Amsterdam 29 May 2013 - Payment defaults in Western Europe rose to 5% of total invoice value over last year - Cash flow considered biggest challenge to profitability this year
Payment default rates are rising, negatively impacting the profitability of businesses in Western Europe. According to survey respondents of the Atradius Payment Practices Barometer, on average, 5% of the total value of B2B receivables of survey respondents was defaulted on (up from 3% last year). The increase in default rates and in late payments are making it more difficult for businesses to maintain adequate cash flow levels. This along with falling demand for products and services is considered to be the biggest challenge to business profitability this year.
The Atradius survey interviewed approximately 3,000 businesses across 14 countries in Western Europe. Overall, approximately 30% of the total value of the invoices issued by survey respondents to their domestic and foreign B2B customers is unpaid at the due date. Payment delays from domestic B2B customers occur most often in Italy (36.8% of average total value of domestic overdue B2B invoices) and from export customers of Swiss respondents (38.7%).
Compared to last year, domestic past due B2B invoices decreased slightly (down 1.6%) whereas there was an increase in foreign past due invoices (up 6.7%). France recorded the largest increase (up 14.2%) in the average total value of domestic past due B2B invoices and Turkey in past due foreign invoices (up 194.4%).
Nearly 5% of the invoices issued by the survey respondents to domestic and foreign B2B customers are defaulted on (up from nearly 3% last year). Average payment default rates are highest from domestic B2B customers in Italy (7.6% of the total value of domestic B2B receivables) and foreign B2B customers of respondents from Switzerland (7.0%). Domestic B2B receivables are defaulted on mainly due to the customer being bankrupt or out of business, In addition to this reason, foreign receivables are frequently unpaid due to the failure of collections attempts.
The increase in payment default rates of survey respondents reflects the year-over-year increase in domestic (15%) and foreign (22.6%) B2B receivables unpaid more than 90 days past due date. Consistent with responses in the survey of one year ago, insufficient availability of funds is cited as the primary reason for payment delays from B2B customers. 62.3% of respondents reported it as the primary reason for domestic payment delays and 45.9% for foreign payment delays.
Falling demand of products and services and maintaining adequate cash flow are considered to be the biggest challenges to the profitability of the respondents’ businesses this year. The percentage of respondents citing falling demand of products and services ranges from 44.7% in Spain (42.2% in the Netherlands) to 20% in Greece. This reverses, in respect of respondents citing maintaining adequate cash flow, with Greece having the highest percentage (48%) and Spain the lowest (17.7%).
Andreas Tesch, Chief Market Officer of Atradius N.V. stated, “The payment environment in France, Switzerland and Austria have declined quite noticeably and are now among the worst in Western Europe. The Payment Practices Barometer responses confirm this deterioration showing that the default rate on French domestic trade debt has reached 6.0% and is getting close to that of Greece at 6.3%”.
The Atradius Group provides trade credit insurance, surety and collections services worldwide. With a presence through 160 offices in 45 countries, it has a market share of approximately 31% of the global trade credit insurance market. Atradius has access to credit information on 100 million companies worldwide. Its products help protect companies throughout the world from payment risks associated with selling products and services on credit.
For further information:
Atradius Corporate Communications
Tel.: +31 20 553 2047