2025 Credit Briefing

As 2025 unfolds, trade credit is set for another year of transformation, presenting both challenges and opportunities for credit professionals. Economic pressures, regulatory shifts, and sustainability demands are rewriting the rules of risk assessment while geopolitical uncertainties and technological advancements continue to shape global markets.

This briefing cuts through the noise to highlight the trends that matter most — keeping you informed, prepared, and ready to act.

UK Economy

Macro Environment

• OECD projects 1.7% growth, IMF revised to 1.3%
• Inflation at 3.2%, base rate at 4.25% after BoE cuts
• ￡40 billion in tax increases amid infrastructure spending
• Potential rate reduction to 3.25% based on inflation trends

Trade & Geopolitical Factors

• US trade negotiations: agricultural and digital trade policy challenges
• Brexit adaptation: ongoing customs and regulatory divergence
• Ukraine conflict causing energy price volatility
• Middle East stability concerns affecting markets

Business Landscape

• 49% of businesses expect revenue growth
• 32% require external funding
• Key challenges: supply chain disruptions, ESG compliance

Sector-Specific Impacts

• Construction: material costs and labour shortages
• Retail: inflation-driven demand shifts
• Hospitality: higher operating costs
• Manufacturing: CSRD compliance affecting UK exporters

EU Economy

Macro Environment

• OECD: 0.8% GDP growth, reflecting moderate recovery after weak 2024.
• IMF: Revised to 1.1% growth, citing fiscal tightening and trade risks.
• Inflation: 3.0%–3.5%, driven by energy costs and supply chain pressures.
• ECB Base Rate: 2.25%, with cuts likely to 1.75% by mid-2025 to stimulate growth.
• Fiscal Policy: Tightening in Germany and France may limit spending, but the EU Recovery Fund supports green and digital transitions.

Trade & Geopolitical Factors

• US Tariffs: Threats targeting automobiles and agriculture could disrupt exports and raise costs.
• Protectionism: Global trade risks, particularly in China and the US, threaten export-focused sectors.
• Energy Volatility: Ukraine conflict continues to drive commodity shortages and energy price spikes, impacting manufacturing and agriculture.
• Middle East Stability: Reduced shipping risks, but oil price volatility remains a cost concern.

Business Landscape

• Confidence: 50% expect revenue growth, but 32% face profitability pressures due to input costs.
• Funding Needs: High reliance on external funding due to energy costs and working capital pressures.
• ESG Compliance: CSRD reporting mandates add costs but create green financing opportunities.
• Supply Chains: Nearshoring and reshoring gaining traction to reduce disruption risks.

Sector-Specific Impacts

• Construction: Material costs and labour shortages, but public spending supports growth.
• Retail: Inflation-driven demand shifts impact pricing strategies and margins.
• Manufacturing: Energy costs and US tariffs pose risks for exports and competitiveness.
• Energy: Transition to renewables raises capital demands, while fossil fuels face financing risks.
• Agriculture: Commodity price fluctuations and trade disputes create export barriers and cost pressures.

Regulatory Changes: UK

Payment Services Directive 3 (PSD3)

• Replacing PSD2 with stricter security, authentication, and fraud-prevention measures.
• May affect payment processing systems and fraud detection tools used to evaluate customer payment reliability.

Financial Services and Markets Act 2023

• Post-Brexit reforms establishing a UK-centric regulatory framework for financial services.
• Could introduce new compliance checks or influence risk assessments for UK-based customers and counterparties.

Critical Third Parties (CTPs) Regulation

• Sets standards for key service providers to improve operational resilience and reduce risks.
• Requires monitoring of vendor resilience and supply chain risks, impacting customer dependency assessments.

Basel 3.1 Implementation

• Updates capital requirements and risk evaluation rules for banks and lenders in the UK.
• Implementation delayed until January 2026, giving additional time to assess potential impacts on lending practices and credit availability.

