- Three in five businesses across Western Europe express concern about an
increase in insolvencies in the year ahead.
- This concern reflects anxiety about their capacity to
maintain sufficient working capital
amid longer Days-Sales-Outstanding (DSO) and an increase in bad
debts.
AMSTERDAM, May 22, 2024
/PRNewswire/ -- An upward trend in bad debts impacting companies
across Western Europe is evident
in the increased number of businesses grappling with the problem of
maintaining sufficient working capital amid longer
Days-Sales-Outstanding (DSO) than this time last year. This is
weighing on debt collection efficiency and raises concerns among
companies about the outlook for insolvency risk during the coming
months, undermining business confidence.
These are the key findings of the May
2024 edition of the Atradius Payment Practices Barometer for
Western Europe, a survey based on
feedback from approximately 3,000 domestic and export suppliers in
fourteen markets (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Spain,
Sweden, Switzerland, The
Netherlands, and the United
Kingdom) and across eight sectors (Agri-food, chemicals,
construction, consumer durables, electronics/ICT, machinery,
steel/metals and transport).
Across the markets and sectors involved in the Atradius survey,
around 20% more companies than last year report anxiety about a
significant worsening of their Days-Sales-Outstanding (DSO). This
is echoed by an upward trend in bad debts, currently accounting for
an average of 8% of the total value of B2B sales on credit, up from
6% last year. This clearly signals a declining efficiency in
outstanding debt collection among businesses in Western Europe, prompting widespread concern
about the overall financial health of companies across the region.
Three in five businesses surveyed say they are concerned about
severe financial constraints in a challenging commercial
environment and anticipate an increase in insolvencies during the
year ahead.
The Atradius survey also found business confidence in
Western Europe weighed down by
worries about the broader economic landscape in both the short-
term and long-term (ten years and beyond). One-third of businesses
express concern about the health of national economies, the impact
of ongoing geopolitical tensions, and the uncertainties surrounding
the monetary policy, with volatility of borrowing costs forcing
companies to scale back on their access to bank credit. A
significant number of respondents (44%) say they already rely on
trade credit to finance their business operations. An expected
increase in costs to meet sustainability goals and comply with
environmental regulations going forward are also widespread
anxieties for businesses across Western
Europe.
Andreas Tesch, Chief Market
Officer of Atradius N.V. said: "We expect recovery in the
global economic activity to be modest this year, with world GDP
growth projected at nearly 3% in 2025. While the timing of interest
rate cuts by central banks will depend on inflation and labour
market trends, we expect relief from the heavy pressure businesses
currently face from higher interest rates may only materialise next
year. This supports our expectations of insolvencies decreasing by
a mere 1% in 2025 globally, and stabilising to an adverse new
normal, although with wide variations across markets and
sectors".
However, the Atradius survey finds some light at the end of the
tunnel, with more than one-third of companies saying that they will
focus on improving debt collection efficiency during the coming
months to alleviate the pressure of customer credit risk on their
financial health.
"Businesses' capacity to mitigate the impact of the challenging
economic conditions on their operations will be pivotal in
determining the insolvencies trend in the coming months.
However, navigating the challenges posed by fluctuating B2B
payments requires a clear-sighted approach to customer credit risk
management. Insuring B2B receivables can be the right strategic
choice for businesses aiming to grasp growth opportunities through
safe and profitable trade amid the current volatile economic
landscape" added Tesch.
The complete report highlighting all findings of the
May 2024 edition of the Atradius
Payment Practices Barometer for Western
Europe can be downloaded from the Atradius website at
Atradius Publications.
About Atradius
Atradius is a global provider of
credit insurance, bond and surety, collections and information
services, with a strategic presence in over 50 countries. The
products offered by Atradius protect companies around the world
against the default risks associated with selling goods and
services on credit. Atradius is a member of GCO, one of the leading
companies in the Spanish insurance sector and one of the largest
credit insurers in the world. You can find more information online
at https://group.atradius.com
Connect with Atradius on Social Media:
Website: https://group.atradius.com
LinkedIn: https://www.linkedin.com/company/atradius
YouTube https://www.youtube.com/user/atradiusgroup
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SOURCE Atradius N.V.