An emerging trend for businesses in Western Europe is the widespread policy of delaying or halting investment plans amid the current challenging economic environment. The key factor prompting these decisions in companies across all sectors is the markedly deteriorating payment behaviour of customers in B2B trade, which has left businesses facing liquidity shortages and heightened risk of insolvencies.
With most cash being used to run day-to-day operations there has been a significant negative impact on the investment required to expand or protect businesses. As well as being a signal of financial distress, the choices to delay or halt investment also pose a significant threat to the economic growth of individual companies and whole sectors.
Another worry is that decreased attention has been focused on areas where long-term investment is crucial, such as transitioning to clean energy, fighting the threat of cyber fraud and creating a high-skilled workforce.
These are clear messages from companies polled in 14 markets, Netherlands, Germany, France, Italy, Spain, United Kingdom, Belgium, Austria, Switzerland, Denmark, Sweden, Greece, Ireland and included for the first time Finland, in the 2023 edition of the Atradius Payment Practices Barometer survey for Western Europe.
The worsening situation around B2B customer payment behaviour affecting companies polled in Western Europe was evident in the survey finding an average 20% increase in the volume of late payments during the past 12 months. Payment delays now affect on average nearly half of all B2B sales transacted on credit, and companies in Western Europe had to wait on average one week longer than last year to be paid.
This prompted a range of measures to ease pressure on liquidity, and when they sought external finance most companies polled said they preferred to borrow through supplier credit rather than relying on more costly bank loans. However, our survey found a lower appetite from suppliers to accept trade credit requests, with many businesses saying their requests were not fully met.
Further concerns expressed in our survey included the impact of persistent inflation, high borrowing costs and geopolitical tensions. A heightened fear of insolvencies was especially evident in Italy and the United Kingdom, a market suffering the effects of Brexit. A variety of new anxieties also emerged in our survey, for example about carbon footprint limitations and clean energy storage, which had particular resonance in Germany and Austria.
Andreas Tesch, Chief Market Officer of Atradius stated, "Global economy is expected to grow only 1.7% in 2023. This is mainly due to persistent inflation and continued monetary tightening by central banks. Against this background, the level of insolvencies is forecast to rise, leading to a deterioration of the worldwide landscape for trade credit risk, affecting business across many regions including Western Europe. This may explain why many companies polled in Western Europe told us they put a greater focus on strategic credit risk management in B2B trade, with a significant number of businesses polled saying they took up credit insurance to mitigate the higher impact of customer credit risk on the business, an average 15% rise from last year".