European Payment Report 2020 The impact of the COVID-19 crisis in the European and Greek markets

“Businesses are now taking necessary steps to prepare for a recession caused by the pandemic. Decreased revenues have reduced businesses’ cash flow and increased pressure on their outgoing payments. The initial impact on the European payments landscape continues to be dramatic” says Mikael Ericson, President and CEO of Intrum. 

Cutting costs and cutting down recruitments 

In the report, two measures among European companies clearly stand out. In order to protect their business in preparation for a recession and an economic upheaval, 38 per cent of respondents plan to cut costs, while 35 per cent will be more cautious about debt. 29 per cent say they are looking to cut down on recruitment to prepare for a recession, compared to 18 per cent in 2019. 

The payment gap is widening 

Businesses are prioritising their payment practices to find solutions. Despite all good efforts being done, the payment gap is widening across Europe.  The estimated time between the agreed payment term and the actual duration of pay is now 14 days compared to 6 days in 2019 in B2B corporate payments.

More than four in ten respondents (43 per cent) see risk from debtors increasing over the next twelve months and 19 per cent say it will increase significantly. Businesses are under increasing pressure by reduced liquidity, leaving many of them to search for alternative ways to free up cash.

Nearly half (46 per cent) say the widening gap is a real risk to the sustainable growth of their business. During the crisis, more than half (51 percent) said that late payments threatened a liquidity squeeze for their business, compared to 35 percent of those surveyed before the crisis

“The widening payment gap is a growing concern for business as it pushes them into unnecessary difficult financial positions. Left unchallenged, it might take European businesses more time to rebound financially than European governments” says Ericson.

Real estate and construction hit hardest by late payments 

A recession will hit industries in different ways. The report highlights that businesses in the real estate and construction sector have been hit hardest by late payments. 41 per cent of these businesses say they now have accepted longer payments to avoid bankruptcy, whereas the European average is 35 per cent.  

At the same time, companies within hospitality and leisure still struggle with different government restrictions across Europe. Within this sector, four in 10 respondents (42 per cent) say that a recession will have a severe impact on their businesses – the highest figure of the 11 industries Intrum surveyed. 

European Payment Report 2020/ Key findings for the Greek market

1. Risk from debtors and credit loss concerns are highest in Europe.
   
   A third of Greek businesses surveyed say that debtors paying after the set due date is highly problematic – above the European average of 25 per cent and the joint highest in Europe.
   
   This appears to be impacting cashflow: 66 per cent have seen increase in credit losses compared to last year – also the highest figure in Europe.
2. Greek businesses are being pushed to accept longer payments.
   
   Over half (54 per cent) of Greek businesses have accepted longer payment terms than they feel comfortable with from a large/ multinational corporation, compared to 43 per cent across Europe.
   
   Almost half (48 per cent) have accepted longer payments in order to avoid bankruptcy – above the European average of 35 per cent.

In specific, regarding:

Late payments

• 4 in 10 (41%) respondents – in comparison with about 6 in 10 (57%) in pan-European level - agree that the biggest challenge for consistent customers is the risk of a pan-European recession.
• Late payments are the main threat to the survival of their business, says 60% of the respondents in SMEs and 62% in large corporations.
• 35% of respondents (compared to 12% in 2019) characterize as increasing the risk of late or no payments.
• The main precaution against late payments is credit checks states 40% (EU average: 35%).

Estimates for recession

• Only 23% support that the Greek economy is in recession (the relevant percentage for 2019 was 87%) while 32% estimate that it will be in recession next year.
• The main precautions to address the economic downturn are being more cautious about taking on debt for SMEs (46%) and cost reduction for large corporations (52%).

Prompt payment initiatives

Businesses in Greece and throughout Europe have significant margins to manage the issue of late payments.

• Only 42% of respondents stated that governance structure promotes a prompt payment culture, while 67% stated that their business does not have a relevant code of ethics.
• Only 19% of respondents from SMEs and 35% from large corporations stated that they always use the European Late Payment Directive**.
  
  
• * Intrum has gathered data from 9,980 companies across 29 European countries covering 11 industry sectors. The survey was conducted during February to May 2020 (pre and during Covid-19).  
  **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.

• About Intrum
  Intrum is the industry-leading provider of Credit Management Services with a presence in 24 markets in Europe. Intrum helps companies prosper by offering solutions designed to improve cash flows and long-term profitability and by caring for their customers. To ensure that individuals and companies get the support they need to become free from debt is one important part of the company’s mission. Intrum has circa 10,000 dedicated professionals who serve around 80,000 companies across Europe. In 2019, revenues amounted to SEK 16.0 billion. Intrum is headquartered in Stockholm, Sweden and the Intrum share is listed on the Nasdaq Stockholm exchange. For further information, please visit www.intrum.com. For more information, please visit www.intrum.com