European Firms Suffer Late Payments and Await Recovery, says EPI Survey

The European Payment Index (EPI) 2014 survey has found that of the 10,000 business managers from 31 European countries questioned by Intrum Justitia, 40% view late payments as an impediment to them hiring new staff. In addition, despite assertions of a slowly improving economic situation, very few of the European business leaders surveyed said they saw signs of recovery, with 72% claiming they’d felt no positive ‘recovery’ impacts in the last three months.

Carried out by Bing Research in Q1 2014 and commissioned by Intrum Justitia, the EPI survey found that one in four of the business managers questioned in the 31 European countries assessed, including the UK, Ireland and Greece – plus Russia and Turkey – said the consequences of late payments included having to dismiss employees.

Intrum Justitia, a EUR700m credit services firm that buys accounts receivables and employs 3,600 people across 20 countries, has run its EPI survey since 1998 following a request from the European Commission (EC) to assess payment risks and behaviour across the continent. Its 2014 findings show that 55% of businesses said they are suffering as a result of late or non-payment of bills and invoices, the highest percentage ever in the EPI, with 50% saying it prohibits growth and 36% claiming it places their very survival at stake.

Despite recent evidence of a slow recovery, total bad debt losses in Europe rose from 3 to 3.1% of total business revenue, equating to EUR360bn, which is equivalent to 8m lost jobs, claims the EPI survey. It is the eighth year in a row that bad debt losses in Europe have risen.

“Imagine if European companies had that EUR360bn to invest in their businesses,” said Lars Wollung, Ppresident and chief executive officer (CEO) of Intrum Justitia. “If all bills were paid on time I believe that would add jobs to our economy. This is why I believe companies’ credit management is a key component to a sound economy. We would all be better off if bills were paid on time,” he concluded.

This is true for smaller companies reliant on cash flow, but for large multinational corporations (MNCs) ‘sweating’ their cash positions is often a contradictory driver and motivation, with treasurers focusing on this issue instead. The EPI survey tends towards assessing smaller job-creating businesses’ across Europe, rather than larger corporations.

Nevertheless, Intrum Justitia says that a lack of liquidity is a problem that should be addressed with 35% of businesses surveyed in Germany – the European Union’s (EU) largest economy – saying that late payments were a contributing factor when they had to lay people off. The picture is the same elsewhere with 30% of UK companies sharing in the concern; 28% in Spain, which has been hard hit by the eurozone crisis; and 25% in France reporting the same correlation.

Of the EU countries surveyed, Iceland and Sweden were the most pessimistic about signs of an economic recovery in Europe, with only 1-2% of business managers saying they’d felt any positive signs of a recovery. Hungary and Serbia were similarly pessimistic, with 2-3%, while the most optimistic countries were Lithuania, where 44% saw signs of economic recovery, and Denmark on 37%. The Netherlands at 36% was also relatively speaking ‘optimistic’ and surprisingly 30% of Spain’s businesses reported signs of recovery, although this is against a picture of staggeringly high youth unemployment with half of the country’s youngsters out of work.

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