Half of UK & US firms predict a recession in 2020 and a third predict a global recession

  • Just under half of firms in the UK (46%) and US (45%) predict their country will go into recession in 2020, according to research by trade finance provider Stenn
  • The poll of over 700 senior executives at medium-large sized businesses across the UK, US and China, also revealed that well over a third (37%) of UK firms and one in three (35%) US firms expect to see a global recession or international global crisis in 2020
  • In the UK, a third (33%) of firms expect the economy to shrink in 2020, with well over a tenth (14%) expecting it to contract by 1-3%
    • A further 6% expect the UK economy to stay flat with no growth
  • In the US, almost one in five (16%) expect the economy to shrink in 2020, most likely by 1-3% (7%)
    • In addition, 6% also expect it to stay flat with no growth. 

Dr. Kerstin Braun, President of Stenn Group, commented: “2019 was weaker than expected and the stakes are only higher for 2020. Governments around the world are having to act forcefully to prevent the economic hit from Covid-19 deepening, taking a coordinated approach and opening the liquidity pipe for both fiscal and monetary support.

While a low interest rate provides an important cut in borrowing costs for businesses and consumers at this delicate moment, the coronavirus outbreak will be a real test of the health of the UK and US economies. Lowering rates alone isn’t enough to be effective in offsetting the economic impact of Covid-19. We already know the Chinese economy is going to be hit in the first and second quarter.

“For us, the plunge in oil coupled with the economic damage of Covid-19 marked the beginning of a global recession. Our research showed that at the beginning of the year, half of UK and US businesses predicted a recession and a third predicted an international global crisis, and just three months into 2020 and we’re starting to see this play out.”

Methodology

The survey was conducted by Atomik Research among 706 senior decision makers at medium-large sized businesses, across the UK, US, and Chinese markets. The research fieldwork took place on the 18th – 28th November 2019. Atomik Research is an independent creative market research agency that employs MRS-certified researchers and abides to MRS code.

About Stenn

Stenn International Ltd. is a UK-based, non-bank trade finance provider specialising in cross-border trade. Stenn’s trade finance solutions are comprehensive and can be combined to cover the entire supply chain from purchase order to delivery of goods. Innovative practices allow Stenn to finance in sectors and geographic regions currently underserved in global trade. The company operates globally with offices in Buenos Aires, Los Angeles, Dallas, New York, Miami, London, Amsterdam, Dusseldorf, Berlin, Mumbai, Chennai, Singapore, Hong Kong, Guangzhou, Hangzhou, Suzhou, Shanghai and Qingdao.

Learn more at https://stenn.com or follow TwitterLinkedIn and Facebook.

Coronavirus: Is your business immune?

The outbreak of the coronavirus disease, COVID-19 continues to pose a significant threat to businesses in the UK. The impact on supply chains, transport and international travel is causing businesses to consider the impact of coronavirus on their current or future contractual agreements. Here Julie Hunter a commercial solicitor at Stephensons Solicitors LLP, discusses why it’s important for businesses to understand their legal rights and obligations in light of this global pandemic.

Coronavirus: Is your business immune?
Julie Hunter

The outbreak of the coronavirus disease COVID-19 continues to cause severe disruption and uncertainty to global trade. Now categorised as a global pandemic by the World Health Organisation, businesses must consider whether the impact of the coronavirus could cause them to default on their contractual obligations, whether this may be an inability to supply goods due to the effect on the supply chain, an inability to provide services due to travel restrictions or the cancellation of planned public events due to quarantine. Many larger businesses have already started to issue statements to their customers and suppliers in advance of any potential disruption caused by the outbreak.

Can your business delay performance or fail to fulfil its obligations under a commercial contract due to the coronavirus outbreak without facing liability? The often-standard force majeure clause contained in commercial contracts may mitigate risks and help parties navigate the difficulties caused by the outbreak.

What is Force Majeure?

A force majeure clause may relieve a party from performing its obligations under a commercial contract due to the occurrence of events which are unforeseeable or outside of its control. You can only rely on a force majeure clause if it has been drafted into your contract. A force majeure clause cannot be implied.

As force majeure has no defined meaning in English law, the effect of a force majeure clause will depend upon the way it has been drafted into each individual contract. Typically, force majeure clauses can cover:

  • acts of God, such as natural disasters and extreme weather events
  • terrorist attacks, civil war and breaking off diplomatic relations
  • compliance with a law or order, rule or direction of the government
  • embargos
  • epidemics or pandemics

Your force majeure clause may give you the right to suspend performance of the contract for a certain period of time or allow either you or your counterparty to terminate the contract entirely on the occurrence of a force majeure event.

COVID-19 as a Force Majeure

On 11 March 2020, the World Health Organisation classified the coronavirus as a global pandemic. If your force majeure clause covers the occurrence of a pandemic, then the coronavirus outbreak is likely to constitute a force majeure event.

