In recent years, various disruptions such as the Covid-19 pandemic and the invasion of Ukraine have prompted a reassessment of global supply chains. These events are impacting companies and influencing their attitudes towards international trade and their operations abroad. Allianz Trade has now published the second edition of its Global Survey, shedding light on these effects.

The survey encompassed approximately 3,000 exporters hailing from France, Germany, Italy, Spain, Poland, the UK, and the US. Allianz Trade sought insights from these companies regarding their export expectations for 2023, experiences with supply-chain disruptions, plans to enhance supply-chain resilience, and their environmental, social, and governance (ESG) strategies.

Non-payment is still the fear

Despite a generally positive outlook for export prospects in 2023, companies are grappling with significant economic uncertainty. Approximately 70% of companies anticipate a year-on-year increase in business turnover from exports, a slight decline from the 80% reported in the 2022 edition. This trend reflects the less favourable conditions for global trade anticipated in 2023. 

Allianz Trade projects slow growth in global trade volume, expected to increase by only 0.7% compared to the 3.8% growth experienced in 2022. Additionally, trade value is predicted to decline by 0.1% as opposed to the 9.7% growth observed in 2022.

There is a noticeable shift among companies towards prioritising the consolidation of existing markets rather than venturing into new ones. A significant majority, 63% of respondents, express a preference for increasing their investments in countries where they already have a presence.

In contrast, 47% of companies intend to allocate resources towards entering new countries. In terms of exporting, over 55% of corporate entities plan to focus on expanding their market share in the countries where they currently operate. Simultaneously, 52% aim to diversify their reach and target new countries for export opportunities.

Compared to last year, more respondents expect the length of export payments terms to increase (42% vs. 31%), with the share this year reaching levels close to 50% in both the US and the UK. The share of respondents expecting an uptick in the export non-payment risk has increased compared to our early 2022 survey, rising +11pps to 40% overall. The increase is widespread across countries, but especially visible in the UK and Germany (both +16pps), while it is only +6pps in Italy.

Aylin Somersan Coqui, CEO of Allianz Trade said, “Companies are facing a combination of lower demand, additional pressure on profitability and squeezing credit conditions as central banks continue to increase interest rates to bring down inflation. In this context, they are clearly bracing for longer export payment terms and higher non-payment risk in 2023. This is in line with our outlook for global insolvencies, which we expect to rise by +21% in 2023 (after +2% in 2022).”

Despite improvements, companies are still worried about supply-chain disruptions

Nearly 75% of respondents rated logistics hurdles and high transportation costs as having a moderate to a significant impact on export activity in 2023, making it the top challenge in Germany, Italy and Poland. For companies in the US and Spain, the top challenge is the cost and availability of financing. In contrast, for companies in the UK, high energy prices remain the top challenge to overcome this year. In France, companies are most concerned about non-payment risk.

Cash is still king for export financing

To fund export development plans, firms expect to continue to rely on cash, bank loans and payment terms. The former two options were also the top choices in last year’s survey – though the margin compared to other means has clearly declined this year, in a context of declining cash buffers at firms’ disposal and tightening bank lending conditions.

Ano Kuhanathan, Head of Corporate Research at Allianz Trade said, “Interestingly, beyond traditional sources of financing, companies are increasingly turning to Buy Now, Pay Later schemes to finance their exports. For companies in the UK and France, this is cited as the third source of financing after cash and bank loans. This growing interest could also unlock trade financing for Small and Medium Enterprises that were previously shying away from global trade.”

Even when considering public policies, firms are mostly calling for financial support. Active labor policies for labor upskilling ranks second after state-guaranteed loans and grants, stressing the importance of securing financing in the current environment. Cost control seems to be the top priority as the third preferred public policy measure is lowering barriers to trade, including dropping the Carbon Border Adjustment.

Companies prioritise incremental progress in ESG and maintaining business continuity

The energy crisis is accelerating the green transition. Amid the economic slowdown and financing constraints, more than 80% of respondents say that they will prioritize business continuity over ESG commitments in 2023. However, companies have not entirely given up on ESG targets: most respondents (85%) are stepping up efforts to shift to green energy sources over the long-term, especially in Spain, the US and France.

Aylin Somersan Coqui said, “The main priorities in terms of ESG measures still revolve around short-term actions, such as making environmentally friendly transportation choices, increasing ESG standards expected from suppliers or enhancing health and safety standards within the supply chain. But more structural measures are also being prioritized, such as developing sustainable and innovative products and services, and reducing exposure to brown activities.”