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Late Payment & Business Distress

More than 47,000 UK businesses start 2024 on the edge of collapse after critical financial distress jumps over 25% again. The latest Begbies Traynor Red Flag Alert report highlights the speed at which critical financial distress is growing in the UK. 'Critical' financial distress levels jumped dramatically in Q4 2023, up 25.9% on the prior quarter (Q3 2023: 37,772), leaving more than 47,000 businesses near collapse in the UK at the start of 2024. This represents the second consecutive period where critical financial distress has grown by around a quarter. 539,900 UK businesses are now in 'significant' financial distress –12.9% higher than Q3 2023 and 5.6% higher year-on-year (Q4 2022: 511,093), with every sector of the twenty-two covered by Red Flag Alert noting critical financial distress increase on the prior period. Eighteen sectors saw at least double-digit growth. To read Begbies Traynor's news release, go to https://www.begbies-traynorgroup.com/news/firm-news/more-than-47000-uk-businesses-start-2024-on-the-edge-of-collapse-after-critical-financial-distress-jumps-over-25-again.

The number of Profit warnings from UK-listed companies in 2023 exceeded levels at the height of the 2008 financial crisis. According to EY-Parthenon's latest Profit Warnings report, the percentage of UK-listed companies issuing profit warnings last year exceeded the levels seen at the peak of the financial crisis. 18.2% of public firms issued warnings – higher than 17.7% at the peak of the global financial crisis in 2008. Last year, over a quarter of warnings (26%) were attributed to delayed contracts or decisions, 19% were due to increased costs, and a further 19% cited the impact of higher interest rates. In 2023, 39 listed companies issued their third or more consecutive profit warnings in twelve months, representing 18% of all companies that issued a warning last year. This compares to 31 companies that issued their third or more consecutive profit warning over a 12-month period in 2022. To date, 13% of companies that warned over profits for a third or more time in 2023 have gone on to de-list. To read EY's news release, go to https://www.ey.com/en_uk/news/2024/01/profit-warnings-from-uk-listed-companies-exceed-those-issued-at-2008-crisis.

UK profit warnings reached a new high in 2023. New figures released by InfolinkGazette confirm the prediction that company profit warnings would continue to rise in 2023. In 2022, profit warnings had already quadrupled, up from 65 in 2021 to 386 in 2022 – an increase of over 490%. As predicted, that number went up by 23.5% over the previous year to a new high of 477 profit warnings in 2023. 30% of profit warnings cited impacted sales, and 10% noted inflation and increased costs as the reason for the downturn in expectations. References to energy prices in the warnings tripled when compared to the previous year. Ben Sims, Managing Director at Tech City Labs, the company behind InfolinkGazette, commented: "Whilst profit warnings in Q4 2023 (76) were lower than the previous year indicating that things may be starting to level off (Q4 2022: 96), the overall picture suggests that we are still in the middle of a storm." Click here to read InfolinkGazette's news release. 

InfolinkGazette figures show "a huge" increase in Initial Stage Winding Up petitions in 2023 and a Q4 increase in debtor-driven HMCourts filings. Figures released by InfolinkGazette analysing HM Courts' findings show that debtor-driven filings increased by 37% year on year to 2494 filings in 2023. Although the filings were slightly lower in Q4 2023 than in Q3, the data confirms a 12% increase in Q4 2023 compared to Q4 2022. InfolinkGazette figures also reveal "a huge" rise in Initial Stage Winding Up petitions in 2023 – up 87% to 6494 filings in 2023, compared to 3465 filings the previous year. S. Kaler, Head of Data & Operations at InfolinkGazette, commented: "The increase in Winding up Petitions continues to be driven by HMRC actioned filings. Numbers tripled from 982 petitions in 2022 compared to 2856 petitions brought by HMRC in 2023. Similarly, winding up Petitions not initiated by HMRC went up by 56% from 2483 in 2022 to 3638 in 2023. The picture remains tough for many businesses." Click here to read InfolinkGazette's news release.