If your force majeure clause does not cover pandemics, you must carefully consider whether the outbreak or its effects could fall into any of the other force majeure events specified in your contract. For example, you may find it possible to argue that the quarantine or isolation restrictions effecting your supply chain constitute a ‘work stoppage’, or that any international travel restrictions imposed in the UK and other countries which restrict performance could constitute ‘compliance with an order of a government’.

The court often interprets the precise wording of force majeure clauses strictly. If the situation is unclear, you should seek specialist legal advice on whether the coronavirus would constitute a force majeure event under your contract.

Invoking the clause

Even if the coronavirus qualifies as a force majeure event under your contract, you may not necessarily be able to invoke your rights under the force majeure clause.

Most force majeure clauses require you to demonstrate that the event itself has prevented performance of your contract. This means that if the coronavirus outbreak is simply causing performance to be more difficult, costly or time-consuming for your business, this may not necessarily be enough to invoke the clause.

Additionally, it may not always be desirable to invoke your force majeure clause for commercial reasons. You may need to consider the following matters:

  • Is the force majeure clause / event open to interpretation? Your counterparty may dispute your entitlement to any force majeure remedies and seek to enforce performance of the contract.
  • Could your insurance policy cover any losses or business interruption instead?
  • Will other parties / business be facing similar problems with supply or performance? Could you negotiate new terms to navigate the issues?
  • Would exercising the force majeure clause damage your ongoing relationship with the counterparty? Is there a reputational risk if the matter became public?

Breach of contract

It is possible that the effects of the outbreak on your business may not be covered by the force majeure clause as drafted or you may not have the option of relying on a force majeure contract at all.

If this is the case, any failure to perform your obligations under the contract (even if the failure is attributable to the coronavirus) may constitute a breach of contract which you could be liable to the counterparty for. However, there may be other mechanisms in the contract or under English contract law generally which may assist you and it is imperative to obtain legal advice should you find yourself in this situation.

Seeking a legal specialist

If you are currently considering entering into new contracts or are reviewing your contracts in light of the coronavirus, you should seek legal advice on strengthening your force majeure clause.

If you are currently facing threats of litigation over failed performance caused by the coronavirus or are considering invoking your force majeure clause, it is important to seek legal advice on your rights of termination and breach of contract.

About Stephensons

Stephensons Solicitors LLP is a full-service law firm with offices in Bolton, London, Manchester, St Helens and Wigan.

Business owners urged to take six steps to limit coronavirus risk to their operations

AMID all the uncertainty caused by the coronavirus outbreak business owners may feel their fate isn’t in their own hands – but in fact there’s lots that they can do to help them take control.

Business owners urged to take six steps to limit coronavirus
David Tew

“These are uncertain times. No-one knows exactly how this is going to play out. But there are certain things you can do to protect your business,” said David Tew, a dispute resolution specialist with Cartmell Shepherd Solicitors.

“A bit like the advice across society about taking sensible steps such as washing your hands, there are steps you can take as a business to protect yourself,” said David.

Here David shares half a dozen simple steps aimed at helping you and your business to be prepared and to focus on what you can control.

1. Check your ongoing contracts

“Check your contracts. What are your obligations and your rights? 

“Will coronavirus allow a contracting party to pull out of its obligations on an existing contract? It depends very much on what is the exact wording in the contract.

“In particular you should be checking is there a force majeure clause in your contracts which allows a party to suspend or terminate the performance of its obligations when certain circumstances beyond their control arise.

“If there is not a force majeure clause then it is possible to look at the legal doctrine of ‘frustration’ where it is impossible to complete a contract because of a change of circumstances outside your control. But this is open to different interpretations and may be difficult to rely on, highlighting the importance of ensuring that your contracts are fit for purpose.”

2. Check your insurance policies

“Have a close look at your business insurance policy to see if you have any business interruption coverage and check exactly what those terms are.”

3. Carry out a risk assessment

“Carry out a general risk assessment on all parts of your business to identify exactly what is at risk, and then focus on controlling those areas which are within your control.” 

4. Take practical steps

“So far much of the focus has been on the international aspect of coronavirus. But that is set to move to a more domestic level and it is important as a business owner that you do everything you can now to make sure you, your employees, your supply chain and your clients are as prepared as possible.

“If we are moving towards a situation where the advice will be for more people to self-isolate, or if there are restrictions of movement, then there are practical steps that you can take now to mitigate those risks.

“If you want to move to more remote working, then check the practical issues that will involve. Do the business processes and procedures work remotely? Check employee policies – do they cover working from home? Is it practical for all employees to work from home? Do they have a safe environment to work in?

“Review your supply chain. Have a discussion with those in your supply chain and discuss action plans with them.”

