Baker Ing Bulletin: 11th April 2025

Europe got a nastya shock last month as trade war tensions flared again, thanks to President Donald Trump throwing another tariff bombshell. In late March, Trump dropped hefty new levies onto European imports, slapping a painful 25% tariff on cars, steel, and aluminium, alongside a 20% charge on nearly every other EU product crossing the Atlantic. These measures threatened to hit an eye-watering 70% of the EU’s exports to the US, valued at roughly €532 billion per year. 

Markets didn’t waste time panicking: European stocks nosedived, with carmakers suffering the worst bruising. So serious was the impact that S&P Global jacked up its recession-risk warning from a tame 10% to a worryingly real 25%.

But then, in classic Trumpian style, an abrupt U-turn followed. Early April saw the President slam the brakes on most of the new European tariffs for 90 days, offering negotiators a brief respite – but not before ramping tariffs on China to an eye-popping 125%. 

Seizing this opening, Europe also put its own planned retaliations – a hefty package of counter-tariffs targeting $28 billion worth of US goods – on hold, signalling a willingness to sit down and talk. The EU’s now-paused countermeasures included duties of up to 50% on American favourites from bourbon whiskey to cereals, meat, and clothing. Trump, never one to back down, previously warned he’d retaliate with a punishing 200% tariff on European booze if the EU dared to pull the trigger, sparking fears of a damaging tit-for-tat tariff war.

Europe’s diplomats are walking a tightrope now. One EU insider summed up their predicament neatly: 

“It’s a difficult balance – not too soft to be ignored, but not too tough to lead to escalation.”

Meanwhile, trade squabbles aren’t limited to just the EU and US; China and Canada have joined the fray with retaliatory measures, piling extra pressure onto already strained global supply chains. Businesses everywhere face increased disruption and spiralling costs.

Behind the headlines, the trade credit is scrambling. Credit insurance and debt collection agency activity is already booming as firms race to protect their cash flow against trade chaos. Recent surveys confirm they are busier than they’ve been in years, with exporters desperately hunting safeguards against tariff-induced shocks. But insurers aren’t exactly popping champagne corks: despite booming business, they’re bracing for continued high claims and tightening their purse strings accordingly, pushing up premiums.

The hotspot insurers fear most? Germany. Its powerhouse export sectors – automotive, construction, and commodities – are prime candidates for defaults as trade tensions escalate and tariffs bite deeper.

With trade turmoil far from over, credit professionals are on high alert, ready to pivot. As the world watches Washington’s next move, the mood is clear: strap-in, because it’s shaping up to be a very bumpy ride.

Britain’s economy just got dealt another hammer blow. Chancellor Rachel Reeves’ recent Spring Statement was meant to steady nerves – but instead, it saw growth forecasts brutally chopped down by the Office for Budget Responsibility. The watchdog now predicts the UK’s economy will limp along at just 1% growth for 2025 – barely half of what was previously hoped. Blame stubbornly high inflation, sluggish productivity, and global economic headwinds putting the brakes on Britain’s bounce-back.

But it’s not all doom and gloom – at least not forever. The OBR expects the UK to pick itself up somewhat from 2026 onwards, forecasting growth to crawl back up to around 1.8% annually, but only if inflation settles down and investors regain their nerve.

Yet inflation stubbornly refuses to fade away quietly. Consumer prices are now predicted to average 3.2% throughout 2025 – up sharply from the earlier 2.6% estimate. Worse, inflation is expected to peak around 3.8% by July, ensuring the Bank of England keeps interest rates uncomfortably high for businesses and borrowers alike. Even February’s mildly encouraging dip in inflation (from 3% down to 2.8%) isn’t enough to trigger relief: analysts say it’s far too small to encourage rate cuts any time soon.

The government is tackling the gloom by tightening its belt even further. Reeves has ordered whopping austerity measures totalling £14 billion in annual cuts, including welfare reductions, departmental spending slashed by around 15%, and thousands of civil service jobs on the chopping block. Yet despite these eye-watering savings, Brits are staring down the barrel of the highest tax burden since records began way back in 1948 – set to rise from today’s 35% of GDP to almost 38% by 2027/28. And ominously, the OBR has hinted even more tax hikes could appear in the autumn budget.

Unsurprisingly, businesses are far from thrilled. Working groups warn higher taxes coupled with dwindling government support will chill investment, just when the economy desperately needs a confidence boost. Particularly worrying is the government’s 1.2% hike in employer National Insurance contributions, accompanied by a lower salary threshold. According to the UK Chambers of Commerce, this one-two punch will hit 82% of businesses hard, forcing many to raise prices or put hiring plans on ice. UK Hospitality chimed in, warning of an “April cliff-edge,” with crucial government support tapering off right when businesses face soaring tax bills.

This gloomy outlook has shattered business confidence. Alarmingly, nearly one-third of mid-sized UK firms now say they’re seriously thinking of relocating abroad within two years. Why? They blame ballooning operational costs and climbing taxes. And it’s not just talk: about 42% of companies surveyed have already paused expansion and hiring, shaken by economic uncertainty.

