, and a 12% increase in those looking to lower costs and generate more working capital.  Half of credit managers (51%) also stated that increased financial risk to their company was driving investment in technology.

SébastienClouet, Marketing Director at Tinubu Square, said “The desire amongst credit managers to use technology for trade credit risk management is becoming reality.  With business confidence so high and rising over the last six months in the Credit Managers’ Index, companies are hungry for growth and organising the systems they take advantage of the opportunities in front of them.”

Mr King believes the Index, and businesses attitude to risk management, is yet further evidence that the UK is on the road to a sustained recovery: “The improvements demonstrate the benefits of having robust credit management processes and professional credit managers to facilitate new business and keep the cash flowing,” he says.

The latest CMI prompted some 500 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.