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European Payment Risk Index shows slight improvement in 2016

Intrum Justitia’s European Payment Risk Index (EPRI) rose slightly in 2016, but the differences between countries are still substantial.

The EPRI provides a holistic view on risk, markets and how exposed companies are to them. It is a part of Intrum Justitia’s European Payment Report which surveys 9,440 companies across Europe about the payment behaviour and financial health of European Business. The index in its current form was first calculated in 2015, which is the base year with the value zero for the total index. In 2016 the total index nudged up to 0.06, signalling a fractional improvement in conditions compared to the previous year.

The index is an amalgamation of three different parts: the payment morale, the risk of getting paid late and the impact that late payments have on businesses. In spite of the modest improvement in the total index, the difference between the best and worst performers has widened over the past year. The lowest possible value for the total index and its components is -2 and the maximum is +2.

Bosnia maintained its place at the bottom of the index league but slid to -1.46 in 2016 compared to -0.99 in 2015. Debtors with financial troubles is the main reason for late payments in one of Europe’s poorest countries and Bosnian businesses are among the least likely to use debt collection; 73 percent say they never hand over bills to a collection agency.

Italy also showed a negative trend, with its index slipping to -1.15 in 2016 from -0.88 in 2015; intentional late payment is the main cause for the late payments. This led to over half of Italian businesses stating that late payments had a medium to major effect in stunting the growth of their company.

At the other end of the scale, Denmark improved to 0.69 in 2016 from 0.60 in 2015. Administrative inefficiency continued to be the main cause behind late payments but, on the bright side, the outlook for risk from debtors for Danish businesses is stable for the next 12 months, with 91 percent of businesses expressing that viewpoint.

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Intrum Justitia gatherers data from thousands of companies in Europe on a yearly basis to gain insight in to the payment behavior and financial health of European business. The results are presented in our European Payment Report.

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