Global Debt is Rising, UK Firms Must Examine Their Own

19th April 2018.

The world’s $164 trillion debt pile is bigger than at the height of the financial crisis a decade ago, the IMF has warned, sounding the alarm on excessive global borrowing.

It is true that our generation has a tendency to borrow a bit too much, and the International Monetary Fund (IMF) is right to be worried. The fund insists that by cutting debt levels in both private and public sectors, global resilience will be strengthened, giving us an extra arm of defence in case “anything went wrong”. The IMF urges that simply living frugally is no longer enough, and taxes need to be increased in every country to make a dent in that government’s debt. The government debt in the UK has been forecasted to fall from its peak in 2016 of 88.2 percent of GDP to 82.5 percent by 2023. While the solution will ultimately lie with the government, the diminishment of our own country’s debt pile can be helped by a conscious effort to improve our fiscal responsibility.

More than anything else, we need to see a complete culture shift, where conscientious business owners and customers will strive for a debt-free existence. While borrowing is still the trend, recent economic upturns such as the rise in employment and the fall in inflation should loosen the squeeze on households, giving consumers fewer reasons to spend beyond their means. Before we can expect a major change in consumer behaviour, we need to ensure there will still be stores left on the high street. This means store owners need to focus all their time and money on expansion, and not on fending off late payers.

At the Credit Protection Association, our debt recovery and credit management services ensure all our members trade debt-free, and with the enthusiasm to pursue ambitious projects. By definition, the rise in global debt suggests it is not just the UK that is struggling to keep finances under control. As a result, it is important we keep pace with the competition, and see our businesses expand with the newest technology and machinery.

A year ago global economic GDP growth looked weak. It has picked up markedly over the past 12 months, and growth in 2017 rose by 3.8 percent, the fastest since 2011. The IMF now expects growth to strengthen this year and the next, by 3.9 percent.

The fund insists that a more direct approach is needed to encourage growth and to reduce our sizable debt pile.

“Fiscal stimulus to support demand is no longer the priority,” IMF urged.

With the global economy expanding strongly, it recommended that countries such as the US stop using lower taxes or higher public spending to stimulate growth and instead try to reduce the burden of public sector debts so that countries have more leeway to act in the next recession.

Whether it’s personal, business or even global, it is not impossible to become debt-free. It’s certainly difficult, but not impossible.

While the government slowly chips away at the country’s debt pile, businesses should concentrate on their own. Every business owner should accept responsibility for their own finances, making sure all debt is recovered and all late payers are eradicated. If a credit control procedure is not possible in-house, approaching a third party company like the Credit Protection Association, is advisable.

At CPA, our collections team will chase unpaid invoices, while our credit management products will secure a more competent credit control procedure in place. Your suppliers and customers will be credit checked and aligned with our company directory to ensure there are no rogue directors that may cause trouble.

Global finances may be shaky, but your business’ don’t have to be. Credit check your customers, wave off any late payers and put any extra cash into expansion and growth opportunities. Contact CPA for help and advice.