 

UK & Ireland Corporate Insolvencies

Company insolvencies in 2023 reached their highest annual total in thirty years. Latest data from the UK's Insolvency Service has found that in 2023, there were 25,158 registered company insolvencies in England and Wales, comprising 20,577 creditors' voluntary liquidations, 2,827 compulsory liquidations, 1,567 administrations, 185 company voluntary arrangements and two receivership appointments. This was the highest number of company insolvencies since 1993, with one in 186 active companies (at a rate of 53.7 per 10,000 active companies) entering insolvent liquidation in 2023 – an increase from 49.6 per 10,000 active companies in 2022. However, although the rate in 2023 was the highest level since Q3 2014, the number of companies on the Companies House register has increased over time. Consequently, 2023's rate remained much lower than the peak rate of 94.8 insolvencies per 10,000 active companies during the 2008/09 recession. To read the Insolvency Service's news release, go to https://www.gov.uk/government/statistics/company-insolvency-statistics-october-to-december-2023/commentary-company-insolvency-statistics-october-to-december-2023.

Licensed under the terms of Open Government. Licence v3.0.

UK company insolvencies in January 2024 were 10% higher than in January 2023. New data from Creditsafe has found that 1947 companies in the UK became insolvent in January 2024 – a 30% decrease compared to the previous month but an increase of 10% compared to the same month in 2023. 17% of insolvencies in January came from within the UK construction sector. According to Creditsafe, although the current economic challenges are pushing an increasing number of businesses into insolvency, the trends are still uneven. The total number of UK company insolvencies for 2023 rose to 30,199. This number represents a 12% increase compared to 2022 and a 52% increase compared to 2021. Construction accounted for 17% of all company insolvencies in 2023. To read Creditsafe's news release, go to https://www.creditsafe.com/gb/en/blog/reports/insolvencies.html.

Cebr raises its forecasts for corporate insolvencies in 2024 by nearly 18%. In September last year, Cebr predicted that the UK would see 7,000 companies going insolvent each quarter in the UK in 2024. However, the Cebr now note that Q4 2023 data indicates that the UK has reached that level already. As a result, Cebr's central forecast for corporate insolvencies for the year has increased to 33,000. According to Cebr, the companies failing in 2024 and 2025 will have often got into financial trouble during the pandemic and have never really escaped. Traditionally, construction companies are most at risk of going into liquidation, and this has not changed. But both the retail and the hospitality sectors have nearly caught up with construction in terms of insolvency numbers in 2023. To read Cebr's news release, go to https://cebr.com/reports/cebr-raises-its-forecasts-for-corporate-insolvencies-in-2024-from-28000-to-33000/.

UK Economy

The UK economy's stagnation should start to fade in 2024. Although the new EY ITEM Club Winter Forecast has downgraded its 2023 growth forecast from 0.6% to 0.3%, it expects the UK economy to grow by 0.9% in 2024 - up from the 0.7% growth projected in its October Autumn Forecast. GDP growth expectations for 2025 have also been upgraded from 1.7% to 1.8%. Martin Beck, Chief Economic Advisor to the EY ITEM Club, said: "Although it remains possible that the UK may have slipped into a technical recession in Q4 2023, the mood music around the economy is justifiably improving. High inflation and expensive borrowing costs have been two of the biggest obstacles to growth recently and, with both showing encouraging signs of subsiding, prospects for late 2024 and beyond appear brighter." To read EY's news release, go to https://www.ey.com/en_uk/news/2024/01/uk-economy-stagnation-should-start-to-fade-in-2024.

UK GDP growth will likely remain sluggish into the medium term. The National Institute of Economic and Social Research's (NIESR) latest UK Economic Outlook suggests that the outlook for UK GDP growth remains sluggish in the medium term. The report highlights that the UK experienced a recession in the second half of 2023, with GDP growing by 0.3% for the entire year. Looking ahead to 2024, NIESR anticipates a modest improvement, with GDP expected to increase by 0.9%, accompanied by an inflation rate below the Bank of England's 2% target. However, NIESR cautions that geopolitical risks pose significant threats to this forecast. Notably, the institute draws attention to the substantial increase in shipping costs between China and Europe, which have surged by approximately 150% since the beginning of October. Furthermore, NIESR warns that an escalation of the conflict in Gaza could exacerbate challenges. To read NIESR's news release, go to https://www.niesr.ac.uk/publications/uk-households-better-off-election-looms?type=uk-economic-outlook.

