European businesses see outlook improving ‒ now hungry for growth

- Despite government support having prevented businesses from failing, half of the surveyed companies acknowledge that they are lucky to have survived 2020. On the other hand, many have excelled through digitalisation of their business models and more robust credit management practices - and they are thriving. A large part of European businesses are enthusiastic about the future, planning bold strategic initiatives as well as securing cash flow and liquidity. But the true impact of the pandemic on payment behaviour remains to be seen. Many companies have never been as concerned about their debtors’ ability to pay as they are now,” says Anders Engdahl, President and CEO of Intrum.

Although the pandemic turned the world upside down and caused widespread economic turbulence, Intrum’s European Payment Report 2021 finds that 45 per cent of business leaders today are more positive about growth than they have been for many years and are embarking on major strategic initiatives. Among small and medium-sized enterprises 39 per cent state that they have accelerated the digitalisation of their businesses due to Covid-19.

At the same time, the true impact of the pandemic on payment behaviour is not yet fully known. State aid in combination with businesses’ increasing reluctance to negotiate longer payment terms has supported liquidity over the past year. A majority of respondents (62 per cent) state that they have never been as concerned about their debtors’ ability to pay. The report suggests that 66 per cent of all European businesses foresee a considerable risk of late and non-payments growing and as government support is withdrawn, the situation will become more challenging.

Payment behaviour is masked by government support – although this is not the full picture

However, European companies have not only survived due to government support and technology development. The report shows that businesses have adopted a more proactive approach to how they mitigate liquidity squeeze and the risk of late payments. More than six in 10 (65 per cent) of small and medium sized companies say that the pandemic has encouraged them to improve in this area, compared to 46 per cent large corporations. Furthermore, in 2021 to date, there has been a 20 per cent drop from the previous year in companies that have accepted longer payment terms than they are comfortable with to maintain customer relationships.

Businesses see late payments as a societal issue, call for a society-wide solution

In light of Covid-19, business executives do foresee uncertainty for several years to come. Around half of those who have seen their profits decline say it will be 2022 or 2023 until they see a return to business as normal. However, 73 per cent of businesses across Europe expect the vaccine to have a positive impact on their performance during the second half of 2021. The concern today compared to last year’s report, is less about ensuring survival and more about enabling growth and hiring new employees.

More than a third of the respondents (37 per cent) say that late payments are prohibiting growth. As many as 70 per cent claim that faster payments from their debtors would enable them to invest in improving their sustainability performance and pursue innovation through digital strategies. Many companies believe that individual action will not be enough to deal with late payments but see them as a societal issue which should be reflected in new, pan-European legislation.

Finally, the report shows that economic recovery is highly dependent on the responsible handling of payments, sound credit management, and access to a level playing field. Sustainable cash flows and long-term profitability are more important than ever to enable companies to grasp the significant growth potential that they see on the horizon.

European Payment Report 2021/ Findings for the Greek market

Key findings

1. The risk of a pan-European recession threatens customer payments.
   The Greek economy was hit hard by the Covid-19 pandemic in 2020. Tourist arrivals fell by almost 80% compared to 2019, and revenues, which usually account for 1/5 of GDP, fell from 18 billion to 4 billion. In our survey, 44% of Greek companies report that the risk of a pan-European recession is a major challenge for customer payments over the next 12 months.

2. Businesses plan to locate areas that are exposed in the midst of a recession.
   Sixty-one percent of the companies surveyed say the Covid-19 pandemic has pushed them to improve their risk management of late payments (59%). Nearly 1/4 (24%) plan to identify areas of the business that are particularly exposed to prepare for an economic downturn compared to 19% across Europe. At the same time, more than 1/3 of companies (34%) intend to reduce costs compared to 28% of the European average.

In addition:
The impact of Covid-19 on business prospects and growth

• 42% of Greek companies, which participated in the survey, state that they see the future with enthusiasm, a percentage close to the corresponding European average (45%).
• 46% of Greek companies - a percentage also very close to the European equivalent of 49% - say they were fortunate to survive the impact of Covid-19 on its revenue and cash flow.
• One in 3 companies in Greece, which have seen a decrease in profits, estimate that they will return to normal in 2022 or 2023 as opposed to half of the companies in the rest of Europe
• In addition, 61% said the Covid-19 pandemic pushed the company to improve risk management from late payments.
• Also, an interesting and positive impact of the pandemic was the significant acceleration of the digitization of companies, mainly SMEs - by 39% - as a "response" to the crisis.

The economic perspective of the country from the business point of view

• 65% of companies surveyed - close to the European average - said the country was in recession, up from 55% in 2020.
• More than half (53%) of companies estimate that the pandemic will have little impact, while 34% said it will have a serious impact on their business. In terms of preparatory measures, the main measure for SMEs is cost reduction (37%), while large companies will seek to identify the "areas" that are most exposed to an economic downturn (33%).

The impact of the Covid-19 crisis on payments

• Six out of 10 (61%) companies stated that growing macroeconomic uncertainty led them to extend payment times to suppliers in the previous year, while almost half (48%) have accepted later payments than they would feel comfortable with not to negatively affect customer relations.

Risks and consequences of late payments

• In Greece, 66% (compared to 35% in 2020) of the companies that participated in the survey see an increased risk of overdue / zero payments from the company's debtors in the next 12 months.
• It is also worth noting that more than half of SMEs (58%) and large companies (55%) state that they do not apply the relevant European Directive ** to receive compensation in cases of late payments.

Towards a society without cash

• More than half of the companies in the sample (57%) believe that within the next 10 years the transactions in our country will be made without cash, when the corresponding percentage a year ago was only 25%.
• 45% of respondents believe that small businesses will not survive the pandemic if they cannot operate without the use of physical payments.

*About the survey:

The European Payment Report describes the impact of late payments on businesses’ outlook, growth, and development. Intrum gathered data from 11,187 small, medium and large companies across 29 European countries covering 11 industry sectors. The report was compiled between 25 January and 16 April 2021. From Greece 240 companies participated in the survey. 

**The European Late Payment Directive aims to bring about changes in the direct payments approach. The Directive proposes payment periods for companies to be no later than 60 days and for public authorities 30 days.