As we embark upon a new quarter, with Bank of England and European Central Bank keeping interest rates at a record low and with many fiscal stimulus programmes still ongoing around the world, there is an emerging consensus of tentative optimism. G20 co-ordinated their actions to introduce fiscal support and inject liquidity into cash-starved markets. Closer to home, our own Government has countered the tough times with a far reaching programme of stimulus packages to support domestic trade and keep struggling British businesses above water.  A key focus has been to improve liquidity including quantitative easing to the tune of £200 billion.  This has been replicated in most major economies around the world.

And there are clear signs of pay-back emerging. The decline is slowing and the US exited recession in Q3 09 with GDP growth of 2.8% and the Eurozone with 0.4%. International opinion seems to be generally united around the fact that we will see further economic recovery in 2010, with sales, production and trade figures revised upwards. Recession has thankfully receded for the time being and our fingers are universally crossed for a steady recovery for the battered economies and businesses who have made it through.

So whilst an optimism pervades the world business community, here in the UK we aren’t out of the woods yet, despite some “green shoots” emerging in the Q4 GDP figures. Many economic updates in the first two months of 2010 offer little comfort or certainty. There are also some elements of current business practice which still warrant close scrutiny. One of those we trade credit insurers are keeping a close eye on is the ‘Time to Pay’ tax deferral scheme.

This scheme has enabled businesses to postpone payment of their taxes for a given period, helping with their short term liquidity. In this climate this has provided a welcome break for hundreds of thousands of businesses. So what’s the problem? Well at some point, the scheme must come to an end. And naturally all of this raises a number of key questions. When should it end? And how? HMRC will surely insist that all deferred taxes are repaid as the economy improves but the Government will be anxious to avoid the inevitable spike in insolvencies when many companies can’t find the working capital to avoid an HMRC winding-up order. Election time will very quickly be upon us and what will result is currently anyone’s guess. But what is certain is that the new Government’s decisions in this area will be critical to  the contribution thousands of small businesses make to our economic recovery.. We may yet see a record number of perfectly viable companies of all sizes disappear either because they are unable to pay their tax bills, or worse still, unable to pay creditors, who could, in turn, disappear after feeling the effects of non payment.

Or perhaps they won’t disappear, which leads us to the second practice we continue to monitor with concern at Atradius. Recent weeks have seen the UK labelled the “Bankruptcy Brothel” of the world. This is a response to the growing number of companies choosing to (or threatening to) exploit the UK insolvency law through the “pre pack” administration process, leaving unsecured creditors, often small businesses, unpaid in their wake. Despite campaigning, the scheme continues to be open to exploitation through a lack of transparency, though we remain hopeful tighter regulation will avoid the flagrant abuse of insolvency rules.

So whilst there are clear signs that things are stabilising, the practices which will actually make the most significant difference within trade are trust and transparency. It is more important than ever for companies to know who they are dealing with and to encourage mutually open exchanges of information on a regular basis. At Atradius we’ve launched This e-mail address is being protected from spambots. You need JavaScript enabled to view it so that companies can send us their management accounts directly. We see information on thousands of businesses each day, and we are encouraged by how ready so many businesses are to share monthly management accounts both with us and with one another. Your trading partners’ business is your business and transparency could prove critical on either side. If you are close, get closer. Instigate regular management accounts reviews with anyone on your order book - and reciprocate with others who make the demand of you.  Don’t be afraid to ask.