 

Allianz Trade ranks the UK as "medium risk" for enterprises. Trade Finance Global (TFG) has reported that the UK's economy is expected to have narrowly avoided a recession in 2023, with GDP growth of 0.5% and exports not yet reaching pre-pandemic levels – making the UK an exception among G7 nations. GDP growth in the UK is forecast to remain subdued, at  +0.6% for 2024, with an expected increase to +1.5% in 2025. Inflation is on a slow decline but remains well above the Bank of England's target, with no expectation of dropping below 2% before 2025. Compared to other nations, the UK's risk rating at AA2 is behind Australia, Canada, the US, Belgium, Denmark, Finland, France, Germany, and Ireland, all of whom are ranked AA1 (low risk). To read TFG's article, go to https://www.tradefinanceglobal.com/posts/allianz-trade-releases-first-country-risk-atlas-uk-ranked-medium-risk-enterprises/.

Most UK SME exporters are seeing no improvement. The BCC's latest trade Confidence Outlook shows that UK SME exports have been broadly static since the pandemic and are far less likely to see improvements compared to the pre-pandemic and pre-Brexit periods. In Q4 2018, 28% of SME exporters reported an increase (5 points higher than Q4 2023) and 16% reported a decrease (8 points lower than Q4 2023). The BCC also notes that there has been a noticeable divergence between domestic trade performance and exports in the period since the pandemic. As the economy reopened in 2021, there was a sharp increase in UK sales, while overseas orders saw no corresponding rise. The situation remains more volatile for SME manufacturers than other sectors, with 28% reporting an increase in exports, 44% no change and 28% a decrease. To read the BCC's news release, go to https://www.britishchambers.org.uk/news/2024/01/most-sme-exporters-seeing-no-improvement/.           .

The UK is now ranked the 8th largest manufacturing country in the world. Xenia Broking has published its latest Market Insight report on the UK manufacturing industry. The report notes that the UK has moved up and is now ranked the 8th largest manufacturing country in the world (with a total of £34 billion invested into the economy yearly), the 14th largest for export of goods (10th in 2022), 8th for import (5th in 2022) and maintained 2nd in the service trade. In 2022, the UK's exports of goods and services totalled £834 billion, and imports totalled £902 billion, with the EU accounting for 41% of UK exports of goods and services and 47% of imports. According to data from Allianz, Atradius and Coface, there has been a deteriorating trend in non-payments this year, with the situation expected to worsen in 2024 before recovery. According to research by Atradius, invoice payments take between 45 and 60 days on average. To read Xenia's Market Insight report, go to https://xeniabroking.com/news-and-insights/sector-report-uk-manufacturing           .

    

The rising cost of debt could cost UK Plc £25 billion. A new analysis from EY warns that the cost of debt financing has increased, on average, by 3 to 6 percentage points since January 2022. Based on the projections, between 2024 and 2027, £500 billion of private and corporate debt will need to be refinanced by UK listed companies, costing an additional £20-25 billion in annual debt service costs. Luke Reeve, Partner and Head of Debt Advisory at EY, said: "This will require adjustment in capital structures and equity valuations, which will affect all UK-based companies and will be untenable for some." To read EY's news release, go to https://www.ey.com/en_uk/news/2024/02/rising-cost-of-debt-could-cost-uk-plc-25bn-gbp.

Small business confidence dipped in the final quarter of 2023. According to the latest quarterly Small Business Index by the Federation of Small Business (FSB), small business confidence decreased in the final quarter of 2023, reversing earlier gains. The hospitality sector remained the least optimistic, while manufacturing firms experienced a notable decline in confidence between the third and fourth quarters. Overall, the percentage of small businesses anticipating growth in the coming year decreased from 49.6% to 48.2%, with an uptick in those expecting contraction from 12.7% to 15.0%. Late payments continued to pose challenges for 65.8% of businesses, up from 60.8% in Q3, with a notable increase in those reporting worsening late payment issues, climbing from 20.5% to 27.4% over the last three months. To read the FSB's news release, go to https://www.fsb.org.uk/resources-page/final-quarter-of-2023-saw-small-business-confidence-lose-ground-new-report-finds.html.