Regulatory Changes: EU

Corporate Sustainability Reporting Directive (CSRD)

• Mandates detailed ESG disclosures for sustainability reporting by large companies.
• Affects credit risk profiles due to ESG compliance and sustainability costs.

European Sustainability Reporting Standards (ESRS)

• Provides specific guidelines for ESG disclosures under CSRD.
• Supports comparability and risk reviews with standardised ESG data.

Carbon Border Adjustment Mechanism (CBAM)

• Requires emissions data reporting for imports with carbon pricing; full implementation by 2026.
• Potential cost increases for carbon-intensive imports, impacting financial stability and supply chains.

EU Trade Defence Measures

• Implements protections against unfair trade practices to safeguard EU industries.
• May influence supply chains and trade flows, requiring monitoring for disruptions and liquidity risks.

EU Combined Nomenclature (CN) Update

• Revises goods classification codes for customs declarations, effective January 2025.
• Could cause short-term disruptions in supply chains but has limited direct credit risk impacts.

Regulatory Changes: USA

Basel III Endgame Reforms

• Finalising stricter capital requirements for banks to improve financial stability.
• May tighten credit availability and increase financing costs, impacting liquidity and risk evaluations.

Trade Policy Updates (Tariff Adjustments)

• Expected tariff increases or trade agreement changes, especially with China and Mexico.
• May disrupt supply chains and affect creditworthiness for import-dependent businesses.

Corporate Transparency Act (CTA)

• Expanded beneficial ownership reporting requirements to combat financial crimes.
• Impacts KYC processes, customer screening, and risk management frameworks.

Climate-Related Disclosure Rules (SEC)

• Mandates climate-risk disclosures for publicly listed companies.
• Could increase compliance costs and affect creditworthiness, especially in carbon-heavy industries.

FTC Non-Compete Rulemaking

• Potential bans or limitations on non-compete agreements across industries.
• May affect workforce stability and operational risks, especially in IP-reliant sectors.

International Trade Environment

Trade Policy Changes

US tariffs include 25% on imports from Mexico and Canada, effective January 20, 2025, targeting automobiles, machinery, and agriculture. A 10% tariff on Chinese imports is also proposed, affecting electronics, textiles, and industrial equipment. Financial impacts include 12–15% cost increases in automotive production, 8–10% food price rises in agriculture, and 5–7% higher machinery costs, putting pressure on profitability and capital investments.

Protectionist trends continue, with the US considering 60% tariffs on Chinese goods and the EU exploring retaliatory measures, increasing risks of trade fragmentation. Trade agreements remain uncertain, with US-UK deal progress stalled and the EU-Mercosur pact delayed, limiting export expansion opportunities. However, growth in CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) and AfCFTA (African Continental Free Trade Area) may offer alternative markets to reduce reliance on high-risk regions.

Global Trade Growth Patterns

Global trade volumes are forecasted to grow 3% in 2025, but sector-specific risks persist. Energy and metals are expected to decline due to geopolitical disruptions and ESG transitions, while technology and electronics may see growth supported by reshoring initiatives and digital infrastructure investments. The agriculture sector faces mixed performance due to climate risks, tariffs, and supply chain disruptions.

Alternative markets are emerging, with Asia-Pacific and Africa becoming trade hubs.

Geopolitical Developments

Sanctions against Russia and Iran continue to impact energy markets and shipping routes, while China’s export restrictions on technology and critical materials further fragment global supply chains. Deceptive shipping practices, such as location spoofing, complicate sanctions enforcement and require enhanced compliance monitoring. Regulatory frameworks, including OFAC updates and EU sanctions regimes, demand frequent audits and blockchain-backed tracking tools to ensure compliance.

Trade war risks are rising, particularly between China/US/ EU, heightening the potential for tariff escalations and non-tariff barriers, which could disrupt industries such as electronics, pharmaceuticals, and industrial goods.