For credit managers – our humble peers tasked with ensuring firms don’t end up drowning in unpaid debts out there – the signals are flashing red. Slow growth, squeezed profits, and towering tax pressures spell higher risks, especially for mid-market companies feeling abandoned by policymakers. More than ever, credit teams will need eyes wide open, closely scrutinising customers and tightening up lending terms.

One slender silver lining? Public finances, despite the gloom, still broadly align with fiscal targets thanks to all these cuts. But with taxes breaking records and growth faltering, the message is clear: batten down the hatches, because businesses face a challenging time ahead.

Central bankers across Europe have been juggling a tricky act this past month, wrestling with cooling inflation on one side and a trade-war on the other. Early March saw the European Central Bank (ECB) slashing interest rates yet again — its sixth straight cut since mid-2024 — chopping the deposit rate by another 25 basis points, bringing it down to 2.50%. Why so cautious? Simple: The tariff storm.

ECB insiders openly admitted that the new tariffs slapped onto Europe pose a serious threat to the Eurozone’s economic growth. Even though lower energy costs and a stronger euro have helped calm inflation somewhat, policymakers worry the tariff shock could cripple demand, risking inflation tumbling permanently below the ECB’s crucial 2% target. No wonder they acted fast with pre-emptive cuts.

But there’s a catch: if Europe does end up hitting back with tariffs of its own, prices for certain goods could spike temporarily. Faced with this tricky paradox – and with President Trump suddenly hitting pause on European tariffs for 90 days from early April – the ECB cautiously stopped short of promising further immediate cuts. 

Still, markets aren’t convinced the ECB’s rate-slashing spree is over. Investors are betting heavily that another cut is just around the corner – possibly two more later this year—especially if inflation continues easing (it currently stands around 2.3%).

Meanwhile, across the Channel, the Bank of England (BoE) chose a different path. Holding firm at 4.5% interest rates, the BoE voted 8–1 against immediate cuts, defying market hopes for swift relief. Governor Andrew Bailey didn’t mince words: the future looks murky, with trade battles triggered by the USA’s tariffs and retaliatory punches from Europe adding layers of uncertainty.

Inflation stubbornly clings on in Britain, still hovering around 3% (as of January), with the Bank expecting it to climb even higher to around 3.8% by July. Clearly, there’s no breathing room for rate cuts just yet. Bailey’s team also reminded everyone that UK rates have barely budged from their recent highs, contributing directly to Britain’s frustratingly sluggish growth. Despite nudging its Q1 GDP forecast slightly higher to 0.25%, the BoE is treading carefully. Governor Bailey insists that while rates will likely head downward eventually, nothing is set in stone; policy decisions will remain flexible and sensitive to changing circumstances.

For credit, these central bank manoeuvres send mixed signals. The ECB’s looser policy stance might improve liquidity and lower borrowing costs across Europe, but it reveals deep anxiety about future Eurozone growth. Meanwhile, the BoE’s cautious hold suggests UK businesses won’t see cheaper financing anytime soon, despite weakening domestic demand.

The two banks’ contrasting moves – ECB easing versus BoE caution – could even shift currency dynamics, potentially nudging the pound upwards against the euro. That’s important for exporters, influencing their competitiveness and complicating hedging strategies. 

We’ll need to watch these shifts closely as central banks battle to tame inflation, navigate geopolitical storms, and keep economies steady in increasingly turbulent times.

Europe’s corporate landscape is looking pretty grim right now, with insolvencies stubbornly high as the post-pandemic credit hangover refuses to fade. According to Allianz Trade, business bankruptcies shot up 10% globally in 2024, and they’re set to rise another 6% this year. Western Europe is feeling the pain most acutely, seeing insolvencies jump 19% last year alone – France up 17%, Germany soaring 23%, and Italy rocketing an alarming 45%. 

Around half of Europe’s industries have now crashed past their pre-pandemic bankruptcy levels, with construction, transport, and B2B services suffering the worst of it. Allianz warns insolvencies in Western Europe will tick up by another 3% in 2025, before possibly easing slightly in 2026. Highly leveraged firms, already struggling under rising interest rates and stubbornly high input costs, remain particularly vulnerable.

Yet it’s not all bad news everywhere. Britain, after hitting a brutal 10-year insolvency high in 2023, is showing signs of a modest turnaround. UK bankruptcies are predicted to fall by 6% in 2025, down to roughly 27,480 cases. Credit insurer Coface even upgraded Britain’s country-risk rating from A4 to A3, putting it level with France and Germany, on the back of signs insolvencies have peaked and begun declining. Germany and Italy, however, aren’t so lucky: bankruptcies there are expected to keep climbing steeply, by 10% and 17% respectively. France could hit a record-high 63,000 insolvencies this year before things start easing. These differences boil down to timing: the UK faced its wave earlier, shaking out weaker companies sooner, while the Eurozone is still adjusting from pandemic-era government support artificially propping up businesses.

