Western Europe: Overdue invoices and write-offs increase dramatically

Crédito y Caución (Atradius) | This year’s Payments Practices Barometer survey in Western Europe was conducted during the pandemic downturn.

For many businesses around the world, 2020 has been the most challenging year experienced for some time. Global GDP is forecast to contract by more than 4% this year, world trade by about 15% and insolvencies to increase by 26%. Without exception, every country polled in Europe reported an increase in late payments which corresponds to an average two-thirds increase on pre-pandemic figures for the whole region. This would make a bigger downturn than the 2008/2009 recession. That said the impact of the recession varies across companies, sectors and regions. The countries with the strongest GDP contractions are those that enacted the most stringent pandemic lockdowns.

In Western Europe, this includes France, Italy and Spain. Meanwhile, the UK has had to face a double uncertainty with the challenges presented by both the pandemic and Brexit. It’s not all bad news. Many economies have been buoyed by governmental fiscal policies including tax breaks, social assistance and freezes on insolvency proceedings.

Key takeaways

-Increased business caution leads to a drop in the use of trade credit:

Trade credit is, on average, used in 55% of B2B sales across the region, lower than the 60% average seen in last year’s pre-pandemic sales.

-Payment terms lengthen by an average of 12 days

Where businesses did offer trade credit, many chose to increase the payment terms they offered in a bid to increase competitiveness and support customer liquidity issues.

-Overdue invoices and write-offs increase dramatically

Overdue invoices rise by two-thirds on pre-pandemic figures, and write-offs more than triple from 2% to 7% of total invoice value.

-94% of businesses in Europe report lengthening DSO

Late payments throughout Western Europe have led to a significant increase in DSO, although for the majority of businesses (57%) the increase is less than 10%.

-Despite pandemic challenges, a modest majority is cautiously upbeat

A small majority of businesses in Western Europe anticipate growth in their domestic markets next year. On balance, more businesses in the region are optimistic about the global economy and international trade.

Survey results for corporate payment behaviour by country (and other industries, including construction, construction materials, ICT/electronics, machines, paper, textile, transport and services including business services) can be found in individual reports featuring the listed below countries in Western Europe.