Global Economy

The Weil European Distress Index has found that European corporate distress is deepening. The latest Distress Index, which analyses data from more than 3,750 listed corporates and financial market indicators, signals a shift in pressure over the past quarter, with falling profitability becoming the primary driver of corporate distress. Germany emerges as the most distressed market in Europe, influenced by the country's bleak economic outlook, with its government and the European Commission projecting a 0.4% contraction in its economy for 2024. Whilst there has been a slight easing of corporate distress in the UK compared to the previous quarter, it remains significantly higher than the same period during the previous year. There has been a notable shift in France, traditionally the least distressed market in the Index, now ranking third place. Meanwhile, Spain and Italy, though still the least distressed regions, are experiencing distress levels above the long-run average. To read Weil's press release, with a link to the full report, go to https://www.weil.com/articles/the-weil-european-distress-index

D&B's latest Global Economic Outlook suggests that there is more reason to be optimistic about the global economy's prospects than at the onset of last year. Despite widespread fears of a recession, the global economy managed to steer clear of one in 2023 and is poised to continue this trend into 2024. D&B expects a continued divergence among advanced economies in 2024, with the US economy predicted to outperform its European counterparts – although this dynamic may shift towards the end of 2024 – and emerging economies, particularly India, the key drivers of global growth. However, Europe faces the prospect of stagnation in 2024, and the UK is bracing for a challenging year ahead. Although D&B predicts that the UK will avoid a technical recession, it expects modest growth of less than 1% in 2024, following a 0.4% growth in 2023. For further details, visit D&B's news release at https://www.dnb.co.uk/perspectives/finance-credit-risk/country-risk-global-outlook.html.

 

Allianz Trade's inaugural Country Risk Atlas indicates the robustness of the global economy. Allianz Trade's inaugural Country Risk Atlas suggests that the global economy has shown robustness in 2023, with an upward adjustment in the risk ratings of twenty-one countries (equivalent to around 19% of the global GDP), contrasted with only four downgrades. This marks a significant shift from the previous year, which saw eight upgrades against seventeen downgrades. Africa has the most upgrades (10), followed by Europe (6). Overall, the global risk of non-payment for companies stands at Medium Risk – almost back to 2019 levels. Africa's average risk rating stands above three (Sensitive), while the Middle East, Latin America and Eastern Europe (incl. Russia) are close to but below three (Sensitive). Asia Pacific is slightly above two (Medium), and Western Europe and North America are close to one (Low). To read Allianz Trade's news release, with a link to the full report, go to https://www.allianz-trade.com/en_global/news-insights/news/allianz-trade-country-risk-atlas.html.

Global GDP growth slowed to 3.1% in 2023, with a further slowing expected in 2024. The National Institute of Economic and Social Research's (NIESR) latest Global Economic Outlook estimates that global GDP growth slowed to 3.1% in 2023 from 3.5% in 2022, and a further slowing, albeit slight, is forecast for 2024. NIESR advises that the Euro Area stagnated in 2023, with the economy narrowly escaping recession. In contrast, while not rapid, growth in the US and most emerging economies has held up. In 2024, NIESR predicts that, although it expects slower global GDP growth, major economies should avoid contractions in economic activity. In addition, NIESR forecasts that OECD annual inflation will continue to fall, from 9.9 last year to 7.1% in 2024 and 3.8% in 2025. To read NIESR's news release, go to https://www.niesr.ac.uk/publications/inflation-past-peak-growth-still-slowing?type=global-economic-outlook.

 

GDP was stable in both the euro area and the EU in Q4 2023. According to a preliminary flash estimate published by Eurostat, seasonally adjusted GDP remained stable in both the euro area and the EU in the fourth quarter of 2023 compared with the previous quarter. Compared with Q4 of the previous year, seasonally adjusted GDP increased by 0.1% in the euro area and by 0.2% in the EU. Among the Member States for which data are available for Q4 2023, Portugal (+0.8%) recorded the highest increase compared to the previous quarter, followed by Spain (+0.6%), Belgium and Latvia (both +0.4%). Declines were recorded in Ireland (-0.7%), Germany and Lithuania (both -0.3%). The year-on-year growth rates were positive for six countries and negative for five. To read Eurostat's news release, go to https://ec.europa.eu/eurostat/documents/2995521/18404141/2-30012024-AP-EN.pdf/90da3cfd-0c61-d735-3d27-2597bd170e28.