Supply Chain Transformation

Reshoring and nearshoring trends are accelerating, with businesses prioritising local suppliers and regional production hubs to reduce reliance on high-risk regions and lower transportation costs. Mexico’s automotive sector and Southeast Asia’s electronics industry are gaining traction as alternative hubs for global production.

Financing tools, such as trade credit insurance, factoring, and supply chain financing, are becoming critical to offset liquidity pressures caused by tariffs and delays. Businesses are increasingly leveraging dynamic credit monitoring platforms to manage real-time payment risks and maintain working capital.

Technological Developments

Automation and AI Revolution

AI is revolutionising financial markets and trade credit, enabling enhanced decision-making, improved efficiency, and automated risk monitoring through advanced credit scoring and fraud detection systems.

Blockchain Integration

Blockchain technology is transforming B2B and commercial payments with improved security, speed, and transparency, offering new opportunities in trade finance and payment processing.

Future Implementation

Organisations must integrate these technologies into their credit management processes to maintain competitive advantage and achieve optimal operational efficiency.

Accounting Standards

Consult with your accounting teams to understand the implications of these updates for your company.

United Kingdom

• FRS 102 Amendments – Aligns revenue recognition and lease accounting with IFRS. May affect financial ratios and creditworthiness evaluations.
• Supplier Finance Disclosures – Requires disclosures on supplier finance arrangements. Enhances transparency, impacting liquidity assessments.
• IFRS 16 Lease Accounting Alignment – Requires lessees to recognise leases on balance sheets. Impacts debt-to-equity ratios and balance sheet assessments.

European Union

• CSRD (Corporate Sustainability Reporting Directive) – Mandates detailed ESG disclosures for sustainability reporting. ESG compliance may influence credit risk assessments.
• ESRS (European Sustainability Reporting Standards) – Provides specific guidelines for ESG disclosures under CSRD. Standardised ESG reporting affects comparability and risk reviews.
• CBAM (Carbon Border Adjustment Mechanism) – Requires emissions data reporting for imports with carbon pricing. Potential cost increases for carbon-intensive imports.

United States

• ASU 2022-04 (Supplier Finance Programs) – Requires disclosures on supplier finance obligations. Greater transparency affects liquidity and credit evaluations.
• ASU 2023-08 (Crypto Assets) – Provides guidance for recognising and disclosing crypto assets. Impacts evaluations of crypto holdings and risk exposure.

Other Significant Trends

Increased Insolvencies

Rising business bankruptcies necessitate closer monitoring of financial health and credit risk. This requires enhanced due diligence, tighter credit terms, and payment guarantees to manage default risks.

Economic Uncertainty

Inflation, geopolitical tensions, and regulatory shifts drive market volatility. Flexible credit policies, scenario planning, and stress testing are needed to adapt to market fluctuations.

Geopolitical Developments

Continued risks from the Ukraine war and US trade tensions could disrupt supply chains, increase costs, and require contingency planning to mitigate exposure.

Sustainability Integration

Regulatory pressures drive the need for ESG-focused credit assessments, requiring integration of ESG factors into risk profiles and monitoring compliance in carbon-heavy sectors.

Looking Ahead: Take on 2025

As 2025 unfolds, businesses face a trade credit landscape defined by economic uncertainty, regulatory shifts, and sustainability pressures. For credit professionals, the challenge isn’t just to react to change—it’s to stay ahead of it.

At Baker Ing, we work with businesses to take control of uncertainty. Our expertise lies in recovering high-value debts, protecting cash flow, and strengthening financial resilience—all while preserving commercial relationships. We deliver tailored solutions, combining precision, discretion, and a global reach to ensure our clients can adapt confidently to shifting markets.

This briefing highlights the trends shaping 2025—from ESG compliance and supply chain disruption to geopolitical volatility and rising insolvencies. But insight without action achieves little. That’s where we come in—helping businesses turn complexity into clarity and challenges into opportunities.

Here’s to a year of resilience, foresight, and results. With Baker Ing, you’re ready for what’s next.