- 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
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SOURCE Atradius N.V.
