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Peer2Peer Finance News | November 22, 2017

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S&P predicts less defaults among European corporates next year

S&P predicts less defaults among European corporates next year
Kathryn Gaw

DEFAULT rates among European non-financial companies are likely to remain “exceptionally low” next year, according to Standard & Poor’s research.

In its European corporate outlook 2017 report, the ratings agency said it expects the default rate for non-financial corporates in Europe to decline to 2.3 per cent by the end of September 2017, from 2.5 per cent the year before.

Buoyant credit conditions and healthy economies are beneficial to peer-to-peer lenders. The P2P industry, both in the UK and mainland Europe, is yet to experience a downturn in the credit cycle on any meaningful scale due to its relative nascence.

Read more: P2P will prosper in a downturn, says Funding Circle’s Desai

“The great recession has given way to the great disruption,” said Gareth Williams, corporate economist at S&P Global Ratings.

“European corporates face an extremely challenging year ahead, with slower growth, US reflation and the risk of protectionism, domestic elections, Brexit, pension pressures, global oversupply, and disruptive technological change.

“But Europe remains a relative laggard in the credit cycle and with so many risk factors and a still fragile recovery, monetary policy is likely to remain exceptionally supportive.”

Read more: Tighter credit market provides opportunity for P2P

However, the report also warned that Brexit-induced uncertainty in the UK could have a detrimental impact on credit conditions here.

Read more: Borrowers and investors show strong appetite for alternative finance          

“A febrile political environment in the UK is creating an adversarial climate that risks a loss of goodwill in remaining EU members,” the report said.

“With the precise nature of the terms of the UK’s exit unlikely to become clear until 2019, there is a strong likelihood that a soundtrack of UK-EU dispute has a harmful effect on credit conditions for UK corporates and for EU companies with significant UK exposure.”