Coface warns that global growth is still bending but not breaking (yet). Coface
's latest Country and Sector Risk Barometer for Q3 2023 has advised that, after a somewhat turbulent 2023 which ultimately turned out much better than expected, 2024 is shaping up to be "as decisive as it is uncertain", both in (geo)political terms and in economic terms. Growth in the world economy is set to slow to 2.2% in 2024 (from 2.6% last year), with near stagnation in Europe. In this context, Coface has modified thirteen country risk assessments (twelve upgrades and one downgrade) and twenty-two sector risk assessments (seventeen upgrades and five downgrades), reflecting a significant improvement in the outlook, but cautions that the environment remains fragile and highly unstable and, therefore, uncertain. Coface notes that 2024 will be a pivotal year. To read Coface's news release, with a link to the full report, go to https://www.coface.uk/News-and-Publications/News/2024-a-pivotal-year-in-Coface-Country-and-Sector-Risk-Barometer-Q3-2023.

Growth continuing at a modest pace through 2025, inflation declining to central bank targets. Global growth is holding up, while the pace of growth remains uneven across countries and regions, and inflation is still above targets, according to the OECD's latest Interim Economic Outlook. The Outlook projects global GDP growth of 2.9% in 2024 and a slight improvement to 3.0% in 2025, broadly in line with the previous OECD projections from November 2023. Asia is expected to continue to account for the bulk of global growth in 2024-25, as it did in 2023. Inflation is expected to continue to ease gradually, as cost pressures moderate. Headline inflation in G20 countries is expected to decline from 6.6% in 2024 to 3.8% in 2025. Core inflation in the G20 advanced economies is projected to fall back to 2.5% in 2024 and 2.1% in 2025. 

OECD, 2024, Growth continuing at a modest pace through 2025, inflation declining to central bank targets, 05 February 2024. OECD, https://www.oecd.org/newsroom/growth-continuing-at-a-modest-pace-through-2025-inflation-declining-to-central-bank-targets.htm.

Credit Management: New Resources

Company Watch launches new products and services. Company Watch launches new products and services. Company Watch has launched its new API and Scoring API. Company Watch advises that API & Cloud Data Access allows users to "easily connect our analytics and data directly into your internal systems." Scoring API enables users to apply Company Watch's financial scores, including H-Score®, to a user's own financial data and accounts. In addition, Company Watch told Credit Insurance News that it recently listed a comprehensive historical index of its scores on Google Analytics Hub, enabling Data Scientists and Analysts easy access to vast datasets to explore, test and develop their own insights. Find out more here: https://www.companywatch.net/api/.

The Federation of Small Businesses (FSB) has launched a solution to address the issue of limited finance accessibility for UK small businesses. Recent findings from the FSB reveal a decline in successful SME credit applications, from a 62% approval rate to 53% in Q4 2023, with 33% of approved applications subjected to interest rates exceeding 11% – up from 8.9% - 9.3% in Q3. The predominant motive behind seeking financing has also shifted significantly, with cash flow concerns surging from 26% to 55% within a year. In response, the FSB, in collaboration with Capitalise, has launched a funding platform that offers lending solutions from over a hundred reputable UK lenders. Beyond financing options, it can also give businesses insights into their credit scores and facilitate assessing credit risks associated with suppliers and clients. To read the FSB's news release, go to https://www.fsb.org.uk/resources-page/new-platform-to-improve-small-business-access-to-finance-amid-signs-of-sme-credit-crunch.html.

Events & Professional Development

ICISA Surety Week 2024, 19 February (08:00) - 22 February (17:00) CET.

Surety week is a week of celebration of Surety sector. With this event, ICISA aims at increasing awareness of the valuable economic role of surety industry. Experts in the sector agreed to join our initiative and share their views on issues faced by the industry nowadays.

The event will take place between 19 - 22 February 2024. A total of 8 virtual sessions will be organized during the week, featuring debates, interviews, webinars and presentations. The sessions will be organised daily from 10:00 - 11:00 CET and 15:00 - 16:00 CET.

The agenda and details about registrations will be published in the upcoming weeks.

IDD certificates will be issued on request.

For more information, go to https://icisa.org/event/icisa-surety-week-2024/.