The recent dramatic collapse of Northvolt AB, the Swedish electric vehicle battery giant, underscores just how dangerous things can get. Once hailed as Europe’s answer to Asian battery dominance, Northvolt spectacularly imploded on 12th March after failing to secure around $1 billion in desperately needed cash. Backed by a whopping $15 billion from heavyweights like Volkswagen and Goldman Sachs since 2016, Northvolt’s bankruptcy ranks among Sweden’s worst corporate disasters in decades. At its peak, the company employed over 6,500 people, anchoring a green industrial revolution in the northern town of Skellefteå. Local authorities have called its collapse a “disaster,” devastating for the local economy and workforce.

Despite government backing and huge injections of capital, Northvolt never scaled up production quickly enough. It had already filed for Chapter 11 bankruptcy protection in the US and changed leadership, desperately trying to turn things around – but when big customers like BMW Group cancelled orders over delays, the wheels finally came off. A trustee is now running a scaled-back version with around 1,700 employees, desperately salvaging what can be sold off. Volkswagen’s truck division, Scania Group, already swooped in to buy Northvolt Systems Industrial – a unit making heavy-duty battery packs – marking the first significant asset sale since the collapse.

This sorry saga mirrors wider European vulnerabilities. Construction, retail, and services firms are especially at risk globally, crushed between soaring operating costs and unpredictable consumer demand. Allianz predicts rising insolvencies worldwide could endanger as many as 2.3 million jobs this year alone, nearly half (1.1 million) in Western Europe – a grim ten-year high.

Things could worsen fast if interest rates stay stubbornly high or global trade tensions blow up into a full-scale trade war. In that doomsday scenario, Allianz analysts warn insolvencies could spike another 8% beyond current predictions for both 2025 and 2026.

With danger lurking everywhere, trade credit is understandably jittery, picking their battles carefully. While the UK market seems to be stabilising somewhat, the broader European outlook remains alarmingly fragile. Credit managers need to keep a hawk-eyed watch on vulnerable customers, tighten exposure limits for shaky sectors, and work closely with insurers and their collection partners. Navigating Europe’s messy insolvency landscape in 2025 won’t be easy—but vigilance and caution can still pay off.

When finance leaders land in Amsterdam, you might expect talk of cutting-edge technology and lofty digital ambitions. At the latest O2C Transformation Forum, however, the message was far simpler: stop chasing buzzwords and start chasing ROI.

Gathered at the heart of the Dutch capital at LuminAir Amsterdam, senior executives from finance, credit, and global business services faced a clear-cut challenge – strip back the hype around digital change, AI, and automation, and deliver straight answers on what actually works. The result was a candid, no-nonsense conversation rare in the world of corporate conferences.

First lesson: if you’re looking for a fast route to prove your business case, forget the grand-scale reinventions and start with cash applications. Forum delegates unanimously agreed: this overlooked area provides the quickest wins, rapidly demonstrating tangible returns from automation. It’s immediate evidence – no months-long wait, just fast-flowing cash and clear, provable efficiency.

Next came a reality check about ERP systems. Far from obsolete relics, ERP was repositioned by delegates as the foundation for future innovation. Contrary to popular narrative, the forum emphasised the importance of evolving current systems rather than expensive, risky rip-outs. In short, enhancing what you have – through smart integration and carefully selected bolt-ons – makes far more economic sense than throwing everything away and starting from scratch.

The discussion then moved firmly into human territory. Whilst technology advances relentlessly, delegates stressed that your teams need more than shiny new tools – they need strategic re-skilling. Automation without adequately re-skilled staff simply won’t deliver results. According to experts at the forum, re-skilling isn’t just beneficial – it’s a necessity, the critical enabler that separates digital success stories from expensive failures.

Above all else, however, delegates hammered home one fundamental truth: prioritise ROI above flashy features. This hard-headed focus, though perhaps unfashionable, was lauded as the only reliable compass for meaningful digital transformation. Chasing trendy functionality without clear financial returns, warned experts, was the fastest road to costly irrelevance.

Away from the practicalities of digital transformation, the forum also tackled a broader macroeconomic picture, articulated with characteristic clarity by economist Markus Kuger. He laid bare a challenging landscape: political instability rising, credit risk escalating, and insolvencies mounting across Europe. Whilst UK payment performance shows tentative signs of improvement, Kuger highlighted its fragility. Inflation, both in wages and energy costs, remains dangerously volatile, casting shadows over corporate planning. The outlook across industries is deeply split: services showing cautious optimism, but manufacturing buckling under pressure.

The overarching message from The O2C Transformation Forum Amsterdam was clear – finance leaders must navigate the complexities of digital evolution within the stark realities of a turbulent economy. This blend of blunt realism and practical advice set the O2C Transformation Forum apart once again – not as another high-minded tech gathering – a rare moment of truth-telling in a world of jargon-heavy corporate promises.