5. Keep communicating

“It is really important to keep communication channels open between you, your employees, your clients and your supply chain. Keep talking and discussing how you can support each other. Follow any guidance online https://www.gov.uk/guidance/coronavirus-covid-19-information-for-the-public

“Identify ways you can work together. There will be cases where because of the way a contract has been worded, it is within your legal right to ensure that those obligations are met. But that might not be the best approach when it comes to long-term business relationships.

“You are likely to want those relationships to be positive in the long term. And while the temptation might be to jump on the specific wording in a contract, remember that your clients and customers will still be here long after this situation has come and gone. How you act now, is likely to affect those business relationships in the future. 

“By showing flexibility and understanding and being willing to restructure that arrangement in the short term, is likely to be of benefit in the long term.”

6. Ensure you have good legal advice

“A good solicitor will help you with your concerns and give you the advice on how you can best protect your business. We have a six-strong team in dispute resolution at Cartmell Shepherd led by director Mark Aspin. If you are unsure about anything it is always best to ask.”

Global sell-off could be seen by investors as best buying opportunity in a decade

The worst global market sell-off since the 2008 crash will become an important buying-opportunity for investors, affirms the chief executive of one of the world’s largest independent financial advisory and services organisations.

The prediction by Nigel Green, CEO and founder of deVere Group, comes after equities lost a tenth of their value this week as investors piled into havens on growing concerns the coronavirus outbreak will hit the world economy and impact corporate profits.

Mr Green notes: “Until this week, the markets had largely shrugged off the impact of the outbreak of coronavirus.  We warned about complacency leaving many wide-open to nasty surprises.

“This has now changed. Investors have done a ‘one eighty’ – from a muted overly confident reaction to the serious and far-reaching global issue of coronavirus to running like headless chickens. 

“Both extremes are worrying and could potentially wreak havoc on investors’ returns.”

He continues: “However, the worst global market sell-off since the 2008 crash will almost certainly become an important buying-opportunity for many investors. 

“With markets on the brink of correction territory, panic-selling, mis-pricing of high quality equities, and lower entry points, this could turn out to be one of the key buying opportunities in the last 10 years.

“Some of the most successful investors will embrace volatility to create, maximise and protect their wealth.

“As ever in times of increased turbulence, there will be winners and losers. A professional fund manager will help investors take advantage of the opportunities that volatility presents and mitigate potential risks.

Earlier this week, Mr Green noted: “In the current volatile environment, investors – including myself – will be revising their portfolios and drip-feeding new money into the market to take advantage of the opportunities whilst reducing risk at the same time.”

The deVere CEO concludes: “Global investors should not be spooked by the return of volatility on stock markets but, where possible use it to their financial advantage.  

“Of course, no–one knows for sure what will happen in the immediate future but, as stock markets typically rise over a longer-term period, now is the time to capitalise on the more favourable prices of decent stocks.

“It can be expected that in coming days, serious investors will be bargain-hunting.”

Coronavirus-triggered market correction could hit complacent investors

Investors remain complacent about an imminent Coronavirus-triggered market correction of up to 10 per cent, warns the CEO of one of the world’s largest independent financial advisory organisations.

The warning from deVere Group’s chief executive and founder, Nigel Green, comes as global equities registered losses on Monday following a surge in cases in Italy, Iran and South Korea over the weekend, and as the first cases are confirmed in Kuwait, Bahrain and Afghanistan.

Mr Green comments: “Global financial markets retreated on Monday as they reacted to the coronavirus headlines over the weekend. But it is likely that they will quickly rebound, as they have consistently done in recent weeks. 

“Indeed, stocks keep on reaching record highs.

“This is because many investors remain complacent about the far-reaching impact of coronavirus, which is continuing to spread – and a faster pace. This will inevitably hit financial markets and investors’ complacency leaves many wide open to nasty surprises.”

He continues: “Major global companies, especially those with heavy exposure to the Chinese economy, are lowering profit guidances due to the outbreak. This will have a knock-on effect across international supply chains and throughout economies.  But is the message being heard by investors?

“In addition, coronavirus has struck at a time when major economies, including Japan, Germany, India and Hong Kong are facing a downturn due to other factors such as the U.S.-China trade dispute and political protestors, which could hit the world economy.”

The deVere CEO goes on to add: “Until such time as governments pump liquidity into the markets and coronavirus cases peak, a near-term correction – of up to 10 per cent – is increasingly likely.

“We are hoping for a V-shaped recovery, but our current view is that it will be U-shaped.

“Against this backdrop and with the ongoing uncertainty over the direction of stocks and other risk assets, multi-asset portfolios might be favoured by global investors, given that they offer diversification of risk as well as of return.”

Nigel Green concludes with a warning: “Global markets are at high valuations and the impact of the coronavirus on profits appears largely underestimated.

“In general terms, stocks have hardly been deterred by the coronavirus outbreak.  This complacency is concerning.

“Investors need to ensure that their portfolios are coronavirus-proofed as cases jump and a market correction looks more likely.”