TXF Americas 2024: Structured Trade & Export Finance, 28-29 February. East Hotel Miami
Join the best structured trade and export finance event in the Americas with over 200 of the most active lenders, ECAs, exporters, borrowers, traders and more looking to finance deals and meet key clients. Special offers available - email marketing@exilegroup.com to enquire.
For more information go to https://americas2024.exilegroup.com/.

MENA 2024: Export, Project & Development Finance, 4-5 March. Dubai, Ritz Carlton 
Join us as we gather a deal-hungry attendee list from leading ECAs, exporters, borrowers, EPCs, developers, lenders, investors, ECAs and other key export and project finance players!

Special offers available - email marketing@exilegroup.com to enquire.

For more information go to https://mena2024.exilegroup.com/.

 

The RFIx24 Awards 2024, 22 May. London, Hilton London Canary Wharf.

The BCR RFIx Awards are back for the sixth year of celebrating professional excellence in receivables
and payables finance. The RFIx Awards 2024 looks to acknowledge the players and individuals whose
notable accomplishments are leading the industry towards agile, sustainable growth, innovation and
customer satisfaction.

These prestigious awards are international in scale, and entries are open to all
companies involved in the receivables and payables finance ecosystem, including banks,
non-banks, fintechs, trade credit insurance providers, consultancies, and legal advisors.
Apply for one or more Receivables Finance Industry Awards today, and let us salute your
success: https://bcrpub.com/awards/rfix24-awards.

TXF Global 2024: Export, Agency & Project Finance,11-12 June. Athens, Divani Caravel

The most distinguished export finance event around returns and this year to Athens! With over 1000 in-person attendees, a stellar speaker list and a networking opportunity that is crucial if you work in this industry. 

Special offers available – email marketing@exilegroup.com to enquire,

For more information go to https://global2024.exilegroup.com/.

Professional Development

STECIS, the Trade Credit Insurance & Surety Academy endorsed by ICISA, offers a range of
webinars and classroom training courses.

Classroom training courses are organised once or twice per year or on demand, while webinars
are organised multiple times per year or on demand for groups of participants.


The following courses have been planned in Q2 2024*:

  • 23 & 24 April: The Surety Bonds Foundation Course

  • 23 & 24 April: The Surety Bonds Advanced Course

  • 18 & 19 June: The Trade Credit Insurance Foundation Course

  • 20 & 21 June: The Trade Credit Insurance Advanced Course.

In planning: 4 & 5 June: Two-day seminar, Introduction to Trade Credit Insurance. Dubai – United Arab Emirates

* Note: Stecis’ courses will only be executed when enough participants have enlisted.

Except for the seminar in Dubai, all classroom courses will take place at a location in Amsterdam, the Netherlands. The courses include lunches and a dinner at the end of the first training day. The courses are hosted by very experienced experts from the industry and there is plenty of opportunity for asking questions, discussion and networking. There is also the possibility of arranging in-house training (at your own offices or at a venue of choice) with a tailor-made program based on the training needs of your company.


Detailed information about the webinar and classroom training courses is available on Stecis’ website: www.stecis.org. Also, further information can be obtained by sending an e-mail to info@stecis.org.

About this month's sponsor: Chubb

Chubb is the world's largest publicly traded P&C insurance company and the leading commercial lines insurer in the U.S. With operations in 54 countries and territories, Chubb provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. As an underwriting company, we assess, assume and manage risk with insight and discipline. We service and pay our claims fairly and promptly. We combine the precision of craftsmanship with decades of experience to conceive, craft and deliver the very best insurance coverage and service to individuals and families, and businesses of all sizes. 

Chubb has more than $200 billion in assets and reported $52.0 billion of gross premiums written in 2022. Chubb's core operating insurance companies maintain financial strength ratings of AA from Standard & Poor's and A++ from A.M. Best. Chubb Limited, the parent company of Chubb, is listed on the New York Stock Exchange (NYSE: CB) and is a component of the S&P 500 index. Chubb maintains executive offices in Zurich, New York, London, Paris and other locations, and employs approximately 40,000 people worldwide.

Chubb Global Markets operates through our syndicates at Lloyd’s and also through Chubb European Group SE. This parallel distribution provides us with a unique platform that allows our experiencedand highly skilled underwriting team to offer insurance solutions globally.

UK Economy
Late Payment & Business Distress
Global Economy
Insolvencies
About the sponsor
Events
Resources
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