Which Countries Are a Safe Pair of Hands on Insolvency?

While economic growth continues to be sluggish at home, plenty of UK businesses are finding opportunities to do business abroad.

Latest figures show that UK exports outside the EU are enjoying a surge. They rose by an impressive 8.3 per cent in 2016 to a value of £311.6 billion, compared with exports to the EU amounting to £235.9 billion.

This cannot, of course, be viewed in isolation from Brexit. The EU has long been Britain’s largest trading partner. Now with exit from the union looming, it is apparent that UK businesses are already looking to opportunities further afield.

But trading overseas brings with it risks, especially for businesses which are reaching out beyond the EU for the first time. Domestically, and within the EU, companies enjoy familiar protections. Gaining credit, securing permits, rules to enforce contracts and so on are the same wherever you go across the EU. Plus you don’t have to deal with customs.

Step outside the EU, and you are dealing with different jurisdictions, different laws, different ways of doing business. This doesn’t lessen the opportunities to be found. But it takes more work to get to know them. And ultimately the risks are greater.

Resolving insolvency

As with all things, it is easier to do business in some parts of the world than in others. Each year, the World Bank puts together a guide, Doing Business, which ranks countries according to how easy it is to trade there, both as a domestic business and as an overseas trader. Each country is judged according to 10 criteria, covering regulation, infrastructure and finance.

Overall, in 2017 New Zealand was judged the best place to do business in the world, followed by Singapore and Denmark.

One of the 10 criteria used to make the judgements is how well each country is set up to deal with company insolvencies. For overseas traders, this is a particularly important consideration. All suppliers and contractors understand the problems which can follow if a client gets into financial difficulty. Recovering unpaid invoices can become a major issue, potentially threatening the stability of your own business.

When clients happen to be based thousands of miles away on different continents, those difficulties can multiply rapidly.

So even though New Zealand ranks best for doing business overall, for insolvencies it ranks a relatively modest 32nd out of 190. Not terrible by any means. But for anyone looking to export to New Zealand or travel there for contract work, it is worth noting that its record on resolving insolvencies could be better. If the client or partner you choose gets into trouble, recovering any outstanding monies you are owed might not be so straightforward.

For comparison, the UK ranks a respectable 14th on resolving insolvencies. But the safest hands on insolvency belong to Japan, followed by Finland, USA, Germany and the Korean Republic.

At the opposite end of the scale, there is a long list of countries for which the World Bank was unable to establish whether there was any state apparatus in place to handle company insolvencies. Including, interestingly, Saudi Arabia.

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