A year of changes

2020 will be remembered for the impact of the Covid-19 pandemic, and Europe’s businesses will likely feel the impact for many years. Maintaining a healthy cash flow is top of the agenda for European businesses, as it enables the companies’ ability to meet financial obligations, pay staff and fund future growth. The widespread shutdown of Europe’s economies from March has put that lifeline under threat.

For this year’s European Payment Report, Intrum surveyed 10,000 businesses across 29 European countries in order to understand their payment behaviour, the financial health of their company and the economic outlook in their country of operation. In addition, to get deeper insight into conditions on the ground, we carried out in-depth discussions with six senior executives from major European businesses.

European governments are working to ensure that their economies will rebound quickly from a recession brought on by the pandemic, but it could take longer for companies’ balance sheets to recover.

The results highlight how businesses are taking steps to prepare for a recession caused by Covid-19: 38 per cent of respondents plan to cut costs, and 35 per cent are going to be more cautious about debt. Their stance is understandable: the European Commission has predicted an 8.3 per cent drop in EU GDP this year*.

A recession will hit industries in different ways. We find, for instance, that businesses in the real estate and construction sector have been hit the hardest by late payment: 41 per cent of these businesses say they have accepted longer payments to avoid bankruptcy, compared with a European average of 35 per cent. At the same time, as hospitality and leisure firms grapple with government restrictions across Europe, our research suggests that they are the most concerned about the impact of the downturn.

The picture also varies across regions. Central European businesses are less affected by late payments than other European regions, and Southern European businesses are more concerned: 57 per cent expect the risk of late payments to increase over the next 12 months – 13 percentage points higher than the European average.

European governments are working to ensure that their economies will rebound quickly from a recession brought on by the pandemic, but it could take longer for companies’ balance sheets to recover.

Central to their recovery will be improving payment practices, and our survey reveals that businesses are addressing the issue of late payments by reviewing their internal processes. More than six in 10 respondents agree that paying suppliers late is a governance issue and should be addressed within their business practices, such as by fostering a culture that supports prompt payment.

At Intrum, our mission is to help our clients receive payment for their goods and services, and thereby improve cash flows and support long-term profitability of businesses across Europe. We use our unique insights to develop solutions that work for everyone involved. In this way, we can help businesses to form the foundations that will see them through the crisis of 2020 and into a solid, long-lasting recovery.

Mikael Ericson
President & CEO
Intrum

* ‘Summer 2020 Economic Forecast: An even deeper recession with wider divergences’, European Commission, July 2020 https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1269