Europe looks towards a recovery...

...but payment default risks still an issue

Respondents to the recent Atradius Payment Practices Barometer survey have expressed marginal improvement in payment behaviour of domestic and foreign buyers in some markets, but in most cases these improvements may reflect the response to tighter, more diligent credit management practices and may also be offset by continued weakness in other areas.

The recently published Atradius Payment Practices Barometer surveyed approximately 1,500 businesses in eight European countries:  Belgium; France; Germany; Great Britain; Italy; The Netherlands, and Sweden. The survey reveals that despite a gradual recovery taking place in most European economies, payment default risks remain a crucial issue. Businesses cannot afford to be complacent and still need to be vigilant when it comes to investigating potential trading partners and managing credit risks.

Interestingly the average payment term recorded in the survey was shorter in most markets than in previous surveys, indicating a tightening of payment terms. With an average European payment term of 32 days, countries surveyed ranged dramatically with German companies offering a rigorous 19 day average term while Italian companies gave their customers plenty of time to pay with an average payment term of 60 days.

The survey also pointed to an overall improvement in payment behaviour which bodes well for ongoing economic recovery. Businesses, on average, are paying six days faster than in the survey conducted in June and July last year. It’s not all positive however with respondents being rather critical of customers’ payment behaviour compared to the last survey period, reflecting the tense times still being faced by European economies.

Two countries who traditionally sang the praises of their domestic payment behaviour changed tack this time around with a perception of an overall and continuous worsening of domestic payment behaviour over the previous four survey periods. It’s not all bad on the domestic payment front though with an overall increased optimism about domestic payment trends in Great Britain and France, particularly in comparison to one year ago.

When the survey went onto explore foreign payment behaviour, the general consensus was that companies rated their foreign customers’ payment behaviour more positively than that of domestic customers. However when compared to previous survey periods, quite a few countries with a positive opinion about foreign payment behaviour in the past were now somewhat less optimistic about the payment behaviour of their foreign customers, demonstrating a level of wariness as they emerge from recessionary times.

Overall the varied and overwhelmingly cautious responses emphasise that payment risks remain a crucial issue for companies despite many European economies experiencing positive growth and economic recovery. It is clear that recovery in Europe is a very gradual process and businesses still need to maintain a healthy cash flow to avoid slipping back into the dreaded days of the downturn.

Download the Atradius Payment Practices